© 2011 Rochester Electronics, LLC

Page 2

September 2011

All Rights Reserved

 

Executive Summary

Counterfeit semiconductors are entering the worldwide supply chain in unprecedented numbers, and those

numbers are increasing at an exponential rate. Also entering the world supply chain are substandard components

that were originally viable but have been damaged through improper handling, storage, and shipping methods

employed by unauthorized distributors. All of these components are causing production and maintenance failures

that range all the way from inconvenient to deadly. Added to the already overwhelming mix of components that

just don’t perform properly – or at all – are components armed with malicious “extras” that can destroy systems,

cause malfunctions, or covertly gather proprietary information. Counterfeit and substandard semiconductors are

causing loss of revenue and loss of company credibility in virtually every industry. Malicious insertion threatens

national security.

Technology is making it easier for “entrepreneurs” to produce and market counterfeit and substandard

semiconductors, and, though technology may contribute to methods we can use to detect the “bad” ones from the

genuine, it will take good, old-fashioned cooperation, info-dissemination, and application of best practices to

prevent further encroachment of this destructive industry. Most purchasing officers are unaware that “testing”

provided by unauthorized distributors is inadequate at best, and is never a viable option for assuring quality. To

be effective, testing must always be done with the test programs and equipment of the original component

manufacturer. Unauthorized sources do not have access to such intellectual property.

The most reliable way to avoid purchasing substandard and counterfeit semiconductors is to purchase only from

original manufacturers or their authorized distributors.

Counterfeit and substandard semiconductors are increasingly present in

today’s worldwide supply chain.

It might be interesting to calculate how many semiconductors we rely on during a typical day … coffee maker,

radio, TV, cell phone (and the satellite that sends the signal), automobile, traffic lights, airplane, computer, maybe

a CT scanner or blood analysis machine. Virtually every industry today uses semiconductors: aerospace,

industrial, medical, military, security, contract manufacturing, space, telecom, utilities, transportation,

communications, and more.

It is estimated that the annual sales of semiconductors increases at a substantial rate each year. It has already

exceeded $US300 billion and will approach $US400 billion in the not-too-distant future. Unfortunately, the

percentage of sales that involves counterfeit and substandard parts is also expected to increase – exponentially.

The U.S. Immigration and Customs Enforcement (ICE) reports that, between November 2007 and May 2010, ICE

and U.S. Customs and Border Protection (CBP) made over 1,300 seizures involving 5.6 million counterfeit

semiconductors. The counterfeits were marked with the trademarks of nearly 100 North American, Asian, and

European semiconductor companies and were destined for importers in the United States and fifteen other

countries.

Despite the efforts of industry and international government officials, these seized components represent only a

small percentage of the parts that actually make their way undetected into the international marketplace. It is

difficult to gather exact figures; counterfeiters, of course, will not divulge their success stories. But their victims are

also reluctant to admit being caught in the counterfeit trap for fear of degrading customer confidence, lowering

stock price, and compromising brand strength.