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Dealing with counterfeits in the market

Thu, 05/16/2013 - 2:53pm
George Karalias, Director of Marketing & Communications, Rochester Electronics

For example, the old practice of blacktopping to remark components has now been augmented by sandblasting and laser ablation of surface markings, making visual inspection of devices more challenging.

Industry standards and best practices have gone a long way toward preventing some of the more egregious practices counterfeiters have adopted—even independent distributors recommend visual inspection and test. As standards and practices develop, however, the language of these guidelines often change: “franchised” distribution and “independent” distribution, for example, has become “authorized” versus “unauthorized”. Getting back to the basics—what component makers consider to be authorized products—will go a long way toward clarifying these issues and preventing the perpetuation of counterfeits in the channel.

In a contract between an original component manufacturer (OCM) and an authorized distributor, the term “authorized” has a very specific definition. OCMs protect their brand, their reputation and avoid potential liability by painstakingly contracting, training, and auditing their authorized distributors.  

“We have strict requirements about how we establish our authorized distributors,” said Lawrence Hurst, Corporate Anti-Counterfeit/Fraud and Samples Excursion Program Manager for Intel Corp. “These requirements cover transportation, storage and handling of our components. This ensures that the product delivered to the first customer is just as good as it was after leaving our factory.  But it’s not just how the parts are handled: authorized distribution means they [our distributors] are accountable to Intel and to their customers for delivering the same quality of products as left our factory.”

As the supply chain becomes more complex and orders are passed through contractors, subcontractors and even foreign sales agents, factory-to-end-user transactions have become the exception rather than the rule. As a result, if semiconductor manufacturers are going to stand by their products, they must be able to establish the part in the buyers’ hands was actually developed by, and produced by, the OCM and has not been altered in any way.

Establishing the provenance of components that are still being manufactured remains a complicated process. When a device is declared obsolete or reaches its end-of-life (EOL), the complications intensify. Often, manufactured components, their masks and die are sold to a distributor or put up for auction, and the process of traceability becomes difficult or even moot. Many component manufacturers, in an effort to protect their customers and their brand, will license their inventory; mask, die and IP to an authorized partner that can resell finished inventory, re-manufacture, or re-create parts with the OCM’s full warrantee.

Because many companies sell and procure components in the open market, distributors that are not authorized by OCMs may very well be able to sell parts that come from OCM factories. However, any mishandling or even repackaging of these devices can make them non-compliant—even considered counterfeit—for a specific application.  In most cases, all warranties are rendered void when purchases are made through unauthorized channels.

“Authorized distribution, for our industry, means that the distributor handling our products meets requirements to ensure that the first customer will have a product that is authentic, reliable, meets our performance specifications, and the product qualifies for our warranty,” said Hurst. “Today some organizations believe our products are commodity items for which price is the important differential and quality will be the same no matter where it is purchased -- the reality is that for critical components the source is key to getting a semiconductor that you can trust. This is particularly true for products no longer in production or not available from the original authorized distributors.  In many cases semiconductor companies sell their end-of-production inventory to companies like Rochester Electronics who store and handle the products so even if they are purchased many years later that they would meet the same authenticity and original reliability requirements. “

One of the most important and perhaps basic strategies to keep counterfeits out of the supply chain is to ensure a reseller is authorized -- in the strictest terms — by the original component manufacturer.

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