|Caveat emptor - let the buyer beware. A wave of "gray market" components has saturated the supply chain that is causing both OEMs (original equipment manufacturers) and CMs (contract manufacturers) to work overtime trying to separate the wheat from the chafe. Gray market parts are manufactured by shops that specialize in counterfeit products that are often times nearly indistinguishable from the genuine parts.|
Sometimes the counterfeits work well, but often premature failure is experienced, and the unsuspecting OEMs and CMs are left having to honor warranties that were based on MTBF calculations and empirical lifetime testing performed using genuine components. In many instances, a failed component is returned to the manufacturer that supposedly provided the part, only to discover that it is a knock-off of something they make. The intended supplier loses money because some counterfeiter has part of his market share and the OEM loses money by having to service fake parts and suffer the bad public relations that results.
Ample reports come out of trade shows in China where salesmen (and saleswomen) brazenly canvass the floor with a basket of goods and a handful of fake labels offering to sell as many of the counterfeit parts as the prospective buyer needs - branded with the genuine company's logo. A couple years ago, an epidemic of gray market power supply capacitors caused massive damage; fires started in chassis, flying parts injured the unsuspecting users, electrolyte oozed out of cans onto PCBs, and generally wreaked havoc. A lot of inventory was scrapped. Every few weeks we hear another report of counterfeit cellphone batteries are still catching on fire. Vendors like Nokia have gone to placing holographic labels on their batteries to mark them as authentic.
A number of websites have popped up to track the gray market parts (1, 2, 3), but it is a monumental task. Although they admit that it is only an educated guess, the World Customs Organization estimates that counterfeiting accounts for 5% to 7% of global merchandise trade, equivalent to lost sales of as much as $512 billion in 2004. Seizures of the bogus parts by U.S. customs agents jumped by 46% in 2004. To put it in perspective, the total gray market for all goods, not just electronics, is believed to be larger than the total narcotics trade.
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Alliance for Gray Market and Counterfeit Abatement | agmaglobal.org | Fremont, CA
AGMA's primary purpose is to mitigate gray market fraud and counterfeit trade of high technology products by implementing brand protection practices and controls that render the movement of unauthorized technology products difficult, undesirable and unprofitable.
Are Counterfeit Parts Going Compliant? | sourceesb.com/configurable/article20060111.html
From Source ESB.
Business Week Article | Fakes! The global counterfeit business is out of control, targeting everything from computer chips to life-saving medicines. It's so bad that even China may need to crack down.
CNET News.com | news.com.com/Net+tightens+gray-market+retail+vise/2100-1030_3-5628742.html?part=rss&tag=5628742&subj=news
Article - Net tightens gray-market retail vise.
Combating Counterfeiting and Grey Market - A Challenge for Indian Corporates | in.kpmg.com/TL_Files/Pictures/Counterfeiting In India(1).pdf
Information from KPMG International.
Defending Against Counterfeit Electronic Parts and Gray Market Practices | rocelec.com/downloads/Rochester_Anti-Counterfeit_Paper_Jan2007.pdf
Information from Rochester Electronics.
Design Chain Associates | designchainassociates.com/counterfeit.html
866-322-7676 | San Francisco, CA
Article - Counterfeit Electronic Component Resources.
Electronic Business Online | reed-electronics.com/eb-mag/article/CA371012?pubdate=01/01/2004
Article - Don't get burned by bogus parts, by Barbara Jorgensen.
Elliott Sound Products | sound.westhost.com/counterfeit.htm
Article - Counterfeit Semiconductors with text and diagrams, by Rod Elliott.
IEEE Spectrum Online | ieeexplore.ieee.org/xpls/abs_all.jsp?tp=&arnumber=1176509&isnumber=26410
Article - Leaking Capacitors Muck up Motherboards.
Fighting Back Against the Grey Market
GenuOne, Inc | genuone.com | 866-436-8663 | Boston, MA
Provides companies with the technology and the tools to distinguish undesirable but legal gray market from black market products.
Maxim - Dallas Semiconductor | maxim-ic.com/sales/counterfeit_parts.cfm
408-737-7600 | Sunnyvale, CA
Inferior Counterfeit Parts information.
The Electronics Source Book | sourceesb.com/configurable/article20050309.html
Article - Counterfeit components: Phony parts are clogging the supply chain.
The PC Guide | pcguide.com/buy/des/specGray-c.html
Article on Gray Market Components.
TransportGistics, Inc. | insourceaudit.com/WhitePapers/supply_chain_integrity.asp
Article - Supply Chain Integrity, A Basis to Upset Gray Market Distribution.
Understanding the Flow of Counterfeit and Gray Market Goods though the U.S. Automotive and Commercial Vehicle Parts Marketplace | mema.org/pdf/SRFlow.pdf
The Brand Protection Council of the Motor & Equipment Manufacturers Association.