What’s worse than running out of chips?Fake purchase

Companies in need of chips are taking supply chain risks that they hadn’t thought about before, but realized that what they bought didn’t work. Suspicious sellers are buying ads on search engines to seduce desperate buyers. Sales of X-ray equipment capable of detecting counterfeit parts are increasing rapidly.

This is a quality control crisis caused by the world’s struggle to land hard-to-find semiconductors at any cost. Without these key components, manufacturers of various products, such as home appliances and work trucks, will remain neutral as the global economy regains its vitality.

This spring, Newyork-based BotFactory Inc., a manufacturer of 3D printers that manufacture electronic components, was unable to procure microchips for weeks at a reliable vendor. Eventually, it became an unknown seller on AliExpress, an online sales platform operated by Alibaba Group Holding, which is based in China. Co., Ltd.

Early signs of trouble: The order arrived packed in plastic wrap instead of the usual protective antistatic bag.

X-ray equipment, which is in high demand during this year’s chip shortage, can reveal if the inside of the chip is empty (as in the second from the right) or if the circuit is inconsistent. I will.


Creative electron

“Of course, many of them didn’t work,” said Andrew Ippoliti, lead software engineer at BotFactory.

Ipporiti suspects that the defective part is fake. Before buying, he said BotFactory was convinced that the microchip was legal, but the seller was silent after the product stopped working. BotFactory has filed a dispute with AliExpress and AliExpress has given a full refund.

The company finally ordered directly from the manufacturer to procure about 200 microchips.

ERAIInc holds a record of fraud in the electronics supply chain. So, new complaints arrive almost every day, said Kristal Snider, vice president of industry watchdog. She added that buyers from more than 40 countries filed reports of wire fraud.

Violators are generally opportunistic criminals. They seduce victims through search engine targeted ads, direct them to their proud web pages, and disappear after receiving a wire transfer. ERAI has flagged dozens of high-risk websites based in Hong Kong.

Chip shortages have hit automakers around the world, and Ford Motor Company announced in July last month that it would cut production at more than half a dozen plants in the United States.


Rebecca Cooke / Reuters

One of the flagged companies is Blueschip Co. It claims to be one of the “largest and fastest growing” electronic component distributors in the world. According to ERAI, the company’s website is similar to the website of a known malicious person, including some guarantees that use the same wording.

In a written response to The Wall Street Journal, Bluechip said he couldn’t mind responding to ERAI’s allegations. “Innocence knows their innocence,” said a Hong Kong-based company.

“It’s alarming to see websites popping up that offer hard-to-find, assigned, outdated parts,” Erai’s Snyder said in an email. “After 27 years of investigating and reporting fraud in the industry, it takes a lot of time to surprise me.”

Chip fraud cases have historically been underreported, according to industry participants and experts. Victims are reluctant to publicly admit that they have been deceived. It is difficult to pursue criminal accusations, especially across national borders.

For counterfeiters and shade distributors, the chances of being caught aren’t great enough to change their behavior, said Diganta Das, a researcher at the University of Maryland who studies counterfeit electronics. There are so few convictions that Mr. Das said he could recite all of them if he tried.

The global chip shortage is affecting the time it takes to get a car out of the parking lot or buy a new laptop. The WSJ will visit a manufacturing plant in Singapore to see the complex process of chip manufacturing and how one manufacturer is trying to overcome the shortage.Photo: Edwin Chen of The Wall Street Journal

Counterfeit chips existed before the current shortage. Knockoffs range from sophisticated copies to old parts that have been refurbished to look new. Although counterfeiting technology is constantly evolving, according to chip experts, many buyers have improved testing capabilities and reduced the likelihood that the wrong part will be a finished product.

When most companies encounter counterfeit parts about three times a year, Aegis Software Corp, based in Horsham, Pennsylvania. Michael Ford, Senior Director of Electronic Components, estimates that he has worked on industry standards for electronic component quality and tracking. In almost all cases, no fake parts have been reported, he added.

“We don’t want the entire supply chain to look at risk,” Ford said.

Given the turmoil of this year’s shortage, some buyers are stepping up their fraud protection. An independent distributor of the Electronics Association said orders for a 250-page manual to identify suspicious parts are coming at twice the pace of last year. Group Secretary-General Pfizer Khan said some buyers were companies that obtained defective or suspicious components.

A slight scraping may reveal the original markings on the counterfeit tip.


Independent Distributor of the Electronics Association

At Princeps Electronics Ltd., a UK-based distributor, operations director Ian Walker said the demand for the most expensive and sophisticated electrical tests has nearly quadrupled this year. They require a professional engineer, which in some cases means that the customer is paying tens of thousands of dollars to verify the authenticity of the $ 3 chip.

“It’s very difficult to completely eliminate the risk of counterfeit parts in an efficient and inexpensive way,” Walker said.

According to Bill Cardoso, CEO of Creative Electron Inc.’s fraudulent X-ray equipment, which can cost up to $ 90,000 and detect if the chip is empty or the circuit is inconsistent. Sales have doubled in the past year. An executive of a company based in San Marcos, California.

Astute Electronics Inc., a distributor of electronic components, will soon purchase a fifth X-ray device for in-house inspection, said Dane Reynolds, vice president of operations. This year we started with two people.

Reynolds said the company is analyzing more components as client demand soars. “As a result, we are finding more bad parts.”

Write to Stephanie Yang (

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What’s worse than running out of chips?Fake purchase

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