Lost in the System: How Traceability can Solve the Problem of Counterfeit Materials

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The word "counterfeit" encompasses a wide range of activities that are happening continuously in an "underground” SMT supply chain. The risks and potential effects resulting from the use of counterfeit materials can be huge, threatening human life, as well as the success of any company in the electronics industry. Word on the street is that the occurrence of counterfeit materials is growing rapidly, which means, at some point, a critical mass will be reached. The best managers and engineers among us must surely realize that now is the time to get proactive on this issue before a serious compelling event occurs. Let's play detective and investigate this dark side of manufacturing to try and find out what exactly can be done.

The classic plot of any detective story is the task of discovering the motive, means, and opportunity for the crime. In business, the motive is focused on the financial aspects of materials supply. After all, materials generally are 80–90% of the cost of a finished product. As manufacturing costs decrease, the material costs become more significant. For example, shaving a cent or two off the cost of material in each product can be significant when scaled up to the level of materials used in high-volume consumer products. At the other end of the scale, many individual materials have a high enough value to be a target for counterfeiting even when used in lower volumes.

As well as the physical properties of the materials, test and qualification processes add value to a material, differentiating it from otherwise identical materials. In critical applications, materials that have not been through prescribed testing or have not been handled in an approved way are disqualified from use.


As a result of these pressures, the motivation to reduce material costs can encompass:

Vendor cloning: There are many choices of materials manufacturers, and some have better quality or consistent products, which are also more expensive. The golden rule is to select the level of quality needed at the lowest price available. Substituting lower cost materials in volume, however, can make a considerable financial difference.

Test failures: In testing materials during manufacture, some will inevitably fail. Electrical properties may fall outside of control parameters, or stress testing may reveal weaknesses. These failures create an opportunity for individual materials, groups of materials, or even a whole batch of materials to be scrapped or re-packaged as cheaper versions. This may not represent a huge cost to the original manufacturer, but the opportunity to make some extra money could be a significant motivation to anyone else involved in disposal or recycling.

Trial materials: Materials made during the setting up of manufacturing processes, or samples generated, could also be intercepted in the disposal process and re-sold.

Dirty materials: It is not only in the material manufacture and supply-chain process that counterfeit materials can be introduced. Spoilage generated during assembly production can also be inappropriately used. For example, materials that have been rejected by the SMT processes and discarded may be gathered up and recycled back into the machine at a later time. The handling of these materials outside of the supply-chain rules introduces risk of contamination from dirt and water. In many situations, refurbishing materials is acceptable, but in a situation where an acute shortage of materials happens at the end of a production run because of unexpectedly high spoilage can be a great motivator to simply pick up discarded materials and put them in a tray for re-use. These are also counterfeit because they deviate from the approved supply procedure.

“Garage” materials: Some materials are made specifically with the intent to replace authorized materials. The classic situation is an entrepreneur who buys an out-dated manufacturing process that he sets up in a garage to churn out materials made with substandard raw materials, often without testing. The intent is simply to make the materials as cheaply as possible and then find a way to introduce them as genuine materials in the supply chain.

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Editor's Note: This article originally appeared in the January 2016 issue of SMT Magazine.


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