Fake Chips Flood China Electronics Market and Fill Overseas Supply Chains

Counterfeit products have been circulated in China’s electronics market for a long time. However, as the global chip shortage intensifies, a large amount of refurbished, substandard fake chips are flood the market, exposing major deficiencies in China’s quality control standards.

China Economic Observer reported a chip agent revealed that to meet the growing demand, suppliers were no longer keeping their counterfeiting practices secret. Instead, they are openly creating separate production lines to expedite the sales of counterfeit or refurbished chips. Furthermore, businesses are no longer offering the shoddy products at half price. Many are being sold at full market value.

The agent identified two types of counterfeit chips. The first involves recycling used chips from e-waste by removing the logo and cleaning them for resale with new packaging. The second involves packaging the substandard chips from the regular production line and selling them as good products.

Not surprisingly, customers were often dissatisfied with the product’s performance, reliability, and durability. However, the deficiencies were not immediately evident until after the chips were used over time or under extreme conditions. At which point, it would be the customers or manufacturer of the final products who suffer a loss, while the fake chip providers often avoid troubles, according to the chip agent.

Small and Medium-sized Enterprises Are Most Affected

China has long relied on imported chips. Small and medium-sized enterprises are unable to directly order from overseas manufacturers due to the small quantities, and can only purchase through third-party distributors. Thus, small and medium-sized enterprises in China have become the largest buyers of fake chips, and also the largest group of victims.

For example, a small company once designed a simple data acquisition card. The debugging stage always showed abnormal results. It raised concerns about the design.

Not to worry. China can’t fake those kinds of chips, at least not yet. Intel, AMD, TSMC (which makes most of the chips that are put into automotive applications) are beyond the manufacturing ability of the Chinese. More importantly, the validation tools these chipmakers give to their customers virtually guarantees ‘fake’ chips can’t be used.

Where these chips might find their way into US products is in appliances and other lower-ticket products that don’t use sophisticated chips.

I saw his response after I posted. That was informative.

But dishwashers, refrigerators, ovens, clothes washers, driers...sounds like a disaster looming!

Even basic components are causing problems now. The condenser on our fan/compressor starter on the AC went out Saturday. All the repair shops are slammed and can’t get simple condensers! I finally found a repair guy who had ONE left on his truck and he got it going again Saturday night. I ordered a spare on Amazon if I need to repair it again.

Neighbors are building a brick wall. It’s slowed way down due to shortage of cement (!) and labor.

True or not, it serves to undermine confidence in Chinese products.

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Its true, wake up. Its not a hit piece. Fake stuff is the number one money maker in China, after investing in apartments and apartment buildings. The Chinese are obsessed with making money, so much so that it has become a facet of their culture. Scams are everywhere, and it is impossible to know who’s scamming you, usually until its too late. Crimes like that, pickpocketing, kidnapping are not noticed, even in broad daylight and the police do nothing.

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