Contract Manufacturing
Counterfeit electronics - risks & mitigation
As the number of counterfeit electronics parts has quadrupled since 2009, Mike Archenhold outlines the risks associated with counterfeits and looks at ways to combat them
In 2010 data from the US Department of Commerce suggested that over 1,800 cases of counterfeit parts had been found in weapons – equating to over 1 million individual parts, of which 70% came from China. The flaws of the duplicates are often invisible to the naked eye and get distributed for exceptionally low prices, since counterfeiters save on the enormous R&D costs.
One fundamental rule that OEMs should follow to reduce running the risk of ending up with counterfeit or substandard parts, is to know the source of the parts. The latest figures have been a real eye-opener, fuelling concerns over which supplier to trust when it comes to sourcing electronic components, with OEMs becoming wary of rogue suppliers.
Mike Archenhold I
t has been one of the most discussed and analysed topics in the electronics industry for years, and there seems to be no end in sight for the trade in counterfeit electronics. The counterfeit electronics industry is now savvier than ever with perpetrators finding yet more novel ways to smuggle illegal goods into the supply chain. There are numerous reasons counterfeit parts surface but companies need to be particularly vigilant during supply chain constraints, where low levels in the supply chain have increased the need to use the open market.
Counterfeit components can cause significant damages, not only compromising performance and safety when they malfunction, but also carrying the potential threat of fatal errors that can disrupt critical functions. The subsequent impact to brand image can be significant and have ramifications on future sales and growth opportunities. OEMs are conscious of the danger of
increasingly sophisticated counterfeits and the numbers prove them right: Recent figures confirmed the negative trend and, according to IHS iSuppli, reports of counterfeit electronics parts have soared dramatically in the last two years, with the number quadrupling since 2009.
14 October 2012
When it comes to sourcing electronic parts, there are four options from where OEMs can obtain parts: directly from the manufacturer, authorised/franchised distribution, independent distributors and brokers. Understanding the differences and risks involved in purchasing from these sources is key to avoiding the “bad guys”. An original components manufacturer (OCM) manufactures products/components and has ownership of the IP, copyrights or trademark.
Authorised/franchised distributors are suppliers authorised by the manufacturer they have on their Line Card. In contrast, an independent distributor can also be authorised to sell from some manufacturers on their Line Card, however this is not obligatory. It’s crucial for OEMs to thoroughly check the independent distributors’ internal quality processes. On the other side of the spectrum are
the brokers, who primarily move inventory and are not authorised to sell those lines. They store very little, if any, inventory. And the stock that comes in the door usually goes out the same day. The safest way to proceed is to buy direct through an OCM or
authorised/franchised distribution and only work with independent distributors who guarantee product authenticity and /or have the capability to test components prior to shipment.
Components in Electronics
www.cieonline.co.uk
Third party sourcing With an expert partner on their side, sourcing the parts through a third party can give OEMs peace of mind. However, simply handing the sourcing matter to any partner is not advisable. Instead OEMs should invest time into looking for an EMS partner with renowned anti-counterfeit credentials and internal quality control processes in place.
An EMS should offer full turnkey manufacturing solutions, including the supply chain design and component sourcing. However not all EMS companies are created equal and OEMs should ally with an EMS partner that has strong relationships with manufacturers and franchised distributors. Also, as brokers are considered to be dubious sources, conscientious EMS companies should block order placements for all brokers until the customer completes a review and the management and approval is received. The counterfeit knowledge and expertise of an experienced customer team is indispensable and a first line of defence. Transparency of the suppliers’ internal
processes is crucial; having full visibility into where the parts are coming from provides OEMs with the tracking control they need to make an informed decision. Global trade association memberships
are useful indicators of a company’s quality control measures. By joining an organisation that provides members with access to a list of known counterfeit components in the supply chain, companies can protect themselves against the risks of purchasing rogue parts. Many trade associations conduct risk assessment on all
listed suppliers, highlighting those that have attracted negative attention in the past. In line with trade associations, testing
standards also provide a reliable seal of quality sources. To ensure the highest possible standard of counterfeit testing, the Independent Distributors of Electronics Association (IDEA) has established an inspection standard, the IDEA STD 1010. This is highly recognised within the electronics industry and provides a fundamental checklist. Benchmark-testing standards are key to ensure the authenticity of electronic components, and the standard raises quality-conscious, reputable independent distributors to a higher level in the market.
No need for pessimism Providing an in-depth inspection of every part that is in the supply chain is an impossible task, but today’s counterfeit prevention is not about checking every part. The more people that sign-up to and take the time to look into their supplier sources, the higher the opportunity to deter savvy counterfeiters. Combined with objective industry standards, this can make a real difference.
The message that needs to be spread to the market is a simple one; continued development and improvement of all related control processes for the prevention of counterfeit material is imperative. OEMs should invest time in researching all options and only turn to a partner that meets the highest quality controls.
Plexus |
www.plexus.com
Mike Archenhold is Director of Sourcing for EMEA, Plexus
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