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What's Worse Than a Chip Shortage? Buying Fake Ones

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Legitimate chips, top; defective chips, bottom.

Instances of chip fraud have historically been underreported, industry participants and experts say, because victims are reluctant to publicly admit that they have been duped. Pursuing criminal charges is difficult, particularly across borders.

Credit: BotFactory

The global chip shortage has created a gold mine for bad actors.

Businesses in need of chips are taking supply-chain risks they wouldn't have considered before, only to find that what they buy doesn't work. Dubious sellers are buying ads on search engines to lure desperate buyers. Sales of X-ray machines that can detect fake parts have boomed.

It is a quality-control crisis created by the world's scramble to land hard-to-find semiconductors at any cost. Without those essential parts, makers of products as varied as home appliances and work trucks are stuck in neutral as the global economy ticks back to life.

This spring, New York-based BotFactory Inc., a maker of 3-D printers that produce electronic parts, couldn't source microchips at any of its go-to vendors for weeks. Eventually, it turned to an unknown seller on AliExpress, an online sales platform operated by China-based Alibaba Group Holding Ltd. An early sign of trouble: The orders arrived packed in plastic wrap rather than the usual protective antistatic bags.

"Of course, a bunch of them didn't work," said Andrew Ippoliti, BotFactory's lead software engineer.

From The Wall Street Journal
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