Beware of counterfeiting:

How to seize the opportunities of procuring electronic components in the free market, minimizing possible risks.

By Alessandro Nardo
September 6, 2024

Today, sourcing electronic components on the open market has become inevitable if companies are to ensure the continuity of their production lines and the resilience of their supply chains, according to Alessandro Nardo, founder and sales manager of independent professional distributor, Electronic Partner.

“However, there are significant risks attached to the seemingly excellent prices and perfect delivery times that are promised by websites on the internet, especially for buyers inexperienced in the open market,” Nardo warns. Generally, these problems relate to issues of quality and lack of recourse if the delivered goods are non-compliant, faulty, or fake.

Quality issues

Counterfeiting is an ever-growing problem and takes many forms. While comprehensive global statistics are not available, in 2023 the Semiconductor Industry Association reported that counterfeiting was costing US semiconductor companies in excess of $7.5 billion per year.

Counterfeit goods may come from:

Official production overruns that are sold by unscrupulous employees outside of the manufacturer’s official channel
Stockpiled components that are resold into the market by companies that no longer need them. Sometimes, these product lots are misrepresented to “meet” market demand.
Poor quality products from test production runs that do not meet the performance or quality standards of the manufacturers, but that find their way onto the market instead of being destroyed.
Unofficial and unauthorized copies of original parts that are intentionally altered, repackaged, marketed, and sold as genuine products, but which do not have the quality or guarantees that the components they purport to be do.
Old, outdated, recycled, or decommissioned components on which key identifiers such as the manufacturer’s brand, serial numbers, date codes and or packaging are altered so that they can be resold by questionable dealers as in-demand items.

The cost of counterfeits

Counterfeit electronic components can cause untold harm. Some of these risks include:

Damage to production lines, product performance and brand reputation – Poor quality products that do not fit or work as expected, or that break almost immediately can degrade or damage your production lines, reducing or hampering the performance of your other production equipment and even of your products, potentially harming your customers and even causing death (in the case of medical devices), and ultimately damaging your reputation.
Counterfeits are increasingly difficult to identify – The use of artificial intelligence tools is improving the production quality of fake packaging and labelling. Furthermore, counterfeits frequently have unpredictable failure rates that manifest during high performance or peak demand, or under extreme working conditions. These escape unnoticed during testing under standard conditions. All of these issues make fakes almost impossible to identify.
Company failure – In extreme cases, fake components can house ransomware payloads whereby dastardly players block access to some or all of your company and equipment data until they receive an enormous ransom payment – and even then your ability to re-access your data is not guaranteed, potentially causing the complete failure of your business in addition to the massive payments exacted.
Job loss – a study commissioned by the International Chamber of Commerce in 2011 estimated that counterfeiting was responsible for 2.5 million lost jobs globally.

Lack of recourse

Before purchasing on the open market, companies must find out as much as possible about the legitimacy of the supplier they are buying from, how long they have been in business, whether they have a verifiable track record, what their replacement or restitution policies are, and whether these are dependable and trustworthy.

According to Nardo, the safest choice is to work with a professional independent distributor that has a proven reputation and performance record in the market over time, and that is willing to provide actual references of customers that can be contacted to verify their claims.

He says, “It is even better to partner with an independent distributor like this who also offers escrow services to safeguard your money until the goods are received, and that uses an independent testing house to conduct all the necessary inspections and tests on the products to ensure their authenticity and quality.”

The benefits of using independent test houses

Using a third-party test house ensures that the results of the testing procedures are fully independent of potential bias or of economic interest and that the company will identify and flag any anomalies, abnormalities, or deviances from the manufacturer’s technical specifications for the product.

These companies are highly specialized in various types of testing for counterfeits including:

Compliance testing – They test for compliance with international quality standards for electronic components such as the EU’s RoHS (Restriction of Hazardous Substances) directive and the US Department of Defense standard MIL-STD-1276 (MIL Lead) to assess parts’ authenticity and validity.
Advanced inspection methods – The laboratories have highly advanced inspection equipment to investigate the internal construction of the components and their surface characteristics via XRF analysis, electrical curve tracing, SEM (scanning electron microscopy), BGA (ball grid array) verification, and die verification via OCR (optical character recognition) and functional tests to also identify any genuine components but of class B.

“Independent test houses that are completely external to the supply channel have no vested interest in demonstrating specific results for the tests,” explains Nardo, “Their expertise enables them to recommend which tests to perform on any specific component based on the history of non-conformities found in other batches. This substantially reduces testing time and increases the success rate of identifying potential counterfeit or sub-par parts.”

The importance of reliability

With over 20 years’ experience in electronic component distribution, Electronic Partner has built a consolidated and trusted network of fully screened, vetted and proven suppliers even for hard-to-find or obsolete components. “To ensure our customers’ peace of mind, we always offer independent testing on all ordered parts prior to shipping to verify their authenticity and functionality and we continuously monitor reputable industry sources for reported counterfeits,” Nardo concludes.

Article originally published in the print version of Elettronica-AV

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