Japanese companies: More than 30% of semiconductors on the market are counterfeit
Latest update time：2021-09-02 13:17
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According to a report by Kyodo News in Japan, amid the global semiconductor shortage, a large number of "fake" semiconductors are circulating, with the manufacturer's name on the product being rewritten or taken from scrapped home appliances. A subsidiary of OKI Electric Industries was commissioned by a company to conduct an investigation into semiconductors purchased from sources other than the usual supply channels, and found that more than 30% were "fake". If the circulation of inferior semiconductors expands, it will not only lead to a decline in product performance, but may also have a negative impact on safety.
Semiconductor manufacturers once reduced production due to the spread of the new coronavirus, but demand for automobiles and digital devices has recently rebounded rapidly. In addition, a fire broke out in the production equipment of Japanese giant Renesas Electronics, causing a continued shortage of semiconductors.
Among manufacturers that purchase semiconductors and assemble products, there is a growing trend of purchasing old semiconductors that have been discontinued from specialized trading companies. As demands for confirming the quality of semiconductors obtained in this way grow, Oki Engineering (Tokyo), a subsidiary of Oki Electric Industries, launched a semiconductor authenticity verification service in June and has received requests from more than 100 companies.
According to the company, the most common counterfeit products are those that have the manufacturer's name on the product replaced with the name of a large company. There are also semiconductors that were taken from scrap home appliances produced 10 years ago and sold as "new products", and substandard products that should have been discarded.
These semiconductors are used in beauty equipment, blood pressure monitors, driving recorders, electronic cigarettes, etc. and are put on sale. It is reported that some products cannot be started due to initial failures, and some products catch fire and smoke. Chong Engineering said, "It is difficult for equipment assemblers to distinguish whether semiconductors are genuine."
Some people pointed out that counterfeit semiconductors are exported from China, South Korea, and Southeast Asia. It is reported that many of them are traded online and purchased by professional trading companies that receive orders from assembly manufacturers.
Kei Takamori, general manager of Oki Engineering Division, pointed out: "It is expected that the shortage of semiconductors cannot be solved at present, and there is a high possibility that counterfeit products will increase."
Wall Street Journal: Chip shortage spawns flood of counterfeit parts
The global chip shortage has created a gold mine for bad actors, The Wall Street Journal previously reported.
They note that companies that need chips are taking supply-chain risks they wouldn’t have considered before — finding out that what they bought doesn’t work. Suspicious sellers are buying ads on search engines to attract desperate buyers. The result is a surge in sales of X-ray machines that can detect counterfeit parts.
It’s a quality-control crisis caused by the world’s desperate scramble for hard-to-find semiconductors. Without these essential components, makers of everything from home appliances to work trucks are grinding to a halt as the global economy recovers.
This spring, BotFactory Inc., a New York-based maker of 3-D printers, was unable to source microchips from any of its preferred suppliers for weeks. Eventually, it turned to an unknown seller on AliExpress, an online sales platform operated by China’s Alibaba Group Holding Ltd. An early sign of trouble: Orders arrived wrapped in plastic wrap instead of the usual antistatic protective bags.
X-ray machines, which have been in increased demand this year during the chip shortage, can reveal whether a chip is empty (like the second one from the right) or has inconsistent circuits. Photo: Creative Electronics
“Of course, some of them didn’t work,” said Andrew Ippoliti, lead software engineer at BotFactory.
Mr. Ippoliti suspected the defective parts were fakes. He said BotFactory had determined the microchips were legitimate before the purchase, but the seller went silent after the product stopped working properly. BotFactory filed a dispute with AliExpress, which issued a full refund.
The company ultimately purchased about 200 microchips by ordering directly from the manufacturer.
ERAI Inc., which keeps records of misconduct in the electronics supply chain, receives new complaints almost every day, said Kristal Snider, vice president of the industry watchdog. Buyers from more than 40 countries have filed reports of wire fraud, she added.
Offenders are often opportunistic criminals. They lure victims through targeted ads on search engines, directing them to ostentatious web pages and then disappearing after receiving the wire transfer. ERAI has flagged dozens of high-risk websites, many of which are based in Hong Kong.
Chip shortages have crippled automakers around the world, with Ford Motor Co. saying last month it would cut production at more than six U.S. plants in July. Photograph: Rebecca Cook/Reuters
One company that was flagged was Blueschip Co., which calls itself one of the world’s “largest and fastest-growing” distributors of electronic components. ERAI said the company’s website had similarities to those of known bad actors — including some assurances that used the same wording.
But Blueschip said in a written response to the Wall Street Journal that it would not bother responding to ERAI's claims. "Innocent people know they are innocent," the Hong Kong-based company said.
“The number of websites now offering hard-to-find, allocated and obsolete parts is staggering,” ERAI’s Ms. Snyder said in an email. “After 27 years in this industry investigating and reporting fraud, it takes a lot for me to take.”
Industry players and experts say cases of chip fraud have historically been underreported because victims are reluctant to publicly admit they have been defrauded. Pursuing criminal charges is difficult, especially across borders.
For counterfeiters and shady dealers, the prospect of getting caught isn’t enough to change their behavior, said Diganta Das, a researcher at the University of Maryland who studies counterfeit electronics. Convictions are so few that Mr. Das said he could memorize them all if he tried.
Fake chips existed before this wave of shortages. Imitations range from sophisticated replicas to old parts refurbished to look new. Chip experts say that while counterfeiting technology has evolved, many buyers have improved their testing skills, reducing the chances that a faulty part will end up in a finished product.
Most companies encounter counterfeit parts about three times a year, estimates Michael Ford, a senior executive at Horsham, Pa.-based Aegis Software Corp., who works to set industry standards for quality and tracking of electronic parts. In almost all cases, counterfeit parts go unreported, he adds.
“The entire supply chain doesn’t want to look like it’s been compromised,” Mr. Ford says.
Given the chaos caused by shortages this year, some buyers are tightening anti-fraud measures. The Electronics Independent Distributors Association said it has received twice as many orders as last year for a 250-page manual on identifying suspect parts. Faiza Khan, the group’s executive director, said some buyers are companies that have obtained defective or suspect components.
A slight scratch will reveal the original markings of the counterfeit chip.
Photo: Electronics Association Independent Distributors
Requests for the most expensive and complex electrical tests have nearly quadrupled this year, said Ian Walker, operations director at British distributor Princeps Electronics Ltd. That requires specialized engineers and, in some cases, means customers pay tens of thousands of dollars to confirm the authenticity of a $3 chip, he said.
“It’s very difficult to completely eliminate the risk of counterfeit parts in an efficient and inexpensive way,” Mr. Walker said.
Creative Electron Inc.'s fraud-detecting X-ray machines, which cost up to $90,000 and can detect whether a chip's interior is empty or has inconsistent circuits, have seen sales double in the past year, said Bill Cardoso, chief executive of the San Marcos, California, company.
Electronic components distributor Astute Electronics Inc. plans to buy its fifth X-ray machine soon for internal inspections, adding to the two it purchased earlier this year, said Dane Reynolds, the company's vice president of operations.
Mr. Reynolds said the company is analyzing more components as customer demand surges. “As a result, we’re finding more bad parts.”
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