BAM BLOG: Counterfeits: the 2,000 versus 200 Equation

Before & AfterMarket Blog (BAM). At first glance, having 2,000 component suppliers to choose from -- versus 200 – is a good thing. Competition drives down prices and component selection appears bountiful. In the electronics supply chain, though, things don’t always work that way. In fact, the “2,000 vs. 200” equation is downright dangerous. Almost any vendor can sell a component, but not all vendors are authorized to do so. This is a big distinction.

Thanks to a number of high-profile cases in recent years, purchasing professionals are paying special attention to authorization. Non-authorized resellers frequently buy and sell inventory that’s considered excess in the supply chain. Excess can include parts that are no longer being made – obsoleted — by the original manufacturer. Since long-lifecycle products and legacy systems still use these , they are still in demand. In order to meet that demand, unscrupulous companies may remark, resurface or modify electronics components that are then sold as authentic.

This practice has become so prevalent that the U.S. Department of Defense has adopted a plan called the National Defense Authorization Act. The guidelines and practices outlined in the NDAA are designed to reduce the risk of procuring counterfeits. One of the challenges of the NDAA is that it recommends sourcing from “trusted” partners but not specifically through “authorized” partners. Therefore, an approved vendor list of 2,000 trusted partners may include only 200 authorized vendors.

Most parts sold through unauthorized channels are not counterfeit, but sourcing through unauthorized channels increases the risk of procuring a counterfeit semiconductor. Even if a part is “authentic,” authentic does not automatically mean reliable. Traceability too is a weak substitute for authorization, as it does not guarantee component reliability. A paper trail through an unauthorized channel partner is not audited by OCMs. There are no guarantees that proper component handling and storage has been followed just because a component has traceability. An authentic component isn’t necessarily a new component unless it was procured through an authorized source.

Authorization is an OCM’s way of guaranteeing its partners are selling factory-made, fully-tested, new authentic components. OCMs pass their warrantees and guarantees on through their authorized distributors. Most OCMs will not back a product that’s been sold through unauthorized channels.

Obsolete and EOL components can be found in authorized channels, as authorized distributors buy EOL inventory directly from suppliers. Through programs like Rochester Electronics’ Extension of Life Solutions, components can be re-manufactured using the OCM’s original die, masks and IP. In the event those resources aren’t available, some continuing manufacturers can re-create components to a supplier’s exact specification.

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