Counterfeit Electronic Components are Putting Millions of Lives at Risk

You have heard about counterfeit Gucci handbags, Rolex watches and Callaway golf clubs that can be had for pennies on the dollar. It seems almost comical to be able to buy a $5,000 watch for $60, but when it comes to counterfeit electronic components it is anything but funny. Electronic components are a part of the products that we count on every day. From the pacemaker that keeps many of our parent’s hearts beating to the airplane that holds our lives in the balance between takeoff and landing, we are at the mercy of electronic components everywhere we turn.Our lives are quite literally depending on the reliability of electronic products but the rise of counterfeit components turns that dependence into a frightening game of chance. Do you really want to fly in a plane that is using counterfeit electronic components to manage the flight controls?

The counterfeiting process also affects the lives of men, women, and children living in the more impoverished areas of the world. Half of all of the computers disposed of globally are illegally sent to countries like China, India and Nigeria to remove the valuable parts and materials. It is estimated that 50% of children 12 years or older in the so called “e-waste” cities have dangerous levels of lead in their blood. This will lead to devastating health problems and severely decreased IQs for these already disadvantaged children. Many of the affected children are actually used in the process of counterfeiting. Even those that are not part of the trade are surrounded by the environmental hazards such as the constant burning of the final scrap which leaves a haze of chemical smoke in the air.

Costs? What are the ramifications and costs associated with counterfeit components?

In the last six months there has been an exponential rise in the amount of counterfeit electronic components being distributed in markets all over the world. If the rise of counterfeit electronic parts continues to grow at the current pace the electronics industry is destined to suffer major financial losses and will be at risk for the potential loss of millions of lives due to failed parts and environmental abuses.

For example an order of 100,000 pieces of a $.01 counterfeit capacitor (total $1,000) can end up costing millions to rectify. When counterfeit parts mounted on to circuit boards that are used in consumer products fail it can lead to increased field service calls, warranty issues, a recall of all of the products or heaven forbid injuries that turn into lawsuits. That seemingly great deal can end up costing a manufacturer millions in losses and downtime.

Even if the products never make it to the consumer, it is much more expensive to remove the parts from the boards and replace them than the original $.01 purchase price. We all know that there are automated machines that assemble everything today, but there are not automated component removal systems. Rework has to be done by hand, which is much more expensive. And if you bought parts from multiple suppliers you will first need to test every circuit board to see which ones have the faulty product.

Most manufacturers are doing very little to keep counterfeits out of their supply chains. It is extremely difficult and expensive to keep track of every part and its origin. The component manufacturers are recommending that equipment manufacturers purchase products only from authorized distributors. That is great in a perfect world, but component manufacturers discontinue products regularly and they are also known to have long lead times on many items that equipment manufacturers cannot always plan ahead for. The independent distributor/broker is a necessary part of a purchasing program.

Counterfeits are not going away any time soon. It will not be long before all equipment manufacturers realize that they need to be more selective when choosing suppliers and learn better counterfeit detection methods. Just one counterfeit experience will open their eyes to this growing dilemma. It is not only about price and delivery anymore. The manufacturers need to know what processes are in place at their supplier’s warehouse to detect counterfeit components.

Almost every manufacturer American Electronic Resource works with is interested in information regarding the counterfeit dilemma and what we are doing about it. If they have not received counterfeits themselves they have associates that have experienced a counterfeit debacle within their organization. Ongoing vigilance by both independent distributor/brokers in procuring electronic components and manufacturers in purchasing only from reputable suppliers is required to reduce the risks caused by counterfeit parts.

Author Robb Hammond
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