Industry News: January 7, 2008


Series: Counterfeiters Go Away


Article 2: Counterfeiters Lure

It has become apparent that electronic component counterfeiting is only getting bigger, WHY? Our future as electronic component resellers, distributors and brokers is in jeopardy and the mass confusion and finger pointing is to blame. We have personally encountered OEM's, CEM's and EMS providers that continue to go out to countries like China and buy product at discounted prices. Not only are they buying them in a region known for counterfeiting, they are buying them with out paperwork and without traceability. I can't tell you how many times we have heard the words "we have to take the shot" from end users and resellers. This is what we call the "chinalure" (Pronounce this how you wish). Our experiences are that 50% of the time, the parts are identified as counterfeits within 30 days and out of the other 50%, half of those are identified as counterfeits in 60-90 days. Brokers, distributors and resellers all experience the same thing and this raises the question, who in their right mind would do a 15 day escrow? Why do we even do an escrow that the seller has no cost to them if they can't properly track and identify that their product is legitimate?

As we try and identify some of the problems and why counterfeiters exist in the first place, we need to understand that with today?s technology, information is at everyone's fingertips so it isn't just the resellers, it is the end users as well as the resellers that continue to "take the shot". Even if the end user or a broker doesn't loose out on the deal, someone somewhere in the chain did whether it be because of credit card fraud or the third broker in line. It is all a numbers game to the counterfeiters and they do it well. We collectively need to address this as a whole stop pointing fingers and passing blame.

The history of the counterfeiter from my eyes goes like this; U.S. based brokers made absurd amounts of money in the open market trading electronic components for decades and one of the nasty little tricks was to sell parts as new that had been put on circuit boards, removed, refurbished and retested. Please note that the writer of this article openly admits working in "brokerland" for more then a decade. Trust me when I tell you that there were a lot of fun little terms used in pushing and promoting this product and there were many independent distributors doing it, not just a few. In reality, the end user didn't say to much unless the parts were failing and in most circumstances there were less failures then new packaged and unused parts because these were already proven on a board. Anyways, when the market started to turn we started shipping all our scrap off to countries like China. These countries tried to do the same thing that independent distributors and brokers did in the U.S. for years but the market was drying up and more and more people were catching on so "Quality Control" departments started getting educated and no product was purchased unless it came with C of C's. The only time that product was bought in the open market was if it had a huge cost savings, it was discontinued or was on a 40 week lead time. (This is where the old saying "give the kid an inch and they will take a foot" comes in) Now the scrap had no value so parts were being pulled, refurbished and remarked with parts that fell into a huge cost savings, 40 week lead time or discontinued part status. Keeping in mind that the average person in China makes less then 10% of the average USA worker, you can see where things start to get crazy. It is totally worth the shot for them to counterfeit and someone somewhere is paying but as long as it is not the counterfeiter, they don't care.

End Users are as much to blame when it comes to counterfeiters: Everything that goes over to China ends up being counterfeited in someway. Gucci hand bags, Rolex watches, toys, electronics and more. What where the OEM's thinking when they sent their designs to these countries, the manufacturer's run 1 line for the OEM and 2 lines for the counterfeiters, not to mention that reverse engineering is a piece of cake when you have the specifications in hand.

What does it take to eliminate the counterfeiters? Unfortunately, what it is going to take is that a huge USA based company is going to get sued for hundreds of millions of dollars for product manufactured in one of these countries that is either counterfeit, uses substandard product or lead based paint and it is going to bring harm to a large group of people. When this happens to a fortune 500 company, you will see dramatic changes because now the cost of manufacturing just skyrocketed so much that it would have been cheaper keeping the production right here in the good old USA. When this happens, you will see a change.

Stayed tuned for more!!



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