Open Journal of Social Sciences
2013. Vol.1, No.7, 12-16
Published Online December 2013 in SciRes (
Open Access
The Counterfeit Electronics Problem
Michael Pecht
Center for Advanced Life Cycle Engineering (CALCE), University of Maryland, College Park, MD, USA
Received August 2013
Counterfeit electronics have been reported in a wide range of products, including computers, telecommu-
nications equipment, automobiles, avionics and military systems. Counterfeit electronic products include
everything from very inexpensive capacitors and resistors to costly microprocessors to servers. This paper
describes the counterfeit electronic products problem, and discusses the implication of counterfeit elec-
tronics on the electronic supply chain. We then present counterfeit detection and prevention techniques
for electronics.
Keywords: Counterfeiting; Supply Chain; Authentication
Counterfeiting is an infringement of the legal rights of an
owner of intellectual prope rty (Tiku, Das, & Pecht, 2004). Coun-
terfeit goods mean any goods, including packaging, bearing with-
out authorization a trademark which is identical to the trade-
mark validly registered in respect of such goods, or which can-
not be distinguished in its essential aspects from such a trade-
mark, and which thereby infringes the rights of the owner of the
trademark in question under the law of the country (of importa-
tion) (World Trade Organization, 2006).
Counterfeiting exists, because it is a way to make money by
by-passing the research, development, marketing and sometimes
the quality and reliability aspects of the original product. Some-
times these look-alike products are sold on the open-market
under a slightly different brand name; other times the products
are sold as the original. The first type of product usually in-
volves the issue of intellectual property and copyright infringe-
ment and can be associated with a specific manufacturer. The
latter product is usually slipped into the stream of commerce
surreptitiously, often through unknowing or corrupt distribution
channels and it is hard to trace it back to the original source.
This paper deals with the second type of counterfeiting.
Counterfeit electronics have been found in computers and
telecommunication products, as well as automobiles, avionics
and even military electronics. Whenever a product can be made
cheaper than the original, counterfeiting can occur. Counter-
feiting has been found to be further encouraged if there is a lack
of supply of the original product. In fact, products and systems
that are in service for long periods of time or have long-term
warranty requirements are particularly susceptible to counterfeit
products. The reason is primarily associated with the obsoles-
cence (lack of availability) of the products used in these sys-
tems. When the demand for replacement products becomes
high, the price of such parts increases providing counterfeiters’
opportunities for profit. In addition, replacement of obsolete
products often leads to purchases from less reliable sources
such as part brokers1 and online exchange services instead of
franchised2 or independent3 distributors. In cases of brokers and
online exchange services, the actual sellers are often unidenti-
Risks from Counterf eit Electronics
It is estimated that legitimate electronics companies miss out
on about $100 billion of global revenue every year because of
counterfeiting (Pecht & Tiku, 2006). That figure takes into ac-
count only the profits that counterfeiters siphon off from man-
ufacturers; it ignores the added repair and maintenance costs
necessitated by defective bogus parts and the expenses of trying
to identify and intercept suspected counterfeiters.
The economic repercussions of counterfeit products reach far
beyond the cost of merely replacing the items. For example, an
electronic component that may be worth only $2 can cost as
much as $20 to replace if it is detected to be counterfeit after it
is mounted onto a circuit board (Sullivan & Graham, 2001),
and failures of systems that use counterfeit electronics can
cause loss of mission, safety problems, and significant mainte-
nance and logistics cost s.
For the consumer, the failures of systems that use counter-
feits can lead to safety and security problems. Even if the fake
part works, at least initially, it still poses reliability risks, be-
cause it hasn’t undergone the legitimate manufacturer’s rigor-
ous quality assurance processes (Pecht & Tiku, 2006).
When counterfeit parts make their way into safety related
applications, there is risk to the system manufacturers since the
original counterfeit part manufacturer(s) may not be identified
or be brought into any legal or regulatory system. Even in cases
of failures of electronics in commercial applications, the final
products manufacturer will remain liable for failures due to
counterfeit parts. They will have little chance to recoup the cost
of such liabilities from a counterfeit part manufacturer. It will
be hard to locate, prosecute or even recover the penalties from
Part brokers are scouting agencies for “hard to find” replacement parts and
components that hold inventory of possible sources of parts and not the parts
themsel ves and may also search for parts only when the need arises.
2The term “franchise” refers to a continuing commercial relationship be-
tween the franchisee and the franchiser. Franchisee distributors are those
who hav e signed sell ing and market ing contract with part manufact
urers for
the distribution of goods or services identified by the franchiser’s trademark
or trade name.
Independent distributors are aftermarket sources of parts that offer end
users parts and service. They make a one-
time purchase of parts without
continued commercial relationship with t he manufacturer/suppl i er.
Open Access
Counterfeiting issue can also be seen as a part quality prob-
lem. Counterfeit parts can have a major variation from the ori-
ginal parts in material, construction and electrical properties.
Even when the counterfeit parts are close to the original parts in
quality—they are still not manufactured and evaluated in ac-
cordance with the manufacturer’s standard qualification and ac-
ceptance procedures. These counterfeit electronic parts can be
copies of original parts but can also be re-labeled or repackaged,
and even be recovered from scrap and recycled.
Counterfeit parts pose another type of risk to the system ma-
nufacturers besides quality. The parts may not meet the safety
or environmental rules for the market in which the product is
marketed. For example, the European Union’s Restriction of
Hazardous Substance (RoHS) bans the use of lead and five
other substances from being used in electronics equipment sold
in Europe. If counterfeit parts that claim to be RoHS compliant
does contain the banned substances, the company making prod-
ucts with those parts may be liable for breach of the law. Some
analysts think that huge demand for RoHS compliant parts in
Europe will lead to shortages, which would indirectly facilitate
the entry of counterfeit RoHS parts in the supply chain through
part brokers (Carbone, 2006).
Detection of Counterfeits
The actual extent of counterfeit electronics is difficult to es-
timate. For an electronics equipment manufacturer, it is chal-
lenging to identify counterfeit product from among the thou-
sands of products used to assemble a system. In some cases, the
counterfeit may have been introduced several steps earlier in
the supply chain, and is part of a module or assembly sold by a
reputable company. Most manufacturers do not have the re-
sources to trace the actual origins of every part in the product.
Those who put counterfeit products in the supply chain go great
lengths to duplicate materials, part numbers, and serial numbers
to coincide with authentic products, making counterfeits hard to
detect. Sometimes the parts may actually work, at least in car-
rying out some functions for a short period of time. Thus, without
an anti-counterfeiting inspection procedure or construction ana-
lysis whereby the product is carefully analyzed, counterfeit pro-
ducts can enter into the supply chain undetected and be used in
a variety of applications.
The detection of counterfeit products usually occurs when
there is a system failure, and the subsequent root cause failure
analysis investigation reveals that a part is counterfeit. However,
failures are not always easily traceable and there can often be
confusion as to whether the part was defective, was damaged
(in assembly or use) or is counterfeit. In many cases, without
proper root cause analysis, the failure can be attributed incor-
rectly to other causes (Thomas, Ayers, & Pecht , 2002). Furthe r-
more, if the counterfeit functions as the original, it can be near-
ly impossible to detect, until a problem occurs. It would even
be harder to detect a counterfeit RoHS part since it would not
necessarily lead to system failure.
Examples of Cou nterfeit Electronic Products
Some examples of counterfeit products that have been pub-
licly reported are discussed in this section. These examples il-
lustrate the ease with which counterfeit electronics can find
their way into electronic systems. We have grouped the exam-
ples into three categories: relabeling, illegal manufacturing, and
scrap salvaging.
Examples of Relabeling
This section describes examples of counterfeiting where lo-
wer priced or lower grade items have been relabeled to appear
as a costlier or a higher grade item. This type of counterfeiting
largely occurs when new version products are introduced into
the market. Counterfeiters buy a different version of the parts at
a lower price, relabel them, and then resell them as the version
required by the customer at a higher price.
As early as in 1998, counterfeiters were repackaging 266-
MHz Pentium IIs as 300-MHz chips since 300-MHz Pentium II
chips cost $375 per processor, while 266-MHz Pentium II chips
cost $246 per processor. If a 266-MHz rated processor is oper-
ated at 300 MHz, it runs, but reliability becomes an issue since
it becomes hotter at 300 MHz and can then give incorrect an-
swers to instructions (Cnet Networks, 1998).
In May 2003, RAM Enterprises, a distributor, was convicted
for manufacture and resale of counterfeit parts, falsifying doc-
uments, making false statements and providing counterfeit parts
to companies for use in commercial and military aircraft and
weapons systems. RAM was found to have knowingly sold
counterfeit connectors that were allegedly manufactured by Tri-
Star Electronics International Inc. by including a “false certificate
of conformance” for part number M39029/4-112. In another in-
stance, RAM had used a solvent to remove color bands from
approximately 6500 connectors procured from Air-Electro Inc.
(a maker of mil-spec connectors) to make them appear of a
higher grade (Sullivan, 2003).
In the Fall of 2003, AMD conducted some raids in Europe,
where some of its low speed, low priced microprocessors were
being relabeled as high speed, high priced chips. On investiga-
tion it was found that some resellers in Shenzhen, China were
performing the remarking. AMD also purchased some micro-
processors from the resellers and found them to be fakes (Ta-
kahash, 2004).
Examples of Illegal Manufacturing
This section describes examples where complete parts have
been manufactured and labeled to appear to come from an ori-
ginal manufacturer. These parts are then sold as being manufac-
tured by the legitimate manufacturer.
On October 23, 2006, GIDEP issued an alert about a silicon-
controlled rectifier, JAN2N1774A, of General Electric (GE)
with lot code 9240. Lockheed Martin Missiles and Fire Control
had experienced a high failure rate of these parts with the GE
logo. Failure analysis of the devices by Lockheed Martin re-
vealed poor materials and workmanship in numerous areas (e.g.,
nail bonds to die, lead crimps, marking permanence and die at-
tach) (Government-Industry Data Exchange Program, 2006).
In early 2006, BAe Systems and Platform Solutions received
104 pieces of the CY37032P44-125AI parts, (Cypress Semi-
conductors with date code 0223 and the mark lot number
709673) from Aztec Components, a part broker. This lot of
parts exhibited a high reject rate during programming at a test
laboratory. Cypress Semiconductors checked the date code and
lot number and the logo on the top surface of the parts and
found that the markings were all forged (Government-Industry
Data Exchange Program, 2006).
Open Access
BAE Systems and Platform Solutions found another problem
with 500 pieces of Linear Technology M38510/14802BXA
parts they bought from Electronic Components Inc., a broker in
2006. On visual inspection, it was found the parts to be laser-
marked rather than ink-stamped as is the case with Linear Te-
chnology’s parts. The die of the suspected part was compared
with that of a known good part and found to be 50% smaller.
Also the mask set and wire bonding material were found to be
different (Government-Industry Data Exchange Program, 2006).
On February 24, 2003, Maxim Integrated Products and its
wholly owned subsidiary, Dallas Semiconductor, posted an alert
on its website regarding counterfeit Maxim/Dallas Nonvolatile
Static Ram (NVSRAM) modules (DS1230, DS1245, DS1250)
being sold in Asia. The parts had been disguised and marketed
under the Dallas Semiconductor label, using Dallas Semicon-
ductor marked shipping tubes and boxes. The alert stated that
the customer returns for these imitation modules revealed a
wide variation of components and assembly techniques, quite
different from the authentic parts (Electronics Supply and Ma-
nufacturing, 2003).
In some cases, the copies of products had comparatively easy
to identify mistakes in their labels. On Sep 28, 2005 X-bit labs
reported that forged hard disk drives similar to Maxtor Corps
MaXline II HDDs were being sold in the Japanese markets. The
counterfeit hard disk drives had incorrect font on the label and
used lower case “X” letter in the brand name of MaXLine II
(Shilov, 2005). Similarly, in 2003, Agilent Technologies Inc.
had an experience with counterfeit parts when a customer re-
turned an optocoupler for failure analysis. The part, which was
bought through a broker, came under suspicion when the cus-
tomer found the word “Singapore” spelled incorrectly on the
part (Sullivan, 2003).
Examples of Scrap Salvaging
This section describes examples where defective or outdated
items meant for scrap have been salvaged and then re-circulated
into the supply chain. Electronic parts that are scrapped but not
destroyed are cleaned, reworked and returned to the supply
On September 28, 2004, GIDEP issued an alert regarding un-
authorized distribution of Philips Semiconductors Part number
PCD3311CT (musical tone generator IC) (Government-Indus-
try Data Exchange Program, 2004) after L-3 Communication
Sys tems—East of Camden, N.J. reported numerous failures.
Philips Semiconductors found that the parts appeared to be
scrap material that had somehow showed up on the gray market.
Philips also indicated that they have received other similar cus-
tomer complaints for parts with this part number purchased
from unauthorized resellers.
On April 15, 2003, GIDEP issued an alert about a precision
operational amplifier, LT1097S8 of Linear Technology Corp.
(LTC) with lot code 0103. Textron Systems had experienced a
high failure rate of these parts. LTC’s visual and destructive
physical analysis revealed the parts to be counterfeit. LTC also
noted that the top of some parts appeared to have been sanded
down and remarked; indicating that the parts were eight years
older than they actually were date coded (Government-Industry
Data Exchange Program, 2003).
In January 2005, Advanced Micro Devices (AMD), working
in cooperation with Taiwanese authorities, seized a total of
60,000 counterfeit AMD microprocessors worth US $9.46 mil-
lion during a raid on an electronics company in Tainan, south-
ern Taiwan. The raid turned up suspect AMD microprocessors,
including K7 [AMD Athlon XP] and K8 [AMD Athlon 64]
models. The defective microprocessors, which were meant for
scrap had been stolen from one of AMD’s three packaging
plants in Asia and shipped to Taiwan for remarking (Shilov,
On June 04, 2003, GIDEP issued an alert regarding the pres-
ence of a non-Cypress die within a Cypress military package
5962-8871305RA/PALC16L8-30DMB (a 20 pin CDIP, digital
memory, lot code TAH9949). This part had become obsolete in
1999, and Telephonics had purchased more than 100 parts from
two different brokers in April 2003. Since Telephonics engi-
neers could not program the part with the Cypress algorithm,
they performed a failure analysis that revealed a smaller die
than that of a similar part with lot code THA9916. Also, while
the THA9916 part had the Cypress logo, TAH9949 part had the
MMI logo. Cypress has since indicated that traceability desig-
nators for military parts were missing in the purchased parts
and that the “country of origin” code was wrong (TAH instead
of THA for Thailand) (Government-industry Data Exchange
Program, 2003).
Prevention Efforts
There are organizations that monitor and report on counter-
feit products. One of the most active is the US Department of
Defense Government-Industry Information Exchange Program
(GIDEP); others include the US Department of Energy (DoE)
Lessons Learned Program, the US Defense Industrial Supply
Center, the Electronic Resellers Association International (ERAI),
and the International Anti-Counterfeiting Coalition (IACC)
(Science Applications International Corporation, 2002). These
programs have been effective in alerting companies of known
counterfeit products, but do not solve the cause of the problem.
To stop counterfeit products being introduced into assembled
systems, manufacturers of critical systems must use checks and
safeguards to ens ure that the parts and modules contained within
their systems are not counterfeit. These safeguards can range
from specially designed tests, to aggressive overt and covert au-
thentication techniques. Such overt or covert product protection
makes counterfeiting harder and more expensive. Effective
overt authenticating technologies enable the public to recognize,
avoid, and report instances of counterfeiting, and covert tech-
nologies can alert company representatives and enforcement
authorities to counterfeiting activity. Anti-counterfeiting tech-
nologies also provide evidential support in a court of law,
where issues of product genuineness and liability may have to
be determined (Tiku, Das, & Pecht, 2004). Different types of
authentication techniques are available like data matrix codes,
RFID tags, photonic inks, and microtaggants which can be used
for rapid product authentication. We go over these techniques
briefly and understand their interesting features.
A tool for supply chain management and retail inventory
control is radio fr equency i dentific ation (R FID) ( SATO America,
2006). Radio Frequency Identification (RFID) is an automatic
identification method, relying on storing and remotely retriev-
ing data using devices called RFID tags or transponders. RFID
system consists of a tag, reader and a database. Chip-based
RFID tags contain microchip and an antenna and are used to
store and transmit authenticating data such as manufacturer
name, brand name, model and a unique serial number. RFID
tags are attached to or incorporated into a product for the pur-
Open Access
pose of identification using radio waves. RFID reader, an an-
tenna packaged with a transceiver and decoder, emits radio
wave activating the RFID tag so it can read a nd write data to it.
The reader decodes the data encoded in the tags integrated cir-
cuit (silicon chip) and the data is passed to the host computer or
the database. RFID tags have many applications in automated
manufacturing and logistics control. But use of RFIDs demands
that companies agree on a standard encoding scheme; to date
that hasn’t happened (Pecht & Tiku, 2006).
Another tool is data matrix code, which is a 2D code used for
storing product specific information like identification number
of the manufacturer, identification number of the part type, and
the serial number of the specific part (Agapakis & Stuebler,
2006). The term matrix code applies to 2-D codes that code the
data based on the position of black spots within a matrix. Each
black element is of the same dimension and it is the position of
the element that codes the data. Data matrix codes are applied
with lasers directly on the part and are durable and typically
lasts the life of the part. These codes are read with a reader,
which can be linked to shop floor computer networks and ac-
cessed from remote locations. They have numerous advantages
over barcodes. They don’t require any labels for marking. Also,
they oc c up y on e-te nth of the space of the 1D barcode while sto-
ring greater amount of information and thus can identify very
small components and dense sub-assemblies, which have no
space for labels.
Photonic inks are manufactured to first be invisible, and se-
condly to photo-decay at precise wavelengths and are used in
anti-counterfeiting measures (Bastia, 2002). Apart from authen-
tication, photonic inks can also be used to embed a 2-D barcode
into the product, or the product packaging in a covert fashion.
These barcodes may contain data such as point of manufacture,
distribution or even product specific data such as product type
or other signature data.
Microtaggants is a covert tool for product authentication.
Several different taggants are available. The taggants are used
to create unique code that can serve as a unique fingerprint for a
product. Examples of taggants include polymer based and rare
earth material based. An example of a complete system using
taggants is described in next section.
Authentication technologies should be used at each and every
level of the supply chain from die to the final product packag-
ing so that counterfeit parts don’t find their way into the prod-
uct. In-built authentication technologies not only help in track-
ing and tracing of parts through the supply chain but also aids
in identifying counterfeit parts. Although no authentication te-
chnique is full proof but in many cases if the cost of fraud to the
perpetrators can be made high enough then that can be a deter-
Each of the anti-counterfeiting methods has a cost and an as-
sociated effectiveness. Nevertheless, the International Anti-
counterfeiting Coalition (IACC) reported in 2001 that Fortune
500 companies each spend between $2 million and $4 million
(some companies are reported to be spending up to $10 million)
annually to combat global counterfeiting (Sullivan, 2002). The
goal is to keep counterfeit products out of the consumers’ hands
and the reseller channels.
Summary and Future Directions
Counterfeiting is an infringement of the legal rights of an
owner of intellectual property. High profits, low risk of detec-
tion, and weak prosecution contribute to the supply of counter-
feit parts. Counterfeiting of electronic parts causes potential
hazards including safety and loss of profits to companies, as
well as maligning the reputation of manufacturers and distribu-
tors. All types of parts and part manufacturers are susceptible to
counterfeiting, as illustrated by the examples provided in this
paper. A number of laws have been enacted in the United States
to penalize counterfeit activities and other IP violations. Several
private and public organized groups have also taken notice of
and created technological and information-sha ring tool s to help
the industry detect and avoid the use of counterfeit parts. But
these measures do not solve the cause of the problem.
As illustrated by most of the examples of counterfeiting pro-
vided in this paper, parts bought through sources other than the
manufacturers or authorized distributors have turned out to be
counterfeit. The or iginal equipment manufacture rs (OEMs) should
particularly avoid purchasing from unauthorized sources like
part brokers since they have no direct relation or any commit-
ment to the manufacturer or the buyer of the parts. Part brokers
have negligible control over their supply and can be duped into
purchasing and selling counterfeits. Furthermore, brokers can
close shop at any time after supplying the parts, leaving the cus-
tomer without the possibility of any follow-up action (Tiku,
Das, & Pecht, 2004).
There are two complementary and parallel technical efforts
in mitigating the impact of counterfeit parts. The first one is
driven by the part manufacturers who can make their products
harder to copy and make it easier to detect duplicates. The se-
cond effort comes from the point of view of part users whose
effort is self protective in making sure that they can reduce the
chances of buying counterfeit parts. The authentication techno-
logies can work for both types of efforts. The direction of sci-
entific research needs to ensure that the authentication methods
can be made compatible with the production processes without
major modifications or economic impacts. The research also
needs to ensure that the addition of such methods do not result
in unintended quality and reliability problems for the users.
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