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Semiconductor Gray Market

Semiconductor Gray Market. Grant A. Crawford, PhD Asst. Professor Dept. of Materials and Metallurgical Engineering SDSM&T February 17 th , 2012. What is Semiconductor Gray Market?.

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Semiconductor Gray Market

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  1. Semiconductor Gray Market Grant A. Crawford, PhD Asst. Professor Dept. of Materials and Metallurgical Engineering SDSM&T February 17th, 2012 School of Mines

  2. What is Semiconductor Gray Market? • Gray Market: The trade of parts through distribution channels which, while legal, are unofficial, unauthorized, or unintended by OCM1. • Semiconductor gray market often associated with counterfeiting. • Counterfeiting makes up 2% of worldwide semiconductor TAM  $5 billion value in 20113($40 billion for overall IT industry1) • Counterfeit incidents discovered in military and military suppliers  3,868 cases (2005) to more than 9,356 cases (2008)2 1Alliance for Gray Market and Counterfeit Abatement 2Alliance for Gray Market and Counterfeit Abatement (BIS report 2010) 3www.rocelec.com (Rochester Electronics, LLC) School of Mines

  3. Semiconductor Industry • Two major business models: • IDMs – integrated device manufacturer • Fabless • Customers: • OEMs • ODM/EMS • Distributors School of Mines

  4. Semiconductor IndustryValue Chain School of Mines

  5. Semiconductor IndustryGlobal Value Chain Semiconductor industry characterized by global transfer of goods and services. Source: IDC Manufacturing Insights School of Mines

  6. Where do gray market ICs come from? • Semiconductor Value Chain • ICs released into gray market by downstream customer (impacts fabless and IDM) • Surplus parts sold to distributors • IP or IC released by contract manufacturer (impacts fabless) • Counterfeiting School of Mines

  7. Where do gray market ICs come from? Fabless ICs Source: Certicom.com Fabless IC manufactures has little control of their IP (and ICs) after their designs are sent to foundries School of Mines

  8. Where do gray market ICs come from? Types of Counterfeit Chips • Recycled / Used ICs • Parts pulled from boards; leads straightened/cleaned; original markings removed or “blacktopped”; new markings added • Lower Grade / Inferior “Second-Source” ICs • Parts may be new or used; original markings removed or “blacktopped”; new markings added • Parts typically are functional but out-of-spec • New or Used IC Die Assembled in New Packages • Die may be removed from “old” packages and assembled in new packages; extremely difficult to detect these counterfeits! • Useless ICs • Parts are non-functional: no die, bad die, wrong die, wrong package, etc. Source: Analog Devices, Inc 1Analog Devices, Inc 2www.SIA-online.com (Semiconductor Industry Association) School of Mines

  9. Where do gray market ICs come from? Counterfeiting Difficult to Detect Source: Analog Devices, Inc School of Mines

  10. Semiconductor Industry & Gray Market • Semiconductor Gray Market becoming an increasingly large problem1,2 • Diverse Supply Chain • Cheaper more available equipment (counterfeiting) • Short product lifecycle – need for EOL ICs (e.g. military application) • Global value chain  low cost geography used with potential for limited security. • Supply and demand experience peaks and valleys  in times of shortage counterfeiters make large profits • Internet makes marketing easy and anonymous 1www.rocelec.com (Rochester Electronics, LLC) 2Alliance for Gray Market and Counterfeit Abatement School of Mines

  11. Who is impacted? • Semiconductor manufacturer: • Lost profit (reduction in TAM and ASP)ICs released to gray market often sold for less than those sold through intended channels –results in lost profits and reduction in TAM • Warranty costs (and enforcement) • Brand Name • Electronics Consumer: • Specifically important for consumers using EOL parts (e.g. Military applications) • Failure of wrong or inferior parts • Failure of parts due to improper storage and handling. • Failure of parts impacted by counterfeiting process School of Mines

  12. Gray Market Mitigation • Semiconductor Manufacturer • Improved procedures for handling scrap, overproduction, returns • Improved unit marking and traceability (less common$$) • Hardware “keys” (fabless manufacturers) (less common$$) • Improved supply chain security • Improved authentication/identification at time of purchase School of Mines

  13. Semiconductor Manufacturer Unit Marking and Traceability • Include human readable or 2D-IDs (QR codes) • Brand protection • Warranty enforcement • Open market reduction • Customer Excursion Support • Process development – Commonality analysis, RC identification, excursion containment School of Mines

  14. Gray Market Mitigation • DOD working group1,2 • Improved authentication/identification at time of purchase • SIA Anti-Counterfeiting Task Force (ACTF), NASA, DOD, Jet propulsion Laboratory • DOJ D.C. Counterfeit Microelectronics Working Group1,2 • Identification, investigation, prosecution • SIA ACTF, DOD, and other government agencies • Private Industry • A number of companies focusing on helping consumers and manufactures with counterfeiting security 1 www.SIA-online.org (Semiconductor Research Association) 2 Alliance for Gray Market and Counterfeit Abatement (BIS Report 2010) School of Mines

  15. Conclusions • Semiconductor Gray Market is an increasingly important issue with large economic and safety impact to consumers and manufactures • A portion of possible mitigation process includes unique identification and marking (i.e. security printing) and supply chain security School of Mines

  16. backup School of Mines

  17. Example – Vision Tech From 2006 to 2010, VisionTech Components knowingly sold counterfeit integrated circuits to approximately 1,101 buyers in the United States and abroad, including counterfeit integrated circuits destined for military applications. VisionTech shipped 75 counterfeit chips destined for naval vessel and land-based Identification Friend or Foe system. As the U.S. Attorney noted, “if the system failed during an engagement and could not identify an approaching threat aircraft 25 miles away, a missile fired from the threat aircraft could hit a ship one minute later.”13 Other shipments included 1,500 counterfeit memory chips destined for the Harm Testing System installed on F-16s to track hostile radar systems,14 350 counterfeit ICs intended for an application in the Beam Steering Control Module board within Multiple Sub-Array of Testable Antenna for the U.S. Navy Cobra Judy Replacement Program,15 1,500 counterfeit chips to control the braking system in a high speed train,16 and 196 counterfeit chips to be used in a hand-held portable nuclear identification tool, a device offered for sale on the FEMA (Federal Emergency Management Agency) website as suggested emergency equipment for first responders.17 For her part in the scheme, VisionTech’s administrator, Stephanie McCloskey, was sentenced to 38 months imprisonment and $166,141 in fines. www.SIA-online.org (Semiconductor Research Association) School of Mines

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