From the July 14, 2021 Wall St. Journal: TAIPEI—The global chip shortage has created a gold mine for bad actors.
Businesses in need of chips are taking supply-chain risks they wouldn’t have considered before, only to find that what they buy doesn’t work. Dubious sellers are buying ads on search engines to lure desperate buyers. Sales of X-ray machines that can detect fake parts have boomed.
It is a quality-control crisis created by the world’s scramble to land hard-to-find semiconductors at any cost. Without those essential parts, makers of products as varied as home appliances and work trucks are stuck in neutral as the global economy ticks back to life.
This spring, New York-based BotFactory Inc., a maker of 3-D printers that produce electronic parts, couldn’t source microchips at any of its go-to vendors for weeks. Eventually, it turned to an unknown seller on AliExpress, an online sales platform operated by China-based Alibaba Group Holding Ltd. An early sign of trouble: The orders arrived packed in plastic wrap rather than the usual protective antistatic bags.
“Of course, a bunch of them didn’t work,” said Andrew Ippoliti, BotFactory’s lead software engineer.
Mr. Ippoliti suspects the defective parts were fakes. Before making the purchase, BotFactory had been assured the microchips were legitimate, he said—but the seller went silent after the products failed to work. BotFactory filed a dispute with AliExpress, which issued a full refund.
The company finally procured some 200 microchips by ordering direct from the manufacturer.
At ERAI Inc., which maintains records of misbehavior in the electronics supply chain, new complaints arrive almost every day, said Kristal Snider, vice president at the industry watchdog. Buyers from more than 40 countries have filed reports of wire fraud, she added.
The transgressors are generally opportunistic criminals. They lure victims through targeted ads on search engines, direct them to boastful webpages and then disappear after receiving wire payment. ERAI has flagged dozens of high-risk websites, many based in Hong Kong.
One flagged firm is Blueschip Co., which calls itself one of the world’s “largest and fastest-growing” electronics-components distributors. ERAI said the company’s website shares similarities with those of known bad actors—including some guarantees that use the same wording.
Blueschip, in a written response to The Wall Street Journal, said it couldn’t be bothered to respond to ERAI’s claims. “The innocent know their innocence,” the Hong Kong-based company said.
“The number of websites we see popping up offering hard-to-find, allocated and obsolete parts is alarming,” said ERAI’s Ms. Snider in an email. “After 27 years of investigating and reporting fraud in this industry, it takes a lot to alarm me.”
Instances of chip fraud have historically been underreported, industry participants and experts say, because victims are reluctant to publicly admit that they have been duped. Pursuing criminal charges is difficult, particularly across borders.
For counterfeiters and shady distributors, the possibility of getting caught isn’t great enough to alter their behavior, said Diganta Das, a researcher at the University of Maryland who studies counterfeit electronics. There are so few convictions, Mr. Das said he could recite them all if he tried.
Chips Are Difficult to Make, Even Harder During a Supply Crunch
A global chip shortage is affecting how quickly we can drive a car off the lot or buy a new laptop. WSJ visits a fabrication plant in Singapore to see the complex process of chip making and how one manufacturer is trying to overcome the shortage. Photo: Edwin Cheng for The Wall Street Journal
Counterfeit chips existed before the current shortage. The knockoffs range from sophisticated copies to old parts refurbished to look new. Many buyers have improved testing capabilities, lowering the odds that errant parts could end up in finished products, chip experts said, though counterfeiting techniques constantly evolve.
Most companies encounter counterfeit parts about three times a year, estimates Michael Ford, a senior director at Horsham, Pa.-based Aegis Software Corp., who has worked on industry standards for the quality and tracking of electronic parts. In nearly every case, the fake parts go unreported, he added.
“The whole supply chain does not want to appear as though it’s compromised,” Mr. Ford said.
Given the chaos of this year’s shortage, some buyers are tightening their antifraud measures. The Independent Distributors of Electronics Association said orders for its 250-page manual on identifying suspect parts are coming in at twice last year’s pace. Some buyers are companies that had obtained faulty or suspicious components, said Faiza Khan, the group’s executive director.
At U.K.-based distributor Princeps Electronics Ltd., requests for the most expensive and sophisticated electrical testing have nearly quadrupled this year, said Ian Walker, operations director. Those require a specialized engineer, he said, and in some cases mean a customer is paying tens of thousands of dollars to confirm the authenticity of a $3 chip.
“It is a very difficult thing to totally remove the risk of counterfeit parts in an efficient and cheap way,” Mr. Walker said.
Sales of Creative Electron Inc.’s fraud-spotting X-ray machines, which cost up to $90,000 and can detect whether the inside of a chip is empty or has inconsistent circuitry, have doubled over the past year, according to Bill Cardoso, chief executive of the San Marcos, Calif.-based company.
Astute Electronics Inc., an electronic components distributor, plans soon to buy its fifth X-ray machine for in-house inspection, said Dane Reynolds, vice president of operations. It began the year with two.
As client requests have surged, the firm is analyzing more components, Mr. Reynolds said. “As a result, we are finding more bad parts.”
Businesses in need of chips are taking supply-chain risks they wouldn’t have considered before, only to find that what they buy doesn’t work. Dubious sellers are buying ads on search engines to lure desperate buyers. Sales of X-ray machines that can detect fake parts have boomed.
It is a quality-control crisis created by the world’s scramble to land hard-to-find semiconductors at any cost. Without those essential parts, makers of products as varied as home appliances and work trucks are stuck in neutral as the global economy ticks back to life.
This spring, New York-based BotFactory Inc., a maker of 3-D printers that produce electronic parts, couldn’t source microchips at any of its go-to vendors for weeks. Eventually, it turned to an unknown seller on AliExpress, an online sales platform operated by China-based Alibaba Group Holding Ltd. An early sign of trouble: The orders arrived packed in plastic wrap rather than the usual protective antistatic bags.
“Of course, a bunch of them didn’t work,” said Andrew Ippoliti, BotFactory’s lead software engineer.
Mr. Ippoliti suspects the defective parts were fakes. Before making the purchase, BotFactory had been assured the microchips were legitimate, he said—but the seller went silent after the products failed to work. BotFactory filed a dispute with AliExpress, which issued a full refund.
The company finally procured some 200 microchips by ordering direct from the manufacturer.
At ERAI Inc., which maintains records of misbehavior in the electronics supply chain, new complaints arrive almost every day, said Kristal Snider, vice president at the industry watchdog. Buyers from more than 40 countries have filed reports of wire fraud, she added.
The transgressors are generally opportunistic criminals. They lure victims through targeted ads on search engines, direct them to boastful webpages and then disappear after receiving wire payment. ERAI has flagged dozens of high-risk websites, many based in Hong Kong.
One flagged firm is Blueschip Co., which calls itself one of the world’s “largest and fastest-growing” electronics-components distributors. ERAI said the company’s website shares similarities with those of known bad actors—including some guarantees that use the same wording.
Blueschip, in a written response to The Wall Street Journal, said it couldn’t be bothered to respond to ERAI’s claims. “The innocent know their innocence,” the Hong Kong-based company said.
“The number of websites we see popping up offering hard-to-find, allocated and obsolete parts is alarming,” said ERAI’s Ms. Snider in an email. “After 27 years of investigating and reporting fraud in this industry, it takes a lot to alarm me.”
Instances of chip fraud have historically been underreported, industry participants and experts say, because victims are reluctant to publicly admit that they have been duped. Pursuing criminal charges is difficult, particularly across borders.
For counterfeiters and shady distributors, the possibility of getting caught isn’t great enough to alter their behavior, said Diganta Das, a researcher at the University of Maryland who studies counterfeit electronics. There are so few convictions, Mr. Das said he could recite them all if he tried.
Chips Are Difficult to Make, Even Harder During a Supply Crunch
A global chip shortage is affecting how quickly we can drive a car off the lot or buy a new laptop. WSJ visits a fabrication plant in Singapore to see the complex process of chip making and how one manufacturer is trying to overcome the shortage. Photo: Edwin Cheng for The Wall Street Journal
Counterfeit chips existed before the current shortage. The knockoffs range from sophisticated copies to old parts refurbished to look new. Many buyers have improved testing capabilities, lowering the odds that errant parts could end up in finished products, chip experts said, though counterfeiting techniques constantly evolve.
Most companies encounter counterfeit parts about three times a year, estimates Michael Ford, a senior director at Horsham, Pa.-based Aegis Software Corp., who has worked on industry standards for the quality and tracking of electronic parts. In nearly every case, the fake parts go unreported, he added.
“The whole supply chain does not want to appear as though it’s compromised,” Mr. Ford said.
Given the chaos of this year’s shortage, some buyers are tightening their antifraud measures. The Independent Distributors of Electronics Association said orders for its 250-page manual on identifying suspect parts are coming in at twice last year’s pace. Some buyers are companies that had obtained faulty or suspicious components, said Faiza Khan, the group’s executive director.
At U.K.-based distributor Princeps Electronics Ltd., requests for the most expensive and sophisticated electrical testing have nearly quadrupled this year, said Ian Walker, operations director. Those require a specialized engineer, he said, and in some cases mean a customer is paying tens of thousands of dollars to confirm the authenticity of a $3 chip.
“It is a very difficult thing to totally remove the risk of counterfeit parts in an efficient and cheap way,” Mr. Walker said.
Sales of Creative Electron Inc.’s fraud-spotting X-ray machines, which cost up to $90,000 and can detect whether the inside of a chip is empty or has inconsistent circuitry, have doubled over the past year, according to Bill Cardoso, chief executive of the San Marcos, Calif.-based company.
Astute Electronics Inc., an electronic components distributor, plans soon to buy its fifth X-ray machine for in-house inspection, said Dane Reynolds, vice president of operations. It began the year with two.
As client requests have surged, the firm is analyzing more components, Mr. Reynolds said. “As a result, we are finding more bad parts.”
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Not just chips, also 18650 and 21700 lithium ion cylindrical cells.
Yeah the other 3 chips looked fishy. (photoshop for sure) The problem is serious and getting worse at the moment as are the shortages fueling the market for parts from any source.
Yeah the other 3 chips looked fishy. (photoshop for sure) The problem is serious and getting worse at the moment as are the shortages fueling the market for parts from any source.
Powertool batteries also, i ordered 12V 4Ah on Ali and got 0,6Ah useless junk delivered. Seller rejected my complain with foul excuses, Ali refunded half of what i paid. Crooks everywhere
Isn't this just the Ebay of Asia? I wouldn't order anything from them, even if my life depended on it.
OTOH I'm patiently waiting for a few chips to come back into production. My number one and number two vendors are Mouser and DigiKey. Sometimes I order from Parts Express. That's it.
Everything is just a scam now. I get about a dozen phone calls a day and at least 9 are 100% scam calls (fake IRS etc every single day for three years) and I won't even answer my phone any more. And I'm wondering if any of these chips are ever going to get back online.
I guess the eggheads still don't see fit to manufacture chips in Western countries. Heaven forbid they will have to pay employees a decent living wage.
"PRO Call Blocker". The one we got seems to be obsolete; many alternatives:
https://www.amazon.com/s?k=pro+call+blocker
https://www.giftwows.com/product/best-call-blocker-pro-device/
----combined with an answering machine's cryptic message about "out in the barn". Half the spammers hang-up before I finish going on about the horses. But I can choose to "red-button" the number and if seen again the blocker will hang-up on them (after a few rings- caller ID matching can be slow). Can also block whole area codes.
It is less useful now that spammers learned to forge "local" phone numbers and city-names in place of person-names.
Not only are they forging local numbers, they are forging legit numbers currently in service. I got hundreds of phone calls - dozens a day - from a 104 year old woman that lives less than half a mile from me. Her name came up on the caller ID and everything, and she checked out as 100% legit. They called back over and over and over, for about 45 minutes a day, for weeks.
I'm sure a 104 year old neighbor was calling me like that. Makes perfect sense.
Nothing is going to stop these scammers. They operate with impunity from scam countries. Anyone that doesn't talk to the machine, or call my cell phone, doesn't talk to me.
Another bona fide is Farnell in EU which is part of Avnet in the US. They often have stock that Mouser & Digikey don't have (and vice versa). Similar prices - some lower, some higher, but it's a trusted alternative.
Jan
Ali Express is definitely a lottery.
Bought some IRFP240's and they lasted 10 minutes before popping.
I unplugged my soldering iron and glitch down the mains blew them.
I replaced them with parts from RS and they have worked for 18 months despite glitching the mains loads of time.
I can only assume break down voltage on fake parts was very low.
On the other hand I was looking for AD9201 A2D and they were £15 on RS and elsewhere.
Had a look on Ali Express and they were £1.50.
So bought 10 and they all worked.
Bought some IRFP240's and they lasted 10 minutes before popping.
I unplugged my soldering iron and glitch down the mains blew them.
I replaced them with parts from RS and they have worked for 18 months despite glitching the mains loads of time.
I can only assume break down voltage on fake parts was very low.
On the other hand I was looking for AD9201 A2D and they were £15 on RS and elsewhere.
Had a look on Ali Express and they were £1.50.
So bought 10 and they all worked.
But were they full spec or some LSB error rejects? I presume ADCs get fully packaged before testing
Not so much the wages IMO but the cost of setting up the fab plants. It's not cheap, particularly if you're establishing in developed countries where land is expensive and environmental regs extensive.
The labour intensive part is package and test, which is why so much of that is in places like Malaysia.
The fabs tend to be in the West or favoured countries like Japan and Taiwan, partly due to protectionist policies
I am very surprised Africa is not being used more or at all for low cost manufacturing. Serious.
Wages must be certainly be lower than in China-Korea-India-Mexico by now and don´t think they can afford worrying about environmental protection.
Cost of setting up a plant is about same anywhere, since everything has to be flown in anyway.
Wages must be certainly be lower than in China-Korea-India-Mexico by now and don´t think they can afford worrying about environmental protection.
Cost of setting up a plant is about same anywhere, since everything has to be flown in anyway.
Surprised that's the case, though I've no experience in the industry. I'd thought it would be largely automated too...
These days packaging often cost a lot more than the content, just like bottled water. Actually way pass unsustainable point but public awareness of the issue is not there yet.