Each year the United States Customs and Border Patrol confiscates millions of dollars in counterfeit goods. The United States Chamber of Commerce estimates American companies lose $250 billion in sales every year as a direct result of counterfeiting and piracy. Even in the face of rising awareness among consumers and collaborative efforts among government organizations, the Chamber says the problem is continuing to grow at an alarming rate.
Once thought to be too complex and sophisticated for counterfeiters, electronics and Information Technology (IT) products are becoming the next hot ticket item in counterfeit manufacturing. The Alliance for Gray Market and Counterfeit Abatement (AGMA) estimates one out of every 10 IT products is counterfeit or contains partial counterfeit parts.
Cutting corners with substandard or counterfeit electronics won't be as easy for suppliers whose parts end up with the U.S. military, as the Department of Defense turns to DNA “barcodes” to track components. In the next month, certain kinds of electronic components sold to the military will have to be tagged with an artificial DNA sequence, which will, its designers say, make it well nigh impossible to ship a fake piece of equipment.
DNA tagging technology has potential to help electronic supply chains police their own goods. In a nutshell, DNA-encoded ink is printed on parts at the original equipment manufacturer (OEM) factory as a unique identifier. The random generation of DNA codes is similar to using an encryption machine to generate single use codes which are exceedingly difficult to break. It is assumed it will be difficult and costly for copy-cats (counterfeiters) to match the correct code and thus goods so labeled will be easy to differentiate from fakes.
In a blog post, XS International explores how the electronics industry came to have this problem. The first requirement for a viable counterfeit operation is profitability. There has to be a market for the product being counterfeited in large enough volume to justify the investment and the risk. The most commonly counterfeit products are therefore those with large worldwide markets, such as those made by Cisco, HP and EMC (News - Alert). The Defense Industrial Base Assessment of Counterfeit Electronics provides considerable detail on the types of products and markets into which Counterfeiting is focused. The report confirms that large quantities of modestly priced parts (in the $1 to $500 range) are the most frequently counterfeited.
Image via XS International
According to Fox News, the reason DNA tags are so hard to copy is the nature of DNA sequencing. DNA sequences are made of four different molecules: adenine, guanine, cytosine and thymine. They can only be connected in pairs, called base pairs that are written as GC or AT. To sequence DNA, one has to "amplify" it – basically dissolving it in a solution and then adding chemicals to make the sequences duplicate themselves.
The nature of the worldwide trade in Original Component Manufacturer (OCM) parts means that the entire supply chain is impacted. There are no standards for how to identify counterfeits; nor any standards for how to independently validate counterfeit from legitimate. Counterfeit parts may be shipped directly to distributors or large end users (such as the DOD) for spares, or be integrated into circuit boards. Most buyers in the supply chain assume that testing has already been done, or rely upon the invoice from the OEM/OCM as proof of legitimacy.
XSi belongs to ASCDI/NATD which counts 400+ Independent Resellers as member and we have pledged to honor and abide by the ASCDI/NATD Anti-Counterfeit Policy in order to eliminate or mitigate the impact of counterfeit information technology goods and to develop best practices and strategies aimed at identifying, inspecting, testing and properly disposing of counterfeit goods and to report encounters with counterfeit goods to law enforcement.
The ASCDI/NATD’s goal is to eliminate counterfeit goods from the information technology marketplace. Counterfeit goods are causing havoc with the safe and sound conduct of public and private commerce throughout the world with the potential to cause great damage and harm to life and property. Accordingly, the ASCDI/NATD has adopted an Anti-Counterfeit Policy reflecting the dedication of all ASCDI/NATD Members to abide by the law and to maintain the highest level of integrity and responsibility toward their customers, the information technology industry and the public large.
Just because you buy from the OEM, OEM Distributors and authorized OEM resellers, does not mitigate the chance you will unknowingly by them receive counterfeit equipment more than buying from independent resellers - without this DNA tagging. Independent resellers also employ visual inspections and unlike the OEMs, XSi does not purchase parts from overseas vendor.
To learn more about XS International, visit www.xsnet.com.
Edited by Amanda Ciccatelli