Strategic Purchasing

Buy a counterfeit part and risk going to jail

Should buyers who purchase counterfeit parts from component brokers and independent distributors be held accountable and face jail time?

Ed Smith, Avnet vice president and president of Avnet Electronics Marketing Americas, thinks so. Speaking at the recent Electronic Components Industry Association (ECIA) Executive Conference, Smith said that buyers who purchase counterfeit parts for government programs such as defense systems need to be held accountable. He said there should be a federal regulation that holds buyers responsible for purchasing counterfeit parts and they should be jailed.

Though the measure seems harsh, Smith noted that counterfeit parts can cause a defense system or weapon to fail on the battlefield and could result in the loss of American soldiers’ lives.

Recent studies have revealed that the use of counterfeit parts in defense systems is a big problem. Last year, the Senate Armed Services Committee issued a report that said there were more than 1,800 cases of counterfeit parts being used in military weapons systems, including fighter planes, helicopters and missile systems. About 1 million counterfeit parts were involved in those cases and about 70% of incidents were traced to counterfeiters in China.

Of course, counterfeiting affects more than the defense industry. It can be a life or death issue in other industries as well. For instance, a bogus part embedded in a critical medical device such as a pacemaker can have a catastrophic result on a patient. A counterfeit semiconductor that fails in an automotive system could result in a deadly crash.

Making it illegal to buy counterfeit parts would certainly be a deterrent for buyers who purchase parts from independent distributors and parts brokers. Who wouldn't think twice about buying parts on the open market if there was a possibility of being sent to prison if the components turned out to be fake? But it remains to be seen if such an anti-counterfeiting regulation will ever be enacted.

However, electronics OEMs and EMS providers who are concerned about the proliferation of counterfeit electronic components in the supply chain can take action to make sure they don't purchase bogus parts.

Electronics companies could have an anti-counterfeiting purchasing policy, which could state that buyers should only purchase parts directly from component manufacturers or their authorized distributors, which is what the ECIA has pushed for four years.

The policy could state that under no circumstances should buyers make opportunistic purchases from brokers or independent distributors just to get a lower price for a part.

Some may say that such a policy is unrealistic, as independent distributors are often sources for parts during shortages or during natural disasters such as the flooding in Thailand and tsunami in Japan in 2011, which shut down production of some crucial electronic components and materials. There could be exceptions in the policy during times of shortages, but buyers should be required to do due diligence and screen and qualify an independent distributor before placing a purchase order, which is what some large EMS providers and OEMs do.

A buyer purchasing a counterfeit part on the open market has failed to do his or her job and should be held accountable, perhaps by being fired.

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