Although chip makers have developed better strategies to combat counterfeiting, the absence of strong intellectual-property laws in emerging markets such as China means that the days of counterfeit chips are not over, according to industry experts.
About five years ago, chip counterfeiting was a rampant problem for the processor industry, principal analyst with Mercury Research, Dean McCarron, said. Unscrupulous distributors or fronts for organised-crime syndicates could purchase bulk amounts of PC processors or memory chips on the regular market, and change the identifying characteristics of the chip's label in order to make the processor appear more powerful than it really was.
A more powerful chip would command a higher price on the grey market, a network of secondary distributors that while not illegal, is not considered the chip manufacturer's official channel. Many of the chips bought on the grey market were legitimate, but enough were re-marked or tampered with to cause system problems and raise the ire of users and chip vendors.
Re-markers would change the label or reset the maximum clock speed on a processor in order to resell the product for a premium, McCarron said.
At the time, industry leader Intel was delivering processors on cartridges that could be easily tampered with by a counterfeiter who knew how to work a soldering iron, he said.
Counterfeiting was a significant problem for Intel around 1996 and 1997, company spokesman, Chuck Mulloy, said. Intel's Pentium II chip was often reset to a higher clock speed than the chip was rated for, leading to a higher than usual rate of failures with those overclocked chips.
Advanced Micro Devices (AMD) also had problems with re-marked chips in past years, said John Greenagel, currently a spokesperson for the Semiconductor Industry Association and formerly employed by AMD. In that company's case, it once contracted with a vendor that AMD had hired to destroy bad chips that had been deemed unsuitable for sale. That vendor would turn around and sell the chips to a re-marker, who would label the bad chips and sell them to unsuspecting users, he said.
Intel and AMD have learned from their experiences. Neither company sells processors in cartridge packaging anymore, opting for packaging technologies that would require sophisticated equipment to alter the processor's internal clock rate, McCarron said.
Intel also designed technology directly into its chips that made it much more difficult to change the factory-set clock rate of its processors, Mulloy said. It also set up a Web page where users could download a utility that would examine their processor for authenticity, he said.
AMD sells processors in trays to its major customers, such as HP and other large system builders, product manager for AMD's Athlon 64 desktop processor, Jonathan Seckler, said.
Those trays could be tracked by serial numbers, so that if a re-marked chip was found in the market AMD could tell which manufacturer bought the chip, and track down the counterfeiter accordingly, he said.
Individual system builders bought AMD chips in boxes, which were sealed with stickers and holograms that indicated whether the box had been opened since it left AMD's facilities, Seckler said. It also has a Web page where users can verify that their processor is a legitimate AMD product.
While counterfeiting in the US was not as much of a problem as it was five years ago, much of the activity had moved to Asia and grown more sophisticated, , vice-president of public policy with the Semiconductor Industry Association, Daryl Hatano, said.
In April, a truck delivering chips from Maxim Integrated Products was hijacked in Malaysia, the company said in a release. The stolen chips were worth about $US2.2 million, and had been marked with the appropriate speeds but had not gone through Maxim's final testing procedure, it said. Earlier this year, AMD revealed that police in Taiwan had arrested several suspects who had re-marked its chips for resale in Germany, China, and elsewhere. The company's German subsidiary said none of the re-marked chips have shown up in that country, but it remains unclear if re-marked AMD chips surfaced in China.
US chip companies were starting to see more and more violations of their intellectual property coming out of China, Hatano said. One recent example involved a group that was stripping away layers of a chip to expose the processor core. Since chips were made by etching features onto a silicon wafer over a photo of the design, a counterfeiter could obtain the chip's blueprint by photographing each layer as it is removed, he said.
This level of counterfeiting went beyond the traditional level of sophistication needed for chip hacking.
In most cases of chip counterfeiting using this technique, a chip foundry must look the other way when a company claims to have a new design that needs manufacturing from one of the various foundries in China or Taiwan, he said.
The answer, at least in China, was more stringent anticounterfeiting regulations and stronger enforcement of existing rules, Hatano said.
Intel (download a utility)