Fake Chips Flood China Market, Fill Overseas Supply Chains

Dear ATS Readers, Writers,

When ever a "shortage crisis" comes along, there seems to be someone who is ready, willing, and able to SCAM the situation.

Apparently a rash of fake faulty "computer", or electronics chips have hit the market from China.

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.

Fake Chips Flood China Market, Fill Overseas Supply Chains

Not good, dodgy chips may cause injury or death by malfunctioning.... and least of all, a dodgy "product" that may fail after a short time of usage.

Pravdaseeker

I haven't looked into the how and why of the chip shortage, so I fail to understand how they can produce crappy knockoffs to fill the gap but not produce more of the good ones.

Perhaps someone could address this question for me. If not I'll probably look into it myself when I get time later tonight.

ETA: My first thought was this was another covert war move by China, like the Russian hacking going and some other things.

a reply to: MichiganSwampBuck

Greetings SwampBuck,

Thanks for chiming in mate.

One thing in chip manufacturing is the need for extremely delicate temperature control. That require super steady 60 HZ, and voltages, etc for these chip ovens to cook good chips. If the temps are not held tight, you get a lot of faulty chips. Setting up a power supply for chip making is very pricey, and some of the places let the quality go to heck, and lack an effective testing department, or quality control department... to weed out the "duds".

They were also recycling old chips that had heaps of hours of usage, and marketing them as new chips, also very bloody dodgy.

Hopefully none of these got into our essential military equipment, or power grid "brains", etc, etc. And of course, there is always the "risk" of a dodgy chip maker to put in "secret back doors", etc for future spying, or sabotage purposes.

During the Y2K scare, I know for a fact that a lot Chinese "techies" were flown over and basically given free reign in some of our power grid switchyards in the western USA. Minimal job oversight, usually by electrical engineer that would pop in on the group a few times a day, and wrap up meetings etc, etc. In other words, they weren't monitored for any dodgy programming or chip replacement etc.

They were scared to death about the power grid as it rolled over to 1-1-2000.

So yeah, your concerns are not too far out there; and when national security comes into play, one needs to be sure about that there are no loose ends that will bite you down the road. Especially in this age of asymmetrical warfare.

Prime asymmetrical example of this is all the dang computer hacking and ransom ware attacks, demanding 70 million in bitcoin is the latest demand.. sigh.

Hopefully, it is just a bunch of commie criminals looking to make a fast buck or two.

Now begins everyone checking their "stuff" for any possible dodgy chips I reckon?

Pravdaseeker

a reply to: MichiganSwampBuck

I haven't looked into the how and why of the chip shortage, so I fail to understand how they can produce crappy knockoffs to fill the gap but not produce more of the good ones.

the chip problem is due to what i understand a result of several things that came about due to the world wide shut down from covid.

imo, part is the labor shortage and reduced production, part is due to shipping which is more than likely the main reason. some main ports had back logs of ships waiting to come in and be unloaded that lasted weeks on end for some ships. this was also due to labor shortage and caused a shipping container shortage.

the knock off ones doesn't surprise me, nor them being able to ship them. if you recall during the start of the shut down and for a long period of time cheap shoddy PPE in the form of masks and gowns were being produced and shipped all over the world.

it seems that china has a unlimited supply of manufacturing companies/crooks and able to ship that sh@@ when others can't.

What a relief - it's only computer chips! I just bought some Frito Chili Cheese chips that were $2 off the regular price. You had me worried for a second.

a reply to: TrulyColorBlind

Frito Chili Cheese chips that were $2 off the regular price.

scoops or regular, i prefer scoops with bean dip, home made nacho sauce or pace picante sauce, not that stuff from new york city.

We were getting bad capacitors from China before COVID. We had to make a tester to check them before assembly. It was costing too much to have to tear down an entire unit to replace them. Now the blown ones are put in a box. When the box is full they send us another box to replace them. They don't even want the bad ones back. I'll admit, when they fail it is spectacular.

In China most of their manufacturing is run by their military. Quota's have to be met, so sending out bad parts to meet the quota is the norm.

a reply to: JIMC5499

Greetings Jim,

Ah, I have read that bit before... about the military kinda overseeing things, and production quota's...

That helps explain a lot too.

Pravdaseeker

Chip shortage?
Man, you thin slice some potatoes and fry them until they are crisp.
Shortage fixed.
It doesn't take a rocket surgeon.

a reply to: JIMC5499

It's standard command economy practice. When the USSR was at this point, we weren't buying their crap is the big difference because we knew an enemy when we saw one.

a reply to: MichiganSwampBuck

I haven't looked into the how and why of the chip shortage, so I fail to understand how they can produce crappy knockoffs to fill the gap but not produce more of the good ones.

Supply and demand , there's too much demand but not enough supply of silicon wafers and transistors to make chips , new manufacturing pants are being constructed but due to the complexity of the manufacturing processes they take time to come online.

As ever , buy your tech from a reputable supplier not online marketplaces if you don't want to get fleeced.

Just wait tell china "reunifications" tiwan you think this is crazzy now just wait

Suprised I don't see this hear more the impact on the world from china taking tiwan will be felt for decades if they get the workers and the machins that gives china 3nm chip production along with all the high end intell and amd chips made thus far

a reply to: markovian

Hello markovian,

Good point... this is why you are seeing, reading about different countries trying to revive, or create a chip making industry.

There is an extreme danger to national security in the scenario you mentioned.

Chip manufacturers have "blueprints" of the chips they make. If China were to storm and occupy this island nation, all of these very sensitive blueprints and data would fall into Chinese Communist Party's hands and used against USA and its allies.

All of this data is like pure gold to an enemy state who wishes to undermine your "war machine" in times of a conflict.

They could determine weaknesses and probably develop a form of defeating your electronic weapons and protections.

Like WW2 was completely changed and momentum REVERSED by the intelligence US Navy people gleaned on the impending attack on Midway Island. They got lucky and sunk 4 Japanese carriers.... and that alone gave Japan a near fatal blow to its war efforts.

Pravdaseeker

a reply to: pravdaseeker
Yea everyone is scrambling but the machines are hard to get and cost alot but even tossing money aside the time it takes to get any chip prosess going is years and we don't just need 10nm chips we need all of them

Tiwan also has chip architechs who where tought bye people like Jim Keller and his teams it would be like operation paperclip but for china

China's looking to catch up fast the virus gave them a edge than they got Hong Kong a economic hub for exporting goods bye land and next in there sights tiwan the largest semiconductor manufacturer on earth

If no one defends tiwan things are going to get ugly

Not gonna lie ... I keep thinking potato and tortilla chips every time I see this thread even when I know that's not what it's about.

originally posted by: markovian
Just wait tell china "reunifications" tiwan you think this is crazzy now just wait

Suprised I don't see this hear more the impact on the world from china taking tiwan will be felt for decades if they get the workers and the machins that gives china 3nm chip production along with all the high end intell and amd chips made thus far

100% true.

I wrote a thread a while back about TSMC, the stranglehold on global chip supply that Taiwan has, and the incredible peril the West is in with being having the rug of chip manufacturing advantage and easy supply yanked out under our feet.

With the incredible concentration of chip infrastructure and expertise in Taiwan, the proximity of Taiwan to mainland China, and China's stated goals for surpassing the West in chip production, it defies logic how nothing is being done by the US to counteract this huge HUGE strategic vulnerability.

I can reach no other conclusion than this is a scripted turn of events, that Taiwan will fall in the CCP's hands and TPTB WANT this to happen.

originally posted by: markovian
a reply to: pravdaseeker
Yea everyone is scrambling but the machines are hard to get and cost alot but even tossing money aside the time it takes to get any chip prosess going is years and we don't just need 10nm chips we need all of them

Tiwan also has chip architechs who where tought bye people like Jim Keller and his teams it would be like operation paperclip but for china

China's looking to catch up fast the virus gave them a edge than they got Hong Kong a economic hub for exporting goods bye land and next in there sights tiwan the largest semiconductor manufacturer on earth

If no one defends tiwan things are going to get ugly

Everyone is scrambling - But China Scrambled first ... Seems it was all pre-planned - Like it's a War or something - Wake Up

Report: China’s Buying Used Chip-Making Equipment to Skirt US Restrictions - February 28, 2021

......Nikkei Asia said that “nearly 90% of used machines appear to be headed to China,” per a source at Mitsubishi UFJ Lease & Finance, and that another anonymous source at an unidentified used equipment dealer claimed, “machines that were basically worthless several years ago are now selling for 100 million yen [$940,000].”

Some of that equipment is being used on production lines, but Nikkei Asia said that some of it‘s merely being hoarded just in case it could prove useful in the future.It doesn’t make a difference to the companies selling that equipment; they’re making significant profits and selling through stock they otherwise would’ve sat on.

That isn’t just true of Japanese companies. Bloomberg reported earlier this month that “Chinese businesses bought almost $32 billion of equipment used to produce computer chips from Japan, South Korea, Taiwan and elsewhere” in 2020. That was “a 20% jump from 2019,” according to the report, and that growth could continue.

The end goal for China is self-sufficiency. Companies in the country have made progress on their own chip-making equipment so they won’t have to rely on American technologies, for example, and SMIC has sought other ways to reduce the U.S. blacklisting’s effect on its ability to advance the Chinese semiconductor industry.

Does anyone have ideas of which domestic US semiconductor companies to invest in?

www.kiplinger.com...

www.kiplinger.com...