Industry information services provider ERAI Inc. recently reported a significant decrease in the number of reported cases of counterfeit components in 2017. The total per year had ranged from 1,000 to 1,100 cases for the previous five years with no significant trend since a high of nearly 1,300 cases in 2011 but the fall to 771 cases last year appears to buck expectations. Several semiconductor manufacturer mergers and acquisitions last year coupled with large scale increases in demand this year, especially from new and developing applications such as mobile phones, automotive and IoT, led many to expect an increase in the number of counterfeits coming onto the market.

Some observers put the unexpected trend down to the huge amount of work done in recent years in developing and promoting the use of new international standards and the increased level of educational activity, which seems to have raised awareness of the problem and how to deal with it.

However, ERAI Inc. themselves advise against reading too much positive news into the decrease and have even suggested that the decrease ‘may ….. indicate that more sophisticated counterfeiting techniques are resulting in fewer counterfeit parts being detected’. Certainly, the market fundamentals that should give rise to an increase in the number of counterfeits in the supply chain are still there.

Lead times on many passive components are now in the range of 40 to 100 weeks while many semiconductors are on 99 week lead times. Prices have increased substantially, including on outstanding orders. Unsurprisingly, component suppliers are reporting evidence of multiple ordering and that demand may be overstated in some cases, making many OCMs unwilling to add manufacturing capacity to fully meet current demand.

In the USA, the DoD is exercising greater control over where its suppliers can source components making procurement even more problematic for defence contractors while the imposition of higher import tariffs on components manufactured in China is making procurement even more problematic for US based OEMs in the industrial and commercial arena.

The industrial and commercial supply chains may be more vulnerable to counterfeits because the work in developing and promoting the use of best practice has been largely adopted by OEMs in the high end sectors especially defence, aerospace and nuclear and it might be questionable whether many OEMs in other sectors are even following the current best practice to detect incoming counterfeits in the first place, especially given the increased sophistication of counterfeits as cited by ERAI.

Given the continued shortages in the supply chain, extreme caution should be used when sourcing through the grey market. Even trusted grey market suppliers are themselves vulnerable to inadvertently sourcing counterfeits unless they have robust processes in place, for example as specified by SAE International’s standard AS6081 - Counterfeit Electronic Parts: Avoidance Protocol for Distributors.

Anyone unsure of the level of risk they are potentially exposing their organisations to should consider downloading and studying the excellent Development of a Methodology to Determine Risk of Counterfeit Use, a free of charge paper published by INEMI, the International Electronics Manufacturing Initiative.

To find out more about the threat of counterfeits and the best practice developed to counter it, and keep up to date with the latest trends, the Anti-Counterfeiting Forum website at https://www.anticounterfeitingforum.org.uk/ is a useful ‘one stop shop’ for information.