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Increasing Counterfeit Chips Threatens Chip Industry

Published: 9.26.2023

Counterfeit chips have long plagued the semiconductor industry, and their presence has substantially increased in recent years.

The Semiconductor Industry Association estimated that counterfeit chips cost the industry a staggering $7.5 billion annually, in 2017. The Defense Advanced Research Projects Agency (DARPA) went a step further, projecting that the toll in lost electronics revenue had reached an astonishing $170 billion in the same year.

Fast forward to today, counterfeit chips have been magnified by the disruptive forces of the COVID-19 pandemic and the ongoing chip shortage. Counterfeiters have taken advantage of the supply chain disruptions to send fake components into the market.

Counterfeit chips can be categorized into five primary types: recycled, cloned, re-marked, over-produced, and forged. Among these, recycled chips dominate the infiltration of the supply chain.

Several factors contribute to counterfeiting. Cost savings serve as one of the most common drivers. Manufacturers of electronic devices often face intense price pressures and the need to produce cost-neutral products pushing them to explore cheaper alternatives in the development process.

Greed is another significant motivator, as manufacturers may resort to producing counterfeit chips to profit. Counterfeit chips are frequently priced lower than authentic ones, making them an enticing proposition for buyers seeking a bargain.

To address this issue, experts on counterfeiting agree that it can only be effectively tackled if the entire supply chain is involved. Ensuring security at every point is essential for establishing trust and safety for both chipmakers and buyers. Counterfeits must be avoided not just in the form of chips, but also in the raw materials used to make them and in the software they run.

The most effective defense against counterfeit chips is to partner with authorized distributors. The industry has been designed to operate within a secure ecosystem that places accountability and tracking at the forefront.

The semiconductor industry's struggle against counterfeit chips is a continuing and escalating challenge. As the industry continues to innovate and maintaining the integrity of the supply chain remains paramount to ensuring the trust and security of both chipmakers and consumers.

Collaborative efforts at all levels of the supply chain are essential for effectively addressing this pressing issue and preventing the spread of counterfeit chips.

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