© Copyright Rochester Electronics

Page 2

June 2011

 

Introduction

Semiconductors provide “smart functionality” to all electronic systems. These devices are key to every segment of

the electronics manufacturing industry, which today exists across the globe.

The high demand worldwide for semiconductors has made the market attractive to counterfeiters. Statistically, it

has been proven over the years that counterfeit devices have a substantially high failure rate. Any semiconductor

failure is costly, but in any of the many life-critical applications, failure can be catastrophic.

These failures can be expensive, but the actual costs precipitated by the counterfeit industry are far more wide

spread, and directly affect every aspect of the electronics industry.

Several industry factors work in favour of the counterfeiters:

•

To provide the low-cost semiconductor components to as large a customer base as possible, semiconductor

manufacturers make use of the lower-labour-cost areas of the world where security may not be highly

enforced.

•

Semiconductor technology is continually evolving, and many of the devices are manufactured only for a short

period of time, sometimes as short as one to two years. At the same time, demand for these components can

continue for many years – even twenty or more. This provides a ready market.

•

Due to the frequent upgrading of manufacturing facilities and to the nature of the larger-volume markets

where semiconductors are used, the demand and supply frequently go through major peaks and troughs with

times of product surplus and product shortage. During times of shortage, counterfeiters can make large

profits.

•

Counterfeit semiconductors are difficult to identify.

•

The Internet makes marketing easy and anonymous.

In this paper we will look at the costs incurred throughout the electronics industry because of counterfeit

components. And we will demonstrate what values can and cannot be measured.

Cost to the Semiconductor Manufacturers

Semiconductor manufacturers are the organisations most directly affected by the counterfeiters. An analysis of

reports received by original manufacturers from customers, together with data that are available from test houses,

indicates that counterfeiting activity accounts for more than 2% of the worldwide semiconductor total available

market (TAM). Based on this analysis, it can be estimated that the value of counterfeits that make their way into

the supply chain will be over $US5 billion in 2011. This is the first clearly visible measure.

Semiconductor manufacturers are developing and employing solutions and techniques that make their

components more difficult to counterfeit; however, much of the effort they employ is unproductive even though it

still imposes a significant cost, which they must pass on to users through the selling price. And, often, these

solutions work only for a short time because the counterfeiters continually update their techniques to work around

the technologies developed by manufacturers. Because electronic equipment manufacturers are very sensitive to

higher prices for semiconductors, and because these protective solutions are expensive, some manufacturers are

reluctant to use them, especially on lower-cost devices. The cost of counterfeit protection measures can add from

a fraction of a cent to over ten cents per device. Here are some anti-counterfeiting measures:

•

Only some semiconductor manufacturers have their own manufacturing facilities; others use subcontractors

for wafer production, assembly, and test. These subcontractors operate in many parts of the world, and

manufacturers often use multiple subcontractors in different countries for the production of a single device.

Manufacturers must exercise stringent controls to ensure security during initial manufacture, subcontractor

operations, and shipment. Security measures must protect the products themselves as well as critical

intellectual property (IP), both of which can be vulnerable to opportunistic counterfeiting operations.