© Copyright Rochester Electronics

Page 3

June 2011

 

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All semiconductor manufacturers must be aware of the dangers of counterfeiting. To protect themselves,

companies must develop and implement security policies and procedures, and make sure personnel are

trained to carry them out. Additionally, staff must be trained to recognise and check suspect returned product,

to analyse devices, and to prepare reports that may assist government agencies to carry out productive raids,

seizures, and prosecutions. Manufacturers must also supply feedback to their customers to maintain

assurance of their credibility of supply.

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In order to fight against counterfeiters, manufacturers must be able to assist in the identification and

prosecution of offenders. Prosecutions can proceed only when the original manufacturer has registered all IP

and trademark information with the appropriate authorities. In Europe, this means that trademarks must be

registered in all twenty-six countries of the EU. Applications for Action must be lodged with border control

authorities before they can carry out raids and seizures on suppliers of counterfeits. This calls for

considerable resources from company legal and security teams. The number of people directly involved

depends on the size of the company and the nature of the business; it can vary from one person for the

smaller manufacturers to more than ten for the largest. Assuming an average of three people per

semiconductor manufacturer, for around 300 manufacturers worldwide, it can be estimated that at least 900

appropriately qualified people would be employed just on anti-counterfeit activities. If we assume an average

salary and associated support expenses to be $US150 thousand per person per year, the total cost is at least

$US135 million, not including the cost of any extra testing and evaluation equipment required.

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Some manufacturers are working to develop sophisticated identification technologies that can be included in

the production of components. These technologies are difficult for counterfeiters to reproduce. One example

is hidden, encrypted, on-chip performance designation and more sophisticated coded marking. Another

example is radio frequency tagging of devices and packaging. This is an emerging process, and another

measure that adds additional cost to semiconductor components.

Beyond these identifiable costs to semiconductor manufacturers are many other expense factors that are not so

visible. Companies stand to lose incalculable income through the loss of credibility and brand image they suffer

when counterfeits are discovered. Costs also rise when companies become reluctant to use some of the lower-

labour-cost manufacturing sources because they are concerned that the security of the offshore manufacturing

facilities and processes cannot be guaranteed.

 

Cost to Semiconductor Distributors

Franchised and authorised distributors, who procure their entire product from the original manufacturer or their

authorised sources, are the least affected by the counterfeiting issue. These distributors also control their

warehousing and shipping security. Because of these practices, their entire inventory is traceable. As a further

protection, many authorised distributors provide their staff with counterfeiting awareness training.

Unauthorised sources, however, purchase from many different sources. Inventory is not traceable to the original

manufacturer. These sources are most likely to acquire counterfeit parts or substandard parts that have been

damaged because of improper handling.

 

Cost to the Electronics Equipment Manufacturers

 

When an equipment manufacturer sources semiconductors directly from a distributor authorised by the original

manufacturer, no testing is necessary to determine the viability of the components because they are traceable

and guaranteed.

But, when an equipment manufacturer sources product from unauthorised source, significant additional costs

must be incurred to validate the components. Some equipment manufacturers test inventory themselves;

however, due to the improved capability of counterfeiters and the cost of the necessary testing equipment, most

are now using independent test houses.