The Cost of Counterfeit Industrial Equipment for Electronics Manufacturers

April 19, 2020 by Luke James

Today, it is easier than ever before to produce counterfeit products. And in the world of industrial equipment, it represents a ticking time bomb for manufacturers who face significant harm from the growth of knock-off equipment.

According to new data from the ERAI, a global information board for counterfeiting, reports of counterfeit electronic products are growing. Although it is difficult to put an exact figure on just how many counterfeit products are in circulation, estimates suggest that consumer and industrial businesses lose approximately $250 billion each year. 

Counterfeit products can be seen across all industries. From fashion to jewelry and perfume to toiletries, nothing is sacred for the people who set out to profit from peddling fake goods. However, in industries like electronics and manufacturing, they are not just an annoyance to legitimate manufacturers—they can be downright dangerous and cause untold damage.


An Industry Plagued by Counterfeit Products

The electronics industry has long since been inundated by counterfeit products, with semiconductors, integrated circuits, and programmable logic devices representing the most targeted devices. 

Many of these counterfeits are said to be manufactured in China to inferior standards that undermine performance and efficiency while also skirting past stringent testing procedures and failing to meet key safety criteria. This means that when these counterfeits are deployed in larger systems, there is an increased likelihood of malfunction.


The Hidden Costs Behind Counterfeits

If, for example, a counterfeit component was installed in a larger system such a production line, a malfunction or breakdown could lead to significant financial harm through several hours’ or days’ worth of unplanned downtime. The cost is not just financial, though. It is often the case that counterfeit breakdowns are hazardous in nature, and these can lead to extensive damage to peripheral equipment and present a risk of injury to staff members. 

Speaking to All About Circuits, Nigel Smith, the CEO of TM Robotics, said: “Counterfeits products can, and have, cause serious injuries and even fatalities. In some cases, where counterfeit equipment is poorly made and not manufactured to the standard safety regulations, burns and fires are caused which results in serious injuries and deaths. Therefore, counterfeiting in the digital age is not only challenging to identify and prevent, but it results in severe injuries and implications for manufacturing businesses.”


Electronics components transistors

A counterfeit component can lead to a significant malfunction in the product later on and extend development time and costs



Identifying Counterfeit Components

Unfortunately, manufacturers may not realize that they are using counterfeit products. The more sophisticated counterfeits—many of which feature false certifications and engraved identification marks to make them look like they come from OEMs—can go undetected and wind up embedded in critical manufacturing systems. 

Smith also said that counterfeiting is particularly harmful to SMEs: “These companies often do not have in-house experts to monitor or track down and prosecute counterfeiters,” he said. “This means that, for example, manufacturers who believe they purchased a genuine part may hold the company accountable for warranty and liability claims when the fake product doesn’t meet expectations for quality or performance, resulting in lost brand trust.” 

For these businesses, the onus is on them to be on the lookout for counterfeit parts, with those that source their equipment online at the most risk. If the equipment is not purchased directly from the OEM or an authorized distributor, there is a risk it could be counterfeit. “However, the price itself is normally quite telling,” Smith said. “It is essential to consider what the realistic price should be – no one offloads brand-new parts for the [sic] fraction of the price – it would clearly be a fake.” 


Taking Steps to Protect Equipment 

With the industrial supply chain teeming with these parts, it is down to manufacturers to take steps to protect their operations by being cautious and ensuring that they only do dealings with legitimate equipment suppliers—these suppliers will have no qualms with being transparent and providing traceability for their products.