Before buying parts from an independent distributor, purchasers should check what investment the distributor has made in testing and screening for counterfeit parts, By James Carbone.
Counterfeit parts is not a new issue for the electronics industry, but it is a continuing one and affects both large and small OEMs and electronics manufacturing service (EMS) providers.
However, it may be more of an issue for smaller electronics companies as they lack the purchasing volumes and buying power to purchase components directly from component manufacturers. Smaller electronics companies purchase components from authorised distributors, which only sell genuine parts. But there are times when buyers purchase from unauthorised independent distributors and parts brokers because there may be a long lead time for a part and it is not readily available from an authorised distributor. In some cases buyers may purchase components on the open market from independent distributors because the price for the parts may be much lower than from an authorised distributor.
The problem, of course, is that counterfeit parts are sold on the open market by unscrupulous independent distributors or parts brokers who may know that the parts are not genuine. In some cases counterfeit parts are sold unwittingly by usually reliable independent distributors that thought the parts were genuine, but did not thoroughly screen them for authenticity.
Industry trade groups often admonish buyers to only purchase parts from component manufacturers or their authorised distributors in order to avoid purchasing counterfeit components. Unfortunately, buyers don’t always heed that advice, especially if there is a shortage.
Buyers intent on buying in the open market can take precautions to avoid the risk of purchasing bogus components. One simple way is to check out the investment the independent distributor selling the part has made in equipment and processes to screen for counterfeit parts.
Some independent distributors have invested hundreds of thousands and even several millions of dollars in equipment that can detect if a part is genuine or not. Such equipment includes scanning electron microscopes (SEM), decapsulation machines, X-ray fluorescence (XRF) energy dispersive spectroscopy and other equipment.
One distributor that has invested more than $2 million over the last 10 years in such test equipment for counterfeit avoidance is SMT Corp., based in Sandy Hook, Conn. The independent distributor sells parts to companies in the defense/aerospace, medical, automotive, energy, and telecom industries among others.
The distributor has a laboratory equipped with scanning electron microscopes, EDX equipment and XRF and other X-ray machines to test the authenticity of parts. It also has invested about $500,000 in the Advantest Vector 93000 test platform.
“The system allows us to get in-depth electrical testing at high speeds and delve into a part and all the potential parameters” to determine if it is counterfeit, said Tom Sharpe, vice president of SMT.
He said SMT has three scanning electron microscopes so that it can check the authenticity of parts for multiple customers at the same time. “We have to have redundancy for our customers,” he said.
“We also have two EDXs and three XRFs, we have three real-time X-rays and two sub-micron digital X-rays, he said. “We have one Advantest 93000 test systems. That’s probably the next system we have to get redundancy on,” said Sharpe.
The distributor also has digital microscopes, heated solvent test capability, and acoustic microscopy, which “operates, like an ultrasound,” he said. Sound waves are used to test the parts which can show “all the degradation and voiding and latent defects” in parts, said Sharpe.
He said investment in such equipment is necessary because counterfeiters have become more sophisticated in what they do.
“The biggest issue right now is counterfeiters have largely begun to move away from traditional counterfeits” which were legitimate parts that were modified and misrepresented by counterfeiters. Often a part was re-labeled as a higher performing and higher priced component.
Attack of the clones
However, beginning in 2012 “our lab found the existence of clones, which we refer to as advanced counterfeits. These are devices that were completely constructed brand-new from scratch by a counterfeiter,” said Sharpe.
Advanced counterfeits look and electrically work just like a legitimate manufacturer’s part and the counterfeiters have done “such a good job of copying the part literally inside and out,” he said.
Detecting advanced counterfeits is where the future of testing in heading, said Sharpe. Electrical testing is needed and “unfortunately electrical testing is quite expensive,” he said. Electrical testing is seemingly become one of the most important tests besides scanning electron microscopy. “Scanning electron microscopy is in our view the single most important tests of them all,” said Sharpe.
“SEM imagery allows you to resolve all the way down to 300,000x whereas your standard microscope you’re lucky to get past 50X or 100X,” he said.
More independent distributors need to make investments in such equipment for clone detection because the number of counterfeits entering the supply chain is growing, said Sharpe. With cloning, counterfeiters are making fake parts in “manufacturing situations,” he said.
“They are not working with just 100 pieces of components that were plucked off circuit boards. They are working with hundreds of thousands sometimes and their ability to make volumes of these devices is phenomenal,” said Sharpe.
“There are supposedly 800 independent distributors or brokers in the United States alone. Of that that I can tell you on one hand the number that have a chance of finding these advanced counterfeits that are out there right now,” said Sharpe.
SMT offers counterfeiting testing to OEMs and EMS providers and some distributors and it is a growing part of SMT’s business, said Sharpe.
While testing is an important part of SMT’s efforts concerning counterfeit parts, it is not the only one. Sharpe said the company is selective in where it sources parts. “We have a much tighter approved vendor list of who we are willing to buy from,” he said.
Sharpe said it is necessary to check the “processes that suppliers have to vet their own parts before they sell them to us. Their capabilities in house are important to us. There are lots of suppliers out there that have good processes. To get certain levels you have to spend money” to evaluate suppliers, he said
He noted that a lot of counterfeit components originate in China. If an OEM or EMS provider buyer purchases parts from suppliers in China without vetting them, or purchases components from brokers in the U.S., who buy all their parts in China, the OEM and EMS purchaser will end up buying “lots of counterfeits,” according to Sharpe.
He said while it costs money to carefully evaluate suppliers in China, it results in a much better approved supplier list and fewer counterfeit parts.
Another independent distributor that has invested in testing equipment for counterfeit detection is Smith and Associates, based in Houston, Texas. Kirk Wehby, chief operating officer for Smith, said his company has invested in electrical testing, X-rays, scanning electron microscopes, and solderability testing in recent years.
He said the investment in equipment is necessary because “with counterfeit detection and authenticity testing there is no silver bullet,” he said.
“We have invested well north of $1 million globally” in processes, procedures and equipment, he said. Investment in equipment for counterfeit screening is important, but more important is having the right people in place, according to Wehby. There needs to be investment in training people and to have people with the expertise about counterfeiting, he said.
“It’s one thing to have the equipment, but it’s another thing to have that equipment and have qualified people to be able to utilise it,” he said.
While Smith has invested $1 million in equipment, there is also “an ongoing investment in people and training. Such investment is necessary because many customers want evidence that the parts they purchase are genuine.
“We see more and more of our customers are asking us, no matter where we purchased the parts, for authenticity reporting and quality testing and that goes beyond just a visual inspection,” said Wehby.
Testing the application
He said screening and testing of parts is evolving and there is a trend to electrical testing of parts by application. “We constantly have to work to stay ahead of the counterfeiters,” said Wehby. “The progression is getting to a point where there is more application-based electrical testing. That is where the investment needs to be,” he said.
Application-based and electrical testing provide a good indication of how the parts should be functioning in the field, he said. A part could pass electrical tests in the lab, but could fail in the field because the environment conditions in a certain application can be different.
The trend toward electrical testing based on application means that a “bigger investment in people” is needed, said Wehby. More electrical engineers that “can build out some of these test benches or application benches” and allow for more specific testing will be needed, said Wehby.
He said while counterfeiting has become more sophisticated, Smith has seen fewer incidents of counterfeiting internally as it has closely scrutinise and rated it suppliers and only purchases from the most trusted sources.
“Over the years we’ve weeded out a lot of vendors. Our buyers cannot place a PO with hundreds of vendors that we’ve identified as substandard,” said Wehby.
Counterfeit parts is also a concern of smaller independent distributors. For instance NewPower Worldwide, a Nashua, NH-based independent distributor that started in 2014, made an initial investment of $330,000 for microscopes and other equipment for counterfeit detection, said Carleton Dufoe, CEO and founder of the company.
“On top of that we have a big investment in human beings,” said Dufoe. “We have five key people in the organisation and each has 10 years experience with handling, touching and working with good quality product and with counterfeit product,” he said. Such experience helps NewPower identify suspected counterfeit parts even before testing.
He said his experts on staff that have “hands on experience“often can identify telltale signs that a component may be suspect. Often they can tell “a part doesn’t look right. The part may have a bad label or the part may look like it has been remarked or etched.
While some counterfeiters have become more sophisticated with cloning parts, others are still relabeling components to make them appear to be higher functioning parts than they are.
“One of the biggest things is that instead of remarking parts by painting a new part number on is that counterfeiters are buying laser equipment that legitimate component manufacturers used to use”, said Barry Lafontaine, chief quality officer for NewPower.
To the naked eye the new markings are hard to detect, but under a microscope “you can see how these parts were handled and how the leads have been re-pinned. In some cases the laser has gone too far and there are burn marks,” he said.
Whether it identifying remarked parts or counterfeit clones, independent distributors say they will continue to invest in the processes and equipment needed to thwart the proliferation of counterfeit components in the supply chain because customers demand it.
Wehby says the investment that Smith has made in counterfeit detection is a value-added for customers. “The investments we’ve made are simply to make sure we are meeting our customer demands, whether it is from a quality standpoint or delivery standpoint,” he said.
Wehby added Smith has seen a return on its investment in counterfeit testing because it has resulted in Smith being able to “give our customers a strong comfort level. It’s a tangible return on investment when it comes to being able to obtain or retain customers,” he said.