The Problem with Counterfeit Products

The presence of counterfeit products in the global supply chain presents a major challenge. Not only do these products compromise manufacturers' patents and profits, but they can also disappoint customers expecting a certain level of quality or performance. More critically, these counterfeits can pose a security risk to vital infrastructure.

Repair technicians and businesses, while not the originators of counterfeit products, are often unwitting buyers. It becomes an overwhelming challenge for repair businesses, particularly those unable to buy parts through authorized networks, to validate alternative suppliers to meet their customers' needs. One potential solution is for manufacturers to ensure wider parts availability, leveraging their ability to regulate their supply chains.

Identifying the Counterfeiters

Successful counterfeiting operations require a source of product and a marketplace. Unlike counterfeiting currency, counterfeiting products demands significant capital investment and manufacturing capabilities. The reality is that counterfeiters don't need to build their own factories; they just need to corrupt an individual within an existing component factory or assembly facility.

The implicated factory might be selling part of its output to counterfeiters alongside their official contracts with OEMs. They might be reselling defective products intended for destruction or substituting cheaper parts to cut costs. These products may pass basic tests and appear correct, but their performance might be compromised.

Because of these factors, counterfeit products can be challenging to detect, even for OEMs. Counterfeit parts often function identically to genuine parts, which makes their provenance difficult to trace. However, their identification is critical because they can disrupt markets significantly, particularly in Asia where large volumes of parts and products are manufactured and sold. Both the secondary market and the repair market pay close attention to parts’ authenticity due to the prevalence of counterfeits.

Domestic Parts Availability and Counterfeits

When we break down a product to the level of the printed circuit board, we find hundreds, even thousands of assembled parts. Identifying the legitimate supplier of an original part can be difficult, as not all components have model numbers or manufacturer names printed on them.

Parts availability is a major issue in the global repair industry, as OEMs often restrict access to these vital components. When OEMs decide to become the exclusive parts providers, they often make contractual arrangements with suppliers to prevent the sale of these parts elsewhere. Such limitations inadvertently incentivize the illegal supply of parts.

Numerous parts sources exist in Asia that may not meet Western standards of legitimacy. The repair industry cannot remain profitable without acquiring the necessary parts. If the only viable business model for a repair company involves importing parts without questioning their provenance, this will invariably occur. Any restrictions an OEM places on parts access only makes alternative, often illicit sources, more appealing.

However, if OEMs provide reasonable access to parts at fair prices, the allure of questionable sourcing diminishes. OEMs seeking to regulate their supply chain and eradicate counterfeiting can collaborate with repair providers. These partnerships can aid in identifying and shutting down sources of illegal activity worldwide.