Counterfeit Parts Growing

Monday, May 14, 2012 @ 03:05 PM gHale

The number of counterfeit parts vital to the computer industry should reach record levels as the semiconductor industry enters “a phase of accelerating growth,” according to some new analysis.

“The semiconductor industry is exhibiting the classic signs of the start of a new growth cycle, with tightening supplies, broad-based price increases and a lengthening of lead times for the delivery of products,” said Rick Pierson, principal analyst for semiconductors at HIS, an El Segundo, CA-based information and analytics provider. “These are prime conditions for suppliers of counterfeit parts, which are eager to fill supply gaps with their fake goods. For semiconductor purchasers, the rise in counterfeits represents a major risk, bringing downsides in terms of financial losses, damage to company reputations and even safety concerns in some products.”

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And, security problems that could impact homeland security and national defense, authorities added, pointing to bogus computer chips, other parts and counterfeit products supplied to the Department of Defense, many of which were substandard and posed a series safety and security risks for a wide variety of programs and operations.

“The number of counterfeit parts reported in the electronics supply chain historically has risen and fallen generally in concert with the annual performance of the global semiconductor industry,” said IHS. “Chip sales and component counterfeits expanded in tandem during the period from 2001 to 2007 — a time of expansion for the semiconductor industry. Counterfeits then plunged when semiconductor revenue contracted in 2008 and 2009 as the global economy went into recession.”

“However, when semiconductor industry revenue rebounded by a hefty 33 percent in 2010, reports showed that counterfeit reports surged by a whopping 152 percent,” IHS said. “This year, the semiconductor industry is entering a new expansion cycle, with revenue growth accelerating to 4.3 percent, up from one percent in 2011. Growth is expected to rise to 9.3 percent in 2013.”

“With supply chain participants in 2011 reporting 1,363 separate counterfeit part incidents worldwide — a record level — conditions now are prime for counterfeit reports to reach new highs in 2012,” IHS said

IHS believes the semiconductor industry is a “prime breeding ground for counterfeits.”

“Most electronic components appear to be experiencing a tightening of supply along with an increase in pricing and lead times,” and that “price increases are expected to continue rising throughout 2012. IHS now predicts that demand will exceed supply in the third and fourth quarters for many widely used components, including capacitors, NAND flash, dynamic random access memory (DRAM), power semiconductors and logic chips.”

To mitigate counterfeit products, IHS said, electronics buyers have to develop strict internal and purchasing plans to ensure continuity of supply that are similar to contingency preparations for disasters.

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