Counterfeit Electronic components represent $169 Billion annual risk

According to the recent data provided by IHS market research firm, the five most prevalent types of counterfeit semiconductors are: microprocessors, programmable logic devices, memory ICs, transistors and analog ICs.

All these semiconductors are mostly used in military and commercial applications and in 2011, they accounted for more than two-thirds of all counterfeited incidents in the global electronics supply chain. According to data derived from the IHS’s market forecast tool, these five commodity groups are widely used throughout all major semiconductor applications. The sum total of the application markets where these most prevalent commodities are used represented $169 billion worth of semiconductor revenue in 2011 alone.

In a statement, Roy King, director of supply chain product marketing at IHS said,  “There has been a great deal of focus on the issue of counterfeit parts in the defense industry, but the majority of reported counterfeit incidents are for commercial components which have broad use across both military and commercial applications,”

In his observation, one out of every four counterfeit parts was reported to be an analog IC, a component widely used from industrial and automotive devices to wireless, computers and consumer electronics. King said, “A single counterfeit could impact end products in any of these markets and the potential problem is pervasive, amounting to billions of dollars of global product revenue subject to risk.”

According to IHS, the total global analog IC market was worth $47.7 billion in 2011 as the consumer electronics segment consumed $9.8 billion worth of analog ICs, or 21% of the global market. Similarly, automotive electronics amounted to $8 billion, or 17%; computing represented $6.7 billion, or 14%; industrial electronics was at $6.5 billion, or 14%; and wired communications was $2.9 billion, or 6%.

“For the global electronics supply chain, tackling the problem of counterfeit and fraudulent components has become an issue of paramount importance,” King said. “A faulty counterfeit analog IC can cause problems ranging from a mundane dropped phone call to a serious tragedy in the aviation, medical, military, nuclear, or automotive areas.” In short, the excessive cost of rework, repair, and customer returns for component failures is significant.

According to the IHS firm, incidents of counterfeit parts have increased threefold during the past couple of years and 2011 was a record year of counterfeit reporting.  Additionally, IHS has data for over 100 types of integrated circuits, electro-mechanical devices, passive components and other parts with counterfeit incidents. King warned that organizations can use the data of counterfeit incidents to remain vigilant of any problematic parts in circulation throughout the electronics supply chain.