New Solutions To Combat Counterfeits

Prolonged lead times with tier 1 component suppliers during COVID had many OEMs stuck with $100,000
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vehicles and electronic systems unable to ship because they didn't have necessary components. Often integrated circuit (IC) components under $10 were the reason for holding up large shipments. This situation forced OEMs and Contract Manufacturers to go through component resellers (brokers) as it was often the fastest way to get the needed parts. Those in the component manufacturing industry had insider information in forecasted demand, manufacturing lead times, end customers, and component price in reseller market. Resellers of components during COVID found early on that OEMs would pay 8x more on components months after stock dried up to build those $100,000 vehicles and electronic systems. China, for example, is the world's largest electronics component manufacturer and any of the 4.7 million people in the industry with insider information could participate in the arbitrage. For over a year, there was abundant opportunity for millions of people to make 800% on investments in less than a year. And many did. As components became scarcer and more expensive from the reseller market, OEMs began designing certain components out of their products. One product after another eliminated the need for components that are in reseller inventory. Without customers, resellers would recoup sunk costs by trading their non-selling inventory to other resellers. Many IC chip components have the same plastic body housing. Black topping or sanding, laser marking, and repackaging turns unsalable inventory into a gold mine. Counterfeiters knew that most customers won't test or inspect IC chips because it is time consuming and difficult. Remarking puts those parts back in the supply chain. Inventory purchased during COVID-19 will undoubtedly enter the global supply chain under different part numbers. These imposter components pose significant risk to critical electronics for many years to come. Just one counterfeit component leads to field failures which results in loss of life, engineers losing their jobs, company reputation damaged, and expensive lawsuits. Over the next five years, the global electronics manufacturing services industry will grow by $300 billion
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, bringing the total global value to $856 billion. This is due to increased demand for self-driving cars, medical devices for aging population, space exploration, and defense spending. Competitive pressure will push these industries to have more feature -packed and smaller products. More demand for more integrated circuit chips doing more things in critical electronics
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. The last few years startups have approached the problem of counterfeit components. There are different approaches to address this problem. Going to highlight the novel approaches by two innovative startups leading the industry.