X-Rayted Files: The Dark Side of the Chip Shortage—Counterfeits

It’s February 2021, and as the world slowly recovers from the COVID-19 pandemic, another problem plagues the global economy: the electronic component shortage. What some economists have deemed to be a decade of immense prosperity and growth, the “roaring ‘20s” started with a hiccup. From cars to videogames, the lack of electronic components in the market has created a shockwave that is causing delivery delays and billions in losses to companies worldwide. U.S. car giant General Motors, for example, announced that it is shutting three plants and slowing production at a fourth due to the semiconductor shortage. The Detroit car manufacturer said this shortfall will cause a $2 billion reduction in its 2021 profits. GM is not alone. Ford said in January that it was shuttering a factory in Germany for a month, while Volkswagen said in December it will make 100,000 fewer cars this quarter as a result of the shortage.

All that in a year filled with excitement around the long-waited introduction of electric cars in the market: Ford with the passionate Mustang Mach-E, GM with the 1,000 hp insane HUMMER EV (yes, all caps), and Volkswagen with the sensible ID.4. All that excitement has been partially halted because a few ($60 billion worth of them) semiconductors are missing from the supply chain.

Cardoso_Cars_Collage.jpgFor sure nothing else can go wrong, right?

You should know by now, based on last year, that you should never ask this question. Of course, there’s plenty else already going wrong. What most people don’t realize is that right behind the chip shortage shockwave is another shockwave that is as damaging and as dangerous: the counterfeit components shockwave.

The following (non) scientific graphic displays how supply chain disruptions create the counterfeit shockwave (Figure 2). Let’s start prior to the disruption. The world is trotting along, no major disruptions, and in this case supply and demand are well matched. In this case, there’s not much for counterfeiters to do other than explore smaller pockets of disruption often found in the obsolete markets. Military and aerospace companies are big targets because they constantly consume components that are no longer made due to their need to maintain platforms that must operate for 20 years or more.

C_Cardoso_fig2.jpg
Figure 2: This graphic details how supply chain disruptions create the counterfeit shockwave.

Suddenly, a pandemic hits the world, millions of people are working from home and millions of kids are going to school on Zoom. The spike in the need to work remotely and study created a spike in the demand for electronic devices, thus creating a spike in the demand for components. The peak in the demand for components is not immediately matched by a spike in supply. Why not? There are several different reasons.

One, it’s very expensive to ramp up the capacity in the electronic component supply chain. Semiconductor foundries are in the billions of dollars and take years to plan. And even if capital is available to make this supply investment, it is also unknown how long the demand peak will last. What if your brand-new plant is ready when the demand drops, and your multibillion-dollar investment is now collecting dust? In other words, the return-on-investment time profile is uncertain. The large companies that make semiconductors don’t like that.

The supply-demand mismatch creates the supply chain gap we see in the plot above (Figure 2). This vacuum builds an incredible opportunity for the counterfeiting criminal enterprise. They see it as an amazing opportunity to partially fill this supply chain gap with fake components as desperate customers scour the market for parts. The desperation grows as companies see losses in the millions and billions because their manufacturing lines are halted, and as a result they are (sometimes) willing to look for these components in less reputable suppliers. That’s how billions of counterfeit electronic components infiltrate the supply chain, causing unknown damages to the products they are assembled in and the companies that sell them.

Unfortunately, it is hard to quantify these damages, as they are often masked as product defects that are seldom investigated as caused by a counterfeit component. The lack of transparency in how companies deal with counterfeits is a major impediment to our understanding of how grave this problem really is. After all, I don’t recall a single manufacturer happy to share how often they encounter counterfeit components. This information is usually shared under the veil of NDAs. Thus, I invite all companies to come forward: How often do you find counterfeit components? Let’s be open; that’s the only way we can improve this problem.

Companies that never find counterfeit components are often the ones that are not looking for them.

That brings me to the last piece of the puzzle: What to do with all these counterfeit components? This is not the first counterfeit shockwave we’ve seen. Every economic boom has created a similar shockwave. What’s unique about the current shockwave is the impact the pandemic had on the supply chain. Not only do we have a spike in demand, but this increase is also met with a proportional decrease in the supply chain’s ability to react. It's a double whammy.

We forecast an extended counterfeit shockwave, the size and extent of which we haven’t experienced. It’s never been more critical to have a good counterfeit mitigation program in place. That’s the topic of our next column, so stay tuned!

Dr. Bill Cardoso is CEO of Creative Electron.

Back

2021

X-Rayted Files: The Dark Side of the Chip Shortage—Counterfeits

02-17-2021

It’s February 2021, and as the world slowly recovers from the COVID-19 pandemic, another problem plagues the global economy: the electronic component shortage. What some economists have deemed to be a decade of immense prosperity and growth, the “roaring ‘20s” started with a hiccup.

View Story

X-Rayted Files: The Year of 2020 Vision

01-20-2021

What else can we say about 2020 that hasn’t been said? We have so much to reflect on, both to mourn and to be thankful for. The global pandemic has made an indelible mark on us all, and we, like everyone else, are changed forever. With the year behind us, and light at the end of the tunnel, we take a moment to look back as well as look forward.

View Story
Back

2020

X-Rayted Files: Solving for the Limits of Human Visual Inspection

12-16-2020

Because a key element of quality control in manufacturing is still good old-fashioned visual inspection, it’s important to understand the ability of operators to sustain their focus and what we can do to support their success. And while the fallibility of human inspection presents challenges, Dr. Bill Cardoso details how there are many ways to address shortcomings.

View Story

X-Rayted Files: iPhone Transparency—A Window Into SMT

11-17-2020

Though we don’t do them just for fun, teardowns are fun, but they have also taught us more than we could have imagined. Modern teardowns provide critical insights into the nature and construction of these devices. As an example, Dr. Bill Cardoso details the history of the iPhone as told through X-ray.

View Story

X-Rayted Files: A Century of X-Rays in the Automotive Industry, Part 2

10-28-2020

As one of the main users of X-ray inspection, the automotive industry has been one of the main drivers for the development of higher power and higher resolution X-ray imaging systems. Dr. Bill Cardoso continues with Part 2 of this column series.

View Story

X-Rayted Files: A Century of X-Rays in the Automotive Industry, Part 1

09-29-2020

If you have read any of Bill Cardoso's previous columns, you know that he is passionate about X-rays, cars, and electronics. In this column series, he talks about some of his idols, including Curie, Roentgen, Marconi, Galvin, and Ford.

View Story

X-Rayted Files: Is Quality Really Priceless?

08-19-2020

In a day and age when we can learn virtually anything online, manufacturers still manage to be opaque about pricing, especially when it comes to specialty equipment. Some may say, “Quality is priceless,” but Bill Cardoso explains how it isn't.

View Story

X-Rayted Files: Marching Toward 2021, 20 Miles at a Time

07-29-2020

We’re only at the halfway mark, and 2020 has been a real challenge. Our best-laid plans have been cast in doubt by the COVID-19 pandemic. During this transformational time, Dr. Bill Cardoso looks back a century for a bit of inspiration from Norwegian explorer Roald Amundsen.

View Story

X-Rayted Files: E-Commerce Boom Fraught With Risk—X-Rays to the Rescue

06-17-2020

It’s not news that online sales are increasing dramatically during this global pandemic. However, with increased sales comes the increased risk of return fraud and abuse. Dr. Bill Cardoso explains how X-ray can help detect dummy and counterfeit merchandise.

View Story

X-Rayted Files: Why Do We Break Stuff? Intelligence From Teardowns

05-20-2020

The impulse to break a new gadget to "see what's inside" and to “learn how it works” is often the first sign someone will become an engineer. We’ve learned a lot in over a decade of teardowns, which have helped us to understand how the SMT industry has changed over these years. Bill Cardoso investigates.

View Story

X-Rayted Inspection: Manufacturing in the Eye of a Pandemic

04-08-2020

Dr. Bill Cardoso usually writes about X-ray inspection, artificial intelligence, machine learning, and how it all connects to Industry 4.0. This month, however, he shifts gears and shares some of the things Creative Electron has been doing during the COVID-19 outbreak.

View Story

X-rayted Files: X-ray and AI—A Match Made In Heaven, Part 2

03-18-2020

In Part 1, Dr. Bill Cardoso covered the basics of the relationship between X-ray inspection and artificial intelligence (AI). In Part 2, Cardoso takes a step forward to cover some of the practical ways we use AI to improve the efficiency of our X-ray inspections.

View Story
Back

2019

X-Rayted Files: Will Radiation Damage My Electronic Component?

12-17-2019

Before I start talking about radiation damage on electronic components, let me warn you: if you are looking for a simple “yes” or “no” answer to the question, "Will radiation damage my electronic component?" stop reading now. Things will get complicated. You may feel like I did not answer the question at all, and you would be correct. There are whole conferences dedicated to this question (check IEEE’s Nuclear and Space Radiation Effects Conference), so the goal of this column is to give you some background to guide you to the right answer for your specific situation. Ultimately, the best way is to ask an expert.

View Story

X-Rayted Files: The Currency of Technology

11-11-2019

In the ever-moving tide of technology, the need to innovate requires a constant shift in vision, and this need has never been more evident than in PCB manufacturing. In fact, innovation has become so valuable that PCBs are quickly becoming the currency of technology. Dr. Bill Cardoso explains.

View Story

X-Rayted Files: The Risk of Installing Counterfeit Parts

10-02-2019

In high-tech manufacturing, the use of sub-standard components can be catastrophic. There is no greater need for quality control than in PCBs, as they are only as good as the components installed on them; therein lies the problem. Some components shipped to manufacturers are counterfeit!

View Story

X-Rayted Files: Just Because You Can't See the Problem Doesn't Mean It's Not There!

08-20-2019

In this new column, Dr. Bill Cardoso will cover everything related to X-rays from cool historical facts to the latest in technological advancements, starting with the discovery of X-rays in 1895.

View Story
Copyright © 2021 I-Connect007. All rights reserved.