The true cost of counterfeit

January 26, 2008

The problem of component counterfeiting is an increasingly serious and complex  issue, and one which affects virtually every manufacturer or assembler of electronic equipment.

The commercial pressures of international competition and increasingly tough legislative environments have created a fertile environment for the unscrupulous to profit at the expense of legitimate business. Far from being a “victimless crime”, the cost  – both human and commercial – of counterfeiting can be devastating. With so many companies now sourcing on the international market, counterfeiting is an issue that nobody can ignore. Companies need to be aware of the problem and the steps that can be taken to avoid falling victim.

Worldwide, it is estimated that counterfeit goods account for between 5% and 7% of all world trade, worth a colossal $450-$500 billion a year. While fake clothing, consumer durables and automotive components account for a large part of that, counterfeit electronic components are a significant and growing proportion of the total.  An estimated 10% of all technology products sold worldwide now contain fake components. That equates to a staggering $100 billion annually. The cost to industry in terms of product failures, loss of reputation or litigation is potentially much more.

The origins of the majority of these forged and counterfeit components lie in South Asia and the Far East. The EU imports €10.6 billion of goods every year from China alone – mainly computers, electronic components, mobile phones & cameras. While the vast majority of trade is entirely legitimate, with such volumes even a few percent of counterfeiting represents a significant quantity of substandard components arriving into the EEA every year.

In contrast to fake designer clothing or consumer goods, counterfeit components used in electronic sub-assemblies are often very difficult to spot. Today’s counterfeiters have become very adept at producing convincing forgeries and have developed sophisticated techniques for introducing them into the legitimate supply chain. Given the difficulties of enforcing contracts and international intellectual property rights legislation in China and India, the unscrupulous agent or manufacturer has very little to lose from being caught, and everything to gain. The complex ways in which components and sub-assemblies are traded and sourced can work to the advantage of forgers, enabling them to hide their tracks behind a complex series of transactions. The international outsourcing of procurement means that components can often pass through the hands of several procurement agents before delivery; agents that in some cases actually “own” the components for a matter of minutes before selling them on.

The problem is compounded by the number of ways that components can be faked and the sophisticated ways in which unscrupulous suppliers introduce them into the market. Deliberate forgeries are perhaps the most obvious way in which companies can fall victim to the counterfeiters. Bearing a recognised makers name and trademark, an encapsulated component may look – superficially – very convincing. Often, the forged component may even perform to specification, at least initially. Internally, of course, it is a very different matter: Sub-standard materials and production techniques, and lax quality control mean components that can fail suddenly with potentially disastrous consequences.

The remarking of components is more difficult to spot. In this case, genuine components will have their markings modified to denote a component of a higher specification from the same manufacturer. For example, a faster processor or greater memory capacity. In the post RoHS world, remarking can also be one way that non-compliant components can be passed off as legitimate. The unexpected discovery of non-compliant components could easily spell disaster for an equipment manufacturer or sub-contractor, even if no actual failures occur in service. Even without re-marking, non-compliance at component level is very difficult to spot without costly and thorough analysis by specialist companies.

The passing-off of recycled components as new is also a growing trend. Low labour costs coupled with the legislative requirements for the disposal of hazardous waste means that the shipping of obsolete equipment to China and India for disposal and recycling is an increasingly profitable enterprise. In a few cases, parts salvaged in this way can sometimes find their way back into the market as new parts. Although genuine, components are stressed during the salvage process and are often at the end of their useful lives anyway resulting in short-lived and unpredictable performance.

Sourcing only from reputable suppliers is an obvious way in which companies can protect themselves from forged components. But in an increasingly competitive world, the temptation to look to the so-called grey-market for components may well prove an overwhelming one for hard-pressed businesses. But in doing so, companies expose themselves to risk.

Some manufacturers operate a scrap allowance scheme, by which they pay distributors to scrap overstocked inventory. However as this scrapping process is itself often outsourced, these components may well find their way back onto the grey market rather than being destroyed. Although genuine, as far as the manufacturer is concerned they do not exist and so will not be covered by any guarantee.

Even by dealing only with authorised suppliers does not necessarily ensure fake-free components. If an authorised supplier operates a returns policy, this may provide the means for fake components to enter the legitimate supply chain. For example, if a company sources components through both authorised and grey market sources, it is entirely possible that “fakes” from the grey market sources can end up getting mixed in, either deliberately or unwittingly, with genuine returned components. Once a batch of genuine components is contaminated in this way, the fakes become almost impossible to spot.

In combating the menace of component counterfeiting, the best defence that businesses have is to arm themselves with knowledge. For the first time, the subject of component counterfeiting will be addressed at Southern Electronics 2008 (February 6th-7th, Farnborough) as part of the free seminar programme. Hosted by Bob Willis of the SMART group, the presentation on February 6th will take a detailed look at the problem of forged and counterfeit components together with the practical measures businesses can take to ensure they do not fall victim to this pernicious trade.  

 


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CES NEWS: Mitsubishi goes for lasers in the big-screen race

January 26, 2008

Jan 08, 2008

mitsu laser 2006 scaled 

Having already shown concept models of its laser TVs (left) at an earlier CES, Mitsubishi came to this year’s show with working versions, designed to show the superiority of the technology for large screens.

The company is claiming the system gives ‘as much as twice as much colour’ as conventional HD TVs, along with ‘ the most clarity and depth of field.’

Mitsubishi claims that current HD TVs display less than 40% of the colour spectrum the eye can see, but the precise focus and purity of laser illumination doubles that figure. What’s more, the TVs do this while reducing power consumption, as they are more efficient than similarly-sized conventional flatscreen TVs.

Also on display by Mitsubishi was 3D TV, which the company sees as the next big step for home entertainment. Using a 73in 1080P DLP Diamond Series rear projection model, the company partnered with 3D content provider REAL D to make its case.

The claim is that only DLP sets such as this are capable of displaying this 3D material, thanks to their superior response times, unmatched by plasma or LCD rivals.

All the Diamond Series 1080P DLP models are 3D-Ready, and the company expects there to be over a million 3D-Ready HD TVs in use in the States before the end of this year.

From What Hifi Sound & Vision


Plasma breaks 150″ – But to what end?

January 26, 2008

09 January 2008 19:12

As reported in AV Interactive, Panasonic has shown a 150in diagonal plasma screen at the Consumer Electronics Show (CES) in Las Vegas. The massive plasma display panel (PDP) reportedly has an 8.84m pixel resolution (2,160 x 4,096) more than four times the 1080p HD specification (1,080 x 1,920). The screen size is equivalent to nine 50in PDPs with an effective viewing area of 11 ft  wide x 6.25ft high.

 

Impressive – certainly. But it’s rather intriguing what market Panasonic are shooting at with this beast. For sure the resolution and clarity would be impressive, but it’s not bright enough for retail environments like a shop window, for example. Being plasma, it’s also not suitable for C3i or control room applications involving the long term dislay of static graphics. Rental? That glass sure looks heavy and fragile – not to mention awkward to move around. Corporate display or boardrooms might be a possibility, but perhaps not the most economical option in terms of capital and running costs.

 

Mitsubishi Electric’s new LED-based Resolia looks to be a more carefully thought-out solution to large-format, high resolution displays. Designed for long term operation in very high ambient light environments, what Resolia lacks in resolution compared to Panasonic’s 150″, it more than makes up for in contrast, longevity and low cost of ownership

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Fujitsu Exits Display

January 26, 2008

Makers of the Plasmavision and Aviamo lines of flat-panel TVs and monitors, Fujitsu General, will “discontinue participation in the visual display business at the end of March 2008.”

The Japan-based company says it has primarily marketed plasma products in North American and European markets.

“The focus of our marketing was high-end value added products, and our marketing direction was to concentrate on the custom A/V market specializing in advanced A/V systems and high-end custom installations in North America and UK,” says the company in a press release.

“During the past several years, the pricing and profitability of this segment has compressed beyond the point which our company could realize a satisfactory return on investment. We expect that this market situation will continue in the future.”

This comes along when Sony confirmed it would be ceasing production of rear projection TVs because of poor profits from the sets.

As reported on rAVe Europe


Blu-Ray: Plenty of Thunder & Lightning, No Rainmaker

January 26, 2008
By Bob SnyderWarner Bros. says its will back Sony’s format for storing high def movies and gave the Blu-Ray camp the urge to declare HD DVD “beaten.”

“We’ve heard that before,” insisted executives from HD DVD. But it was scary when they cancelled their own CES press conference because it followed too close on the heels of the Warner announcement. If Blu-Ray wins (or HD DVD, for that matter), the question will not be whether or not one group or another had another more thunder or lightning. The real question is whether either camp could ever be a Rainmaker.

With Apple, Amazon, NetFlix, Cisco, Microsoft and others push downloadable content, with cable and phone companies flogging on-demand, all day/all night HD, with I.T. companies pushing on-line storage and new form factors, the DVD business is looking as promising as the last Dodo bird. JVC, for one example, showed a flat-screenTV at CES that allows users to simply insert an iPod to watch video content. So any slim media player can become an alternative to digital video discs. And Denon, for another example, is building iPod docks into its AVRs like Altec, third example, is doing for loudspeakers. Content is going to jump full-blown into on-line delivery. Any and every device with an IP connection will be content-ready.

Now we’ve often talked a lot to AV integrators about “content’ and how they must get into “content.” Much of the time, we get dull, flat looks. The same look you’d get from a desert nomad when you tell him the future is “fish.” And who can blame them? How do you get your head around the cloud, the cumulus of cognition that’s content?

The opportunity, as we see it, is for integrators to understand the new world of content and how it can be streamed, downloaded and re-formatted across networks and devices. The next gen integrator will show customers what content is available and access to that content can improve their business, their organization.  We will be the Sherpa leading organizations up the Everest of content, their guide to finding new Managed Service Providers (yes, even software becomes content in the New World), and their trailblazer to profitable paths of Web 2.0 (and 3.0) opportunities.

In the Old World, we showed companies and organizations how to hook up Audio and Video.  In the New World, we’ll be compelled to help them to throw away DVDs.