There are certain conditions that are ideal for a dangerous virus to grow, and when those conditions prevail, a pandemic can be the result. Similarly, right now we are seeing the ideal growing conditions for fraud and counterfeiting in the electronic components supply chain. Kevin Sink, TTI Inc. Vice President, Total Quality share his views in recent article published by TTI Market Eye.
Logistical issues, the disruption of supply chains by the Covid-19 pandemic, concerns about raw materials availability and increased competition for key components among different industries – all of these factors have led us to the status quo of long lead times and high uncertainty.
In this high-stakes, high-stress environment, larger OEMs and ODMs may have more options than mid-size and smaller manufacturers. Even so, there is no shortage of bad actors who are waiting to take advantage of anyone who falls into their trap.
First, there are the ever-present problems of counterfeit parts: components that are offered as new when they are actually used or refurbished, and components that have been intentionally mislabeled to appear to be of higher quality or reliability than they actually are. Those challenges have not gone away.
In addition, manufacturers are being targeted by sophisticated groups that claim to be franchised distributors with parts in stock – in exchange for up-front payment. These organizations build reputable-looking websites and register a wide variety of domain names related to different electronic components. They invest heavily in search engine optimization (SEO) and bid on internet keywords in hopes that their site will appear above other authorized distributors in search results.
These websites will promise on-time delivery. Of course, as soon as the funds have changed hands, that’s the end. No parts will ever arrive, because there were no actual parts for sale. In many cases the funds have been quickly transferred away from the destination bank, leaving victims with little or no recourse.
Industry watchers have seen similarly-designed websites with multiple different names –as many as 50 or more variations – that seem as if they are in the business of selling passives, semiconductors and more.
This sort of fraud was common years ago until the legitimate industry of parts escrow services helped prevent it. Buyers who are urgently searching for parts via any means possible may not be familiar with this type of scam, or they may not know to rely on an escrow service.
A lot has changed in the past two decades. Smartphones and other computing devices, plus the growing electronics content in vehicles, have increased demand for electronic components vastly. Those who weren’t working in our industry during (for example) the tantalum shortage of 2000 may be caught off-guard.
While major companies with larger staff and more resources may not fall victim to this kind of fraud, unfortunately, smaller manufacturers may be vulnerable – especially those who deal in smaller volumes where every job is a much larger contributor to the company’s overall health.
To those worried about access to electronic components inventory during these challenging times, the best advice we can give is do your due diligence and build connections with a known authorized distributor. If you’re looking for specific components, rely on ECIA’s TrustedParts.com search instead of search engines like Google or Bing.
While the potential for fraud won’t disappear entirely, by working together we can at least help stop counterfeiting and scams from harming manufacturers and customers in the industries we serve.
Special thanks to Kristal Snider of ERAI who contributed information for this article.
A version of this article originally appeared in the July 2021 edition of Electronics Sourcing North America.