Counterfeit Electronics are a Rising Threat to Manufacturers

Counterfeit electronics have become a more prevalent threat to the manufacturing industry due, in large part, to the glut of consumer electronics on the market. Televisions, laptops, mobile devices, wearable technology and wireless devices all contribute to a huge demand for better tech.

Unscrupulous businesses make counterfeit electronics in many ways. Typically, wayward companies pose as manufacturers and cobble together devices that appear to be the same as original technology. However, the inner workings of a tablet, smartphone, headset or computer may have obsolete parts that don't meet the specifications of the original manufacturer. The designers of these electronics develop a supply chain with less expensive parts from e-waste facilities or component design warehouses, and yet they sell these electronics for the same retail price as the originals.

Counterfeit electronics cost the industry as much as $26.8 billion in terms of semiconductors alone, and up to 8 percent of the electronic components revenue goes through a gray market of second-hand products. One way to combat the problem involves electronic labeling of every possible component within an electronic device. These small labels contain unique serial numbers found in bar codes, RFID tags, holographic identifiers or some other covert identification method. These numbers help manufacturers maintain a better supply chain, but the industry lacks standards for component identification. This lack of standard identification presents problems beyond a security threat and lost revenue.

Companies must realize lives are at stake when counterfeit electronics appear within devices supplied to the U.S. military. Those fake components could cost the lives of military personnel and civilians when planes, rockets, tanks, helicopters or missiles malfunction. When the media publishes news stories about counterfeit parts and sting operations, the illegal companies take notice and adapt. Criminals shut down the operation at one location and simply open another one. Then, the process continues and counterfeiters undermine real manufacturers.

Manufacturers should treat counterfeit electronics more like a security threat or a data breach within the walls of a facility. Companies should train employees on how to handle components and how to identify genuine parts at the factory. Manufacturers should meet regularly with suppliers, and the suppliers for the suppliers, to ensure each component has proper labels and sourcing. Companies must identify possible security breaches through the IT team responsible for technology within the plant. Managers and team members should ask themselves "How can we help prevent counterfeiting before it even starts?" That way, the collaborative process begins to mitigate illegal sales of shoddy products.

Counterfeit electronics manifest themselves to manufacturers in several ways, including dissatisfied customers, bad social media press, returned shipments and eventual loss of business. Factories should take responsibility for counterfeiting and implement viable security measures, such as high-tech labeling, to stabilize the supply chain and weed out counterfeiters.

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