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Avoiding the Gray Market

Mon, 04/05/2010 - 9:46am
George Karalias, Director of Marketing & Communications at Rochester Electronics
George KaraliasThe counterfeiting of semiconductors is a well-established problem within the electronics industry. Buying components through brokers and independent distributors on the gray market provides no guarantee of a continuous supply, authenticity, quality or reliability of the procured devices. In addition, semiconductor pricing on the gray market is susceptible to the forces of supply and demand, and as the supply of end-of-life (EOL) semiconductors inevitably decreases, the price inevitably increases.

There is no easy way to ensure that devices procured on the gray market are genuine or if they have been appropriately handled and stored to ensure quality and reliability standards. Physical checks of semiconductor parts, including destructive analysis, chemical analysis, x-ray analysis, physical dimension and weight confirmation, examination of pins and leads for prior insertion, and many others can help identify a fraudulent component, but can be costly and time consuming and sometimes inconclusive. Because it is impossible to inspect every purchased semiconductor part, it is important to plan ahead for end-of-life announcements and adhere to the following guidelines to ensure that procured parts are genuine and of high quality.

Semiconductor Purchasing Guidelines
There are only two fail-safe ways to ensure that a semiconductor device purchased is legitimate: buying directly from the original manufacturer or enlisting the help of authorized continuing supply manufacturers and distributors. Planning ahead and developing a partnership with an authorized source ensures a continuous stream of genuine devices.

To reduce risk when purchasing discontinued semiconductors, consider cost instead of pricing. Even if a bargain is available for semiconductor devices from an unauthorized source, one must consider the overall cost of manufacturing downtime and/or failure of the end-product if the part turns out to be faulty or counterfeit. These costs far outweigh the front-end savings. As a worst-case scenario, counterfeit components can cause legitimate manufacturers to be driven out of business or experience catastrophic disasters through equipment failure. Procuring faulty and counterfeit parts could cost an OEM millions of dollars as a result of manufacturing downtime and the failure of the end-product in the field. For mission-critical applications such as military and aerospace, there can be even more serious consequences where faulty equipment can result in loss of life.
Planning ahead for EOL ensures there is no interruption in the OEM’s supply chain and that manufacturing can continue with traceable, high-quality semiconductors from a reliable and trusted source. By planning ahead, OEMs can avoid the gray market practices and purchasing only from the original manufacturer, contractually licensed continuing supply manufacturers, and OEM-authorized distributors that guarantee the device’s quality, reliability and overall performance.

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