Anti-counterfeiting strategies necessary

Growth is the semiconductor market means growth in the counterfeit parts market and, this year’s expected semiconductor market growth of over 4% rising to over 9% next year, more counterfeit parts are expected to be put on the market.

‘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,’ reports IHS.

Most electronic components appear to be experiencing a tightening of supply along with an increase in pricing and lead times. 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.

Such shortages represent a prime environment for counterfeiters to thrive.

‘Counterfeiters watch the market and know where the weaknesses are,’ says HIS, ‘they know which products are in short supply and can generate profits. And they also know when market conditions are shifting in their favour.”

For example, counterfeits surged in the wake of the Japan disaster when concerns regarding supply shortages prompted panic buying of semiconductors and other components.

Counterfeiters analyse the electronics market, probing for weak points and seeking opportunities to exploit opportunities as they arise.

“To reduce counterfeit incidents, electronics buyers strive to restrict their purchasing activities to their customary supply chains, sourcing parts directly from their suppliers or from franchised distributors,” says HIS, “however the mandate for electronics makers is to keep their production lines running at all costs. And sometimes to do that—especially during a time of rising demand and short component supplies—they go outside of the supply chain to obtain parts.”

Even franchised distributors sometimes buy excess inventory from other companies that could introduce counterfeit parts to the supply chain.

To mitigate the counterfeit problem, electronics buyers must develop a plan to ensure continuity of supply, advises HIS, to update their listing of suppliers, parts/materials, life cycles, logistics and internal operations.

For every supplier, buyers must create and update the supply profile of that entity.

It’s also critical to identify which parts and markets are more susceptible to counterfeit activity.

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