Electronics counterfeiting has hit an epidemic level. At the IP Symposium in San Jose this week, the scope of the problem was laid bare. Surely, there have to be opportunities for start-ups in fighting this problem.
Here are some factoids from the panel which included Tom Valliere, a consultant at Design Chain Associates, Daryl Hatano, vice president of public policy of the Semiconductor Industry Association, and Debra Eggeman, general manager of the Independent Distributors of Electronics Association.
One of every 10 tech products sold is counterfeit, leading to an estimate of a direct loss over $100 billion a year. Direct losses include recalls, increased warranties, rework.
High-tech products account for four of the top ten border seizures, according to U.S. Customs.
Last year, the U.S. and European customs officers seized more than 360,000 fake computer chips in a joint operation. Under “Operation Infrastructure,” the fake goods seized carried more than 40 different trademarks.
A $2 fake part leads to losses of $20 if detected at the manufacturing board level. It costs $200 if detected in the market.
Among the recent warnings for fakes: counterfeit electric drills, circuit breakers, batteries.
China is a big problem because its intellectual property enforcement has historically been weak, but it’s not the only country where fake parts are discovered or made.
Big companies that have been hit: Dell, Hewlett-Packard, and Sony. Industries affected: computers, avionics, automotive, telecommunications.
The types of counterfeiting include reverse-engineered copies, reclaimed scrap, remarked or re-branded working parts, and “bonus lots,” which slip out the back door of a factory. It’s only getting worse with the rise of eBay and Internet trading.
Daryl Hatano, vice president of the Semiconductor Industry Association, said that 15 billion chips were imported into the U.S. in 2006. With such numbers, it isn’t easy to catch the fakes.
One chip company reported that 100 of its parts with distinct serial numbers were counterfeited in the last three years. Another reported that it had made only 200 chips with a particular date code; it found a broker selling more than 40,000 of those chips.
The U.S. and Canada have conducted 400 seizures of fake Cisco network hardware with an estimated value of $76 million at retail.
None of these factoids are new, but they should make the case that somebody ought to do something about it. Technology can supply some answers. Using radio-frequency identification chips (RFID) could introduce supply-chain tracking. Manufacturers can embed nanoparticles and micro-tags in their products as anti-theft and secret identication devices. But such tracing can lead to spooky privacy invasions. Call it security, anti-counterfeiting, or supply-chain management. It’s got to be fertile ground for start-ups.