The Counterfeit Solution - The Importance of Transparency to Mitigate Risk to the EC Supply Chain

Obsolete and allocated components escalate theUsing curve tracing technology, it is possible to verify
motivation to produce counterfeit parts more andthe device's pin output to OEM spec documentation,
more every year. As hi-tech electronic industries grow,identifying counterfeit or substandard components
new and old manufacturers are subject to the risk of(including ESD damages).
receiving counterfeit board level components moreAs an example, our primary authentication screening
often if their suppliers lack proper inspection and testingincludes:
measures.
In 2005, the US Department of Commerce reported1. External Visual Inspection (Guideline: Mil-STD-883
3,868 incidents of counterfeit components. In 2008, thatMethod 2009.9)
number soared to 9,356, an increase of 140% in five2. Internal Visual Authentication (DE-Cap) (Guideline:
years. This does not even begin to calculate theMil-STD-883 Method 2014)
commercial markets that have been reported. An3. Electrical Testing to Manufacturer's Specification (10
electronic part that is not genuine or is deemedSample Run Per Lot)
counterfeit can broadly be defined as:Regulation & Accountability:
"An unauthorized copy, not conforming to original OCMMost OEM & EMS companies work off an
design, model and or performance standards, notApproved Vendor List (AVL), which allows for
originally produced by the OCM or has been producedaccountability, and peace of mind that industry
by unauthorized contractors, an off specification,standards (such as ISO and AS9120) are being met.
defective or used OCM product sold as new or havingThese lists generally consist of proven suppliers and
incorrect false part markings and or documentation".sources who re-sell factory original product. The ISO
(Counterfeits & the U.S. Industrial Base, Nelson,certification ensures that if and when incidents do
2009)occur, the faulting party is subjected to a Supplier
The OEM & EMS Mind Set:Corrective Action Report (SCAR). This is intended to
An open and transparent approach is critical foradd a level of accountability because when a vendor
buyers to make informed purchasing decisions, leavingis SCAR rated for quality, they are often immediately
their customers and top management with peace ofremoved from the AVL. Expecting the same level of
mind. Purchasing agents do not like to add newassurance from your independent suppliers is a must in
suppliers, especially independents unless theytoday's sourcing market.
absolutely have to for a critical shortage buy. OEMInformation:
and EMS providers need to see a history of new andTransparency means providing an unobstructed
original components delivered time and time again.channel of information between the seller and
The Scenariopurchaser. This must include an effective testing
In my experience with serving buyers from OEM andprocess that is both efficient and economical. Your
EMS companies around the globe, I find that manyindependent distributor should allow purchasing agents
times Purchasing Agents need price points not possibleto place an order based on the electrical analysis and
from North American or European sources. Otherauthentication findings of the part before they ever
times parts are only available in Asia or from anreceive product. This has the added bonus of allowing
unknown vendor.purchaser to deviate from an AVL based on informed
One of the key ingredients to our success is beingcustomer approval, when parts are hard (if not
completely transparent to our customers about originimpossible) to source amongst their usual supply
of stock. Being up front with our customers allows forchannels. In some cases, parts are on the other side of
informed purchasing decisions and testing preparations,the world and it is difficult to determine the authenticity
most importantly no surprises of receiving defectiveor electrical integrity of the part, but the customer still
product.wants to bring them in. If your supplier can give you the
Although we have some outstanding sources in China,critical concise information you need about the parts,
Taiwan and Singapore, there are still hundreds of otherthose risks are largely mitigated as one can quickly to
"non-qualified" sources that are considered high risk.determine if the stock is authentic and non-defective
We see these sources being used all too often byproduct based on the specifications required. These
other independent distributors without the informedprocesses can electronically confirm the input/output of
approval of the end user.the device to OEM spec documentation. The internal
The Problemdie of the device can also be analyzed for authenticity
Purchasing Agents are highly trained to negotiate foras well as the part markings, pin condition and package
below market pricing and are under extreme timelabeling. Even original new product can be
constraints for bringing parts in house. Situations like thiscompromised by the mishandling of static sensitive
create extreme pressure for the buyer, so theydevices, highlighting the importance that a supplier must
contact a few brokers to see who can quote the bestalso adhere to strict ESD guidelines as well.
pricing and delivery scenario.Summary
The real problem lies within the quotes that areWhen using an independent distributor, make sure they
presented to a Purchasing Agent. Sometimes, thereare able to demonstrate a level of assurance that
exists a consistent disregard or a complete fabricationadhere to industry standards observed amongst the
given by some independents so they will "win" theelectronic components industry. Do not assume your
order. For example, telling their customer that parts areindependent supplier already has a proven method for
coming from a proven source in Europe when theyidentifying or combating defective/counterfeit
are really rolling the dice with an unknown source fromcomponents. Ask for a copy of their quality manual or
Asia. This lack of transparency and integrity sets thedocumentation supporting their quality process. If a
purchaser up for failure, increasing production time andprice seems too good to be true, it probably is.
escalating cost unnecessarily. If defective orItems like a $100 New DSP Chip shouldn't cost $7.50.
counterfeit components are used during a productionDo not substitute price for quality. If you have to pay
run, thousands and thousands of dollars are lost due toten cents more for parts that are still factory sealed,
board rework, labor costs and the re-sourcing of goodrealize the potential risks associated with purchasing
parts, not to mention the frustration of losing productionnon factory packaged product or product available in
time. Situations like this can be avoided by qualifying3rd party packaging. Be realistic with target prices,
your independent suppliers more effectively.being unreasonable may force some independents to
The Transparency Solution: (Authentication, Regulation,only look at the riskiest surplus lots available because it
Information)is the only way they can compete on price. Do
Authentication:research on the independents you use, are they ISO
There are methods which we have adopted ofCertified? Are they ESD compliant? Again confirm this
performing detection and testing analysis for our OEMwith documentation they can provide. Transparency is
and EMS customers. The process is extremelya must, if your supplier is unwilling to provide detailed
effective, combining internal, external and electricalinformation allowing you to make an informed decision,
testing analysis to determine the authenticity of a chip.build a relationship with a supplier who will.