Foreign media: Chip shortages are exacerbating the flow of counterfeit and shoddy parts

As the global industrial chain is disrupted by the epidemic, news about counterfeit masks and fabricated nucleic acid test results occasionally appear on social platforms. Therefore, facing the increasingly serious global chip shortage problem, industry experts are beginning to worry that it may only be a matter of time before the market is flooded with fake semiconductor products.

The impact of the chip shortage has already affected most industries that rely on electronic components, from basic household appliances such as microwave ovens and refrigerators to the automotive industry. Market research firm Gartner released a report stating that the global semiconductor shortage is not expected to return to normal supply levels until the second quarter of 2022, and the delivery time for wafer orders in the next few months may be as long as 12 months.

Foreign media ZDNet pointed out that for some companies, this means finding other ways to reserve chips or shut down production lines. In other words, the current era provides a great opportunity for electronic component counterfeiters and scammers.

“If you can’t get 5,000 parts next week, your production line shuts down, you’re in trouble, and then you let your guard down,” said Diganta Das, a researcher at the Center for Advanced Life Cycle Engineering (CALCE) who focuses on counterfeit electronics. “You’re not going to follow the rules of supplier verification or product testing processes. And that can turn into a big problem.”

Diganta Das regularly monitors databases of counterfeit reports published by ERAI (Electronic Dealers Association International), and while he hasn’t seen a surge in the numbers yet, he believes the number of reports will start growing in the next six months as companies realize they have purchased illegal parts.

However, this problem has little impact on technology giants. Because large companies have established a sound supply chain due to their dependence on semiconductors, they usually only purchase components from chip manufacturers. The companies that will be at risk are smaller manufacturers with less mature semiconductor supply chains, and may also include companies in key industries such as defense, medical and even automobiles.

Small businesses generally source parts from third-party distributors. Diganta Das said most companies understand that they need to be cautious when buying from distributors. For example, checking the distributor's buying and selling records and thoroughly testing the parts after receiving them are the basis for safe transactions. But this also means spending a week, sometimes two weeks, doing due diligence to ensure that the purchased parts are legitimate. However, in the current situation, some companies cannot afford to waste this time.

He further pointed out that if companies show a severe shortage of parts, it will increase the chances of purchasing counterfeit parts. For counterfeiters, from a supply perspective, there is no better opportunity than a global chip shortage.

Steve Calabria, founder of independent distributor PC Components, also believes that this is just the beginning of counterfeit semiconductors flooding the market. He said, "I think we are on the cusp of a major problem. The global chip shortage has opened the door for criminals to exploit the electronic components market, and I see early signs that this has already begun to happen."

In addition, the continued shortage of chips has caused equipment manufacturers to speed up production. Steve Calabria said that these semiconductor equipment manufacturers are eager to find other ways to obtain the required components. This may give counterfeiters an opportunity.

The report pointed out that electronic component counterfeiting organizations usually use two methods to manufacture illegal products. They can completely copy like the fashion industry, or recycle parts from electronic waste and repackage them. Parts prepared by these two methods may meet basic quality standards, but without any testing process or reliability verification, the part will definitely fail after a period of use or under certain conditions. This may mean economic losses or huge safety risks for companies that use it to manufacture products.

Michael Pecht, a mechanical engineering professor at the University of Maryland and founder of CALCE, agrees that some companies will buy counterfeit parts next year given the current shortages.

Michael Pecht said, "I don't think the semiconductor industry is aware of this at all. Companies are too focused on delivering on time and don't really consider the problem of counterfeit goods." Therefore, companies that want to purchase semiconductors in the coming months will need to conduct a lot of audits, cross-checks and investigations to avoid falling into price traps. At the same time, the delivery time of semiconductor parts will not be shortened soon, and vigilance will be the key for companies to avoid becoming victims because counterfeiters may seize the opportunity.