Auction-style site aims to thwart grey market

Semicentral.com aims to offer an applicable service to the electronics supply chain for the trade of excess inventory and looks to its users to ensure against counterfeit product.

By Suzanne Deffree, Managing Editor, News -- Electronic Business, 5/5/2008

Looking to counter the grey market’s counterfeit component issues, an online electronics supply chain service is aiming to bring together chip manufactures, OEMs, CEMs, and franchise distribution in an auction-style community.

“We are dealing with top 25 CEMs and OEMs,” said Richard Tapping, general manager of the online services tool, Semicentral.com. “What we’ve tried to do here is create a circle of companies and the only way any product can get into [the circle] is through an authorized or factory supply chain. Once it’s inside there, it can be used for production or remarketed in the circle.”

The tool enlists no membership or listing fees. Similar to other auction sites like eBay.com, Semicentral.com takes a 10 to 20% commission on sale prices, which are controlled by the component seller. Buyers and sellers remain anonymous and are identified by numbers, opposed to names. A rating system allows user comments to qualify users. 

To be sure, Semicentral.com does not aim to compete with distributors. In fact, it came out of the gate today with Arrow Electronic Inc among its supporters. Instead, the tool aims to offer an applicable service to the electronics supply chain for the trade of excess inventory and looks to its users to ensure against counterfeit product. Tapping, who spent much of his career at distributor Abacus Group Plc in Europe before moving to the United States in 2004 where he experienced the grey market for a short time before creating Semicentral.com, acknowledged that the site cannot offer a 100% guarantee that components traded will be handled properly and are not counterfeit. However, he said that unlike grey market flow, any such product and its respective participant will be removed from Semicentral.com. That, he believes, will offer the electronics supply chain a safer solution for buying and selling excess inventory than sourcing to and from the grey market.

“It’s been talked about a movement of the world’s commercial and government entities to join forces and make sure counterfeit products aren’t bought and sold. I have to say, it’s impossible to create that. The management of that is even impossible,” said Tapping (pictured left).

Indeed, the United States and European Union seized more than 360,000 fake ICs and components in a joint operation at the end of 2007, but that’s just the tip of the counterfeit component iceberg. While the ICs and components included more than 40 trademarks from the likes of Intel and Philips and were worth more than $1.3 billion, the US Patent and Trademark Office estimates that counterfeiting and piracy drain about $250 billion out of the US economy each year along with some 750,000 jobs.

“Yes, it’s recognized that something needs to be done, but it needs to be done by the community. They need to be given something that works for them on a local level. There is no reason, ultimately, of an OEM or a CEM in today’s market to buy from a grey market channel if they have the right tools to be able to give them the visibility of masses of inventory. We are giving you the tool, you make it good,” Tapping concluded.

Richard Tapping contributes to EDN’s Critical Links blog. For his latest entry, see “The universal law of supply and demand and the grey market.”