The Risk of Counterfeit Components to Electronics Supply Chains in 2021

Semiconductor manufacturers have warned that the ongoing semiconductor shortage, which has been hindering the production of products ranging from cars to games consoles, will extend into 2022 and potentially beyond.

During times when the supply chain is under considerable strain, the risk of encountering counterfeit components rises. Counterfeit components are more common than you think, and pose a serious threat to electronics supply chains. Industry reports suggest consumer and industrial businesses are losing up to $250 billion per annum due to the recent surge in counterfeits, although this number may be even higher considering the number of counterfeits that go undetected. With the number of counterfeit components on the market, it is not just small organisations that are vulnerable. The U.S Department of Defence has estimated that as much as 15% of their spare and replacement parts turn out to be counterfeit.

What Are Counterfeits and Why Are They So Dangerous?

Counterfeit components are illegal/unauthorised imitations of components or products that are knowingly misrepresented as a specified genuine part of an OEM or authorised manufacturer. Counterfeits often fail to meet the required performance demands of businesses, resulting in final products performing intermittently, not to spec, or not at all. Counterfeit components can degrade system performance, cause intermittent performance spikes or delays, and limit the performance of other components in the system. This ultimately leads to product malfunction, which in the case of certain devices such as medical equipment, could be fatal.

Counterfeits can fail at any point. They may work during testing under ideal conditions, but fail when exposed to extreme environments, wide temperature and voltage ranges, or under stressed performance conditions. This means many counterfeits can often go undetected until it’s too late and an issue occurs.

Another risk associated with counterfeit components is the lack of testing and regulations involved in their production. If a fake component was to enter a company’s supply chain, not only could it lead to product failure, but it could also lead to potential compliance infractions which may have serious consequences.

Whilst many counterfeits are simply cheap, low-quality copies of a legitimate product, they can be found in many forms:

• Substitutes or unauthorised copies of a component
• A component as defined by the manufacturer's part number identification, date code, and manufacturers’ identification (logo, trademark) in which the materials used or the performance of the product has changed without notice by someone other than the original manufacturer of the product
• A substandard component misrepresented by the supplier
• Components that have been remarked, or fraudulently altered and/or misrepresented by a 3^rd party

Substitutes and unauthorised copies of components present a threat to supply chains as they are generally low-spec components disguised as higher-spec components. This can be done by altering part numbers, mixing lower-spec components with higher-spec components, or by placing lower-spec parts into higher-spec packaging.

In some cases suppliers may attempt to pass off substandard components as qualified parts. Whilst they may be marketed as legitimate components that function as expected, in reality they are sub-par.

How Can You Mitigate the Risks of Counterfeits?

Having a strong understanding of the supply chain and global market trends is an essential prerequisite for companies looking to minimise the risk of counterfeit components. Due to the size and complexity of many supply chains it is important that companies are aware of the key players and can identify potential breaches through which counterfeits could enter the chain.

By only purchasing from approved distributors or component manufacturers directly, companies can mitigate the risk of counterfeits entering their supply chain. However, purchases from the open market can prove difficult to avoid, especially when the supply chain is under pressure and components become harder to source. Whilst we strongly recommend always purchasing from the original manufacturer or their franchised distributors, if you are purchasing from the open market it is important to carry out extensive inspection, comparative analysis, and testing to ensure the components are authentic.

How Can Corintech Help?

At Corintech we offer full supply chain management and our procedures are designed to ensure that our procurement process is fully traceable and that the the risk of using counterfeit parts is significantly minimised. 

• We always aim to purchase components from the Original Equipment Manufacturer (OEM), where this is not possible;
• We aim to purchase components from authorised distributors, where this is not possible;
• We aim to purchase components with a full chain of custody to the Manufacturer, where this is not possible;
• Components can be purchased from a supplier, that can not provide evidence the component is a genuine part, but only with our customer's full knowledge and with independent validation including inspection, functional testing and de-encapsulation with assessment against the OEMs specifications.
• In all cases, Corintech suppliers must pass our stringent approval process and be accepted as an approved supplier.

With over 40 years’ experience in the electronics industry, we have built a global network of trusted suppliers. This allows us to track down components that are often hard to source, without exposing our supply chain to the threat of counterfeits.

We are an AS9100 and ISO9001 accredited manufacturer, therefore we have strict processes in place that govern our procurement processes and help prevent counterfeit parts.

• All appropriate staff have been trained in the awareness and prevention of counterfeit parts
• All incoming parts are subjected to a thorough inspection and undergo continuous testing
• Suspected and confirmed counterfeits are quarantined and reported
• Continuous monitoring of external sources for reported counterfeits
• Processes in place to ensure components and parts can be traced to original or authorised manufacturers

If you have an upcoming project and are worried about counterfeit components harming your supply chain, contact Corintech to see how we can help.