The counterfeit problem is not going away

However, a threat that has become increasingly prominent over the last few years is the rise of counterfeit products. The rise in merger and acquisition activity in the industry has led to product shortages and obsolete lines. That, combined with the drive to buy cheaper, has opened the door to the counterfeiters.

In addition, outsourcing by fabless companies has led to inadequate controls on foundries, assembly operations and control of scrap material. Electronic component growth in long term markets such as transport, avionics, industrial and medical has also led to a lack of funding for refresh cycles.

However, counterfeit contributors do not solely originate from the semiconductor industry. The end users themselves are exacerbating the problem due to an inadequate understanding of market conditions. Some end users also lack component engineering staff within the supply chain, leading to a difficulty in checking and identifying good product, which means that fakes can pass through visual inspection and nominal test conditions.

So, what’s being done about it?

There are several anti-counterfeit activities being adopted by semiconductor manufacturers to try and counter the problem and raise awareness of the dangers of counterfeit products in the industry. These include a rise in Trade Mark and IP protection and enforcement; an increase in seizures and prosecutions; close cooperation with legislative, investigative and prosecution authorities; enhanced training of border control staff; and the closure of ‘suspect’ web sources with ISP’s and search engines.

Leading these activities is The European Semiconductor Industry Association (ESIA), whose members include several key players in the industry including Infineon, NXP, ST Microelectronics, Texas Instruments, Renesas and Intel. Recent ESIA activities include the training of over 500 border control staff in 14 EU countries during 2015.

However, the truth is that putting a stop to counterfeit activity is difficult as it’s a constantly moving target. Counterfeiters are getting smarter and using more sophisticated methods in order to get their inferior and potentially dangerous products to market. In addition, if the level of industry merger and acquisition activity maintains its current levels then there will likewise be a rise in the amount of product withdrawals and redundant equipment, surplus inventory from product obsolescence, manufacturing facility closures and staff redundancies – all of which contribute to increasing the opportunities to market for the counterfeiters.

The sheer volume of M&A activity, and therefore the scale of the problem, can be highlighted when the value of semiconductor M&A agreements are compared over the last few years. From $11.5bn in 2013 and $16.9bn in 2014, value of M&A agreements rose to $10.3.8bn in 2015.

While semiconductor manufacturers continue to be active in raising the awareness of counterfeit dangers, industry attempts for avoidance and standards for counterfeit mitigation are based on old counterfeit activity. They do not offer a 100% avoidance guarantee and will not identify instances of IP theft and the growing threat of Trojans – which are being introduced by some state authorities and could incorporate spyware into semiconductors that would be very difficult to detect and counter.

These issues were a key part of the Anti-Counterfeiting Forum that was held in London in March. Peter Marston, Business and Technical Consultant, from Rochester Electronics, discussed some of the drivers behind counterfeit activity and highlighted how the company can help electronics equipment manufacturers and users with semiconductor obsolescence and ensure counterfeits are avoided.

It was highlighted at the start of this article that semiconductors affect everybody, and everybody expects reliability, safety and security. Counterfeiting can damage everybody’s expectations, put lives at risk, create security issues and impact IP protection.

The Anti-Counterfeiting Forum stressed the importance of communities and networking and how powerful a tool it can be in the fight against the counterfeiters in terms of building partnerships, educating the industry and the promotion of best practice.

The forum’s website (www.anticounterfeitingforum.com) is a free online resource signposting the most relevant information and the latest developments to combat the threat for all organisations concerned about counterfeit electronics. Users can search, upload and comment on parts in a database of suspected/alleged counterfeit components; search for articles, best practice, events, organisations, publications, reliable component sources and solution providers; and register to receive alerts on new content and part numbers and send private messages to other users.