Microtags placed in ceramic slurries may make counterfeiting of high volume MLCC and ChipR much more difficult.

CALCE Symposium on Counterfeit Components: November 2007

The Symposium on Avoiding, Detecting and Preventing Counterfeit Electronic Parts was held at the Center for Advanced Life Cycle Engineering (CALCE) at the University of Maryland on Nov. 7-8, 2007. Presentations and audience participation revealed that counterfeit components represented between 5% and 8% of the dollar value of the global electronics industry. Additionally, it was found that the counterfeit economy was growing at a faster rate than the legitimate economy. Industry participation at the symposium was primarily from manufacturers with major brands that had the most to lose by having counterfeit parts in their systems. These manufacturers were primarily in mission critical defense, medical and government research manufacturing operations in the United States and abroad. The majority of presentations, both public and private, discussed distressing stories of how top brands were repeatedly stung by sophisticated counterfeiting operations operating in China, the United States and Germany. These counterfeiters targeted a myriad of both active and passive parts that typically guaranteed the highest operating profit for the counterfeiter with no real concern (or knowledge) for the systems into which the parts were being consumed.

Counterfeiting: A Growth Industry:

The global estimate for counterfeit goods given during various presentations varied from between $300 billion and $650 billion USD, with counterfeit clothing, cigarettes, and handbags accounting for the majority of counterfeit operations worldwide. Rochester Electronics noted that counterfeiting accounts for 8% of global merchandise trade and is forecast to grow to $1.2 trillion in value by 2009. Rochester also pointed out that counterfeit parts are usually one half or less of the street price for genuine parts and are largely purchased through unauthorized distributors – an unauthorized distributor is a component vendor that does not have a contractual arrangement with the original component manufacturer and offers no traceability or warranty. (TTI, Inc. is an authorized distributor for all of its manufacturer partners.)

Obsolete Parts Cause Customers to Source Unauthorized Distributors Where Counterfeits Make up a Growing Portion of the Inventory:

A Rochester Electronics survey of seven major worldwide component customers estimated that 23% of global trade in the electronics industry goes through un-authorized distributors because of the need to access obsolete parts by unconventional channels. Rochester also estimated the number of obsolete parts has more than tripled between 2001 and 2007, with a substantial amount of obsolescence affecting global defense platforms. This is a universal problem, affecting all global defense systems, not just the United States.

Port Seizures are Minimal Compared to the Size of the Problem:

According to a presentation given by the Department of Homeland Security, counterfeit components, which are included under the “Computer Hardware” category of counterfeit goods, seized at U.S. ports increased from 1% in 2004, to 5% in 2005 to 14% in 2006. The total value of all goods classified as counterfeit seized at US ports were $139 million USD in 2004, $93 million in 2005, and $155 million in 2006, with the “Computer Hardware” category accounting for $1.7 million in seized good value in 2004, $4.8 million in 2005 and $14.3 million in 2006 – clearly a growing problem.

Goods Seized at U.S. Ports

The Department of Homeland Security made it perfectly clear their charter was to stop the importation of “weapons of mass destruction,” and the collection of counterfeit goods at U.S. borders was largely a collateral benefit of those operations. The increase in seizures of suspected counterfeit electronic components are the result of a larger quantity of counterfeit parts being shipped into the United States.

High Volume Passive Components are Easy to Counterfeit:

Intel noted a concern in mass volume parts, such as MLCC and thick film chip resistors, which statistically represented the largest portion of the market in terms of volume on the printed circuit board, and where the majority of counterfeits could have the largest impact on the supply chain. It was the only area where markings were non-existent on the components on the printed circuit board (this is most certainly true for MLCC). This led to a discussion on price sensitivity of passive components and their marginal limitation on controlling a brand that numbered into the trillions of unmarked pieces. Most importantly, Intel noted that it was in the best interest of all the brands in attendance to award contracts to component vendors who demonstrated advanced anti-counterfeiting measures in the components that they sell.

Taggants – A New Solution?:

One economical way for guaranteeing 100% component coverage in multilayered ceramic chip capacitors and thick film chip resistors is the introduction of taggants (or “microtags”) into the ceramic slurry. Microtags, or electronic taggants are nano-sized silica based particles that are doped with rare earth dyes, quantum dots or other proprietary types of luminescent chemicals. These silica nano-particles demonstrate a unique response when exposed to a specific excitation frequency. The manufacturing processes for both MLCC and chip resistors are almost exclusively based upon the milling of fine ceramics into slurry, which is then metallized and then extruded or stacked before they are fired in a kiln. This extremely high volume production process lends itself to the introduction of microtags into the supply chain. This process would also work in the milling process for capacitor grade tantalum metal powder, nickel electrode powders and pastes and for liquid electrolytes and conductive polymers consumed in tantalum and aluminum capacitors. It would also lend itself to the resin process for production of capacitor grade dielectric films of OPP, PET, PPS and PEN film.

Summary and Conclusions:

Similarities among presenters were that they had all been the target of counterfeiters who were either pretty basic in their approach – literally breaking apart TV sets and removing like components, placing them in a bag with a counterfeit label saying they were the latest part to have gone obsolete; or more sophisticated – taking a reel of low priced components, such as a standard Y5V MLCC, and putting them on a reel that is branded differently (such as an NPO MLCC rated for 125°C operation) and then pocketing the difference.

In summary –

• On more than one occasion it was noted that counterfeit parts had been previously tested by someone else. This suggested the parts were in the supply chain before and probably came back into the supply chain due to improper disposal. It was also noted on more than one occasion that defective components produced at certain factories were simply thrown out into large dumpsters where counterfeiters had access to them.
• Another common theme was that none of the major customers for components had any way of telling something was counterfeit, and just assumed it was a defective part direct from the manufacturer (the majority of captive test procedures are designed to determine component reliability-not authenticity. Either way the brand was tarnished in this process. But it was also agreed that it was the responsibility of the component manufacturer to protect its own brand
• Most major vendors employed a system of using only authorized distributors or purchasing direct from the manufacturer to avoid counterfeiting. This method was good for consumer electronics manufacturers but was not realistic for legacy programs where parts had gone obsolete. Obsolescence was the reason why customers ventured into the “grey market” of components purchased through unauthorized distributors, which may account for as much as 23% of all component purchases.
• Mass produced parts, with emphasis upon multilayered ceramic chip capacitors and thick film chip resistors presented a unique problem due to their high volume, low margins and tendency to be unmarked.
• Best practices from other industries, most notably the pharmaceutical industry, and their movement for traceability for every tablet sold lends itself (in terms of both sheer volume and similarity in milling and batching of granular materials) to the manufacturing process of the passive component industry.
• Although other technologies exist, such as RFID tags and bar coding, these are more applicable to full reels. Taggants offer the best possible coverage for individual coverage of mass produced parts such as MLCC and chip resistors at a low cost, estimated by Armark to be about 1/1000 of a penny per pill in the pharmaceutical industry. No estimates exist for the introduction of taggants into barium titanate, for example, but similar economies of scale should apply.
• The final note involves where taggants should be applied first, and this is in high voltage, high frequency or specialty capacitors and resistors going into defense and medical electronics. Full traceability and authenticity is available for these markets through the use of taggants, and such practices should be implemented immediately to maximize safety and minimize avoidable losses.