News and New Products

Counterfeiters Compliant

By Rob Spiegel -- Electronic News, 12/7/2005

In one of the strangest twists in the industry’s move to green components, some of the companies hawking counterfeit parts are claiming their parts are Restriction of Hazardous Substances (RoHS) compliant.

This bizarre development is occurring as OEMs are hip-deep in evaluating the level of trust they can put in their suppliers. If they can’t trust a supplier to deliver RoHS-compliant parts, they will likely need to test the components as part of their due diligence to prove to European Union governments that their products are compliant. The counterfeiters are not likely to make the trust cut, which means a lot of testing will need to be done to determine the content of these parts.

The flow of gray market parts – some of them counterfeit – balances industry gaps in supply and demand. “The whole issue of the gray market is going to get amplified by compliance,” said Peter Lachapelle, VP of content at Dallas-based i2 Technologies Inc. “This is the least desirable time to buy from the gray market. There’s enough confusion in the black and white market.”

While OEMs may be queasy about gray market components, this is also a time when there will likely be shortages in either compliant or non-compliant parts. Some companies that wouldn’t ordinarily go to lesser-known suppliers find they need to go to the gray market in order to find compliant parts. “I’ve heard reports of counterfeit lead-free solder in China,” remarket Michael Kirschner, president of Design Chain Associates in San Francisco. “A factory manager in China recently said, ‘Look, if you need a certificate of compliance, we’ll get you one.’”

Much of the gray market consists of legitimate brokers, but during the transition to lead-free products, even reputable brokers may come under suspicion. “The reputable brokers are worried about this,” Kirschner said. “These brokers have been an integral part of balancing the supply chain.”

Kirschner noted that OEMs now need to know where the gray-market parts came from. “We now have the additional problem of potential legal issues regarding parts – not just functional issues. That means OEMs need to know the pedigree of the parts they use. That’s near impossible when the components are excess parts from another OEM or producer,” he said.

Kirschner believes OEMs will have use gray market parts, because there may be cases where there will be no alternative source during gaps in supply. In these cases, testing will be critical. “If you desperately need parts and you buy them with no reason to trust what they are, you will have to test them both for functionality and for material content,” Kirschner said.

He believes the critical time will come over the next few months. “Counterfeiting tends to follow demand and supply mismatches, so I’m worried about the next six to nine months. I think there will be a lot of shortages, though we don’t know if the shortages will be in compliant or non-compliant parts,” Kirschner concluded.