Expectations around electronic devices keep growing as buyers become accustomed to higher standards of functionality. Unfortunately, some have sought to take advantage of this sector’s profitability by selling counterfeit components.
Without a reliable way to detect and stop these fraudulent parts from entering the supply chain – like artificial intelligence – electronics manufacturers’ product quality and reliability can suffer.
Zac Amos, Contributing Writer, further explores.
How common are counterfeit electronic components?
As the electronics industry has boomed, fraudsters have increasingly sought to capitalise on it. Consequently, counterfeit parts have become a widespread issue throughout the global device supply chain.
The Electronic Resellers Association International (ERAI) reported 1,055 suspected counterfeits in 2024 alone. That’s a 25% increase over 2023 and the highest number of nonconforming components in a single year on record. It’s also a figure that has largely climbed since ERAI started tracking these cases in 2005.
Integrated circuits account for most of these counterfeits. Demand for legitimate microcontrollers and other chips has skyrocketed amid the booming AI and Internet of Things (IoT) markets. As a result, fraudsters have more to gain by selling fake or nonconforming visions of these components.
Failing to catch these fraudulent parts has extreme consequences. These components will not achieve the same level of accuracy or reliability, leading to technical glitches, short service lives and all-around lower performance. Those shortcomings can harm a company’s reputation and client loyalty. Worse, if a device is serving a mission-critical purpose, they could lead to material harm for the end user.
How AI can fight supply chain counterfeiting
While the rise of AI may have contributed to the proliferation of counterfeits, it can also fight this trend. Here’s how electronics producers can use automation to detect and stop component counterfeiting.
Auditing suppliers
AI-driven counterfeit prevention starts with analysing sources to verify their reliability. Just 15% of chief procurement officers globally have visibility beyond their direct suppliers. Only 18% track risks, and this lack of transparency makes it easy for fraud to occur.
AI can help by streamlining due diligence and poring through documents to identify suspicious trends manufacturers may otherwise miss. It can confirm a supplier’s authenticity by finding their certification or compliance records or raise suspicion by sensing a lack of such reporting or finding complaints about nonconforming parts.
Inspecting components for flaws
Further detection mechanisms are still necessary, even with thorough vetting. Some counterfeits originate from legitimate sources but didn’t pass manufacturer-side inspection. Consequently, the only way to recognise them is to inspect them before integration, and AI improves this process.
Machine vision systems can detect flaws that may not be visible to the human eye to catch anything that falls below acceptable standards. Such technology is also far faster than manual inspections, letting companies watch for counterfeits without slowing down production.
Identifying counterfeit vulnerabilities
AI can facilitate longer-term anti-counterfeit strategies, too. Supply chain analysis tools can pinpoint areas in a business’s supply chain where counterfeits are likely to arise. Leadership can then address the issue by finding alternate suppliers or increasing visibility to stop these vulnerabilities from letting counterfeits into the workflow.
Many organisations already want to restructure their supply chains – 63% of leaders in 2025 say they will invest in supply chain transformation. AI can guide these decisions by recognising which suppliers or areas of poor visibility are particularly risky. Predictive analytics can even suggest potential changes to streamline decision-making when finding alternate strategies to increase transparency and trust.
AI can strengthen the electronics supply chain
Electronics manufacturers must catch counterfeits to ensure the reliability and quality of their products. In a complex supply chain environment, the only way to do so is to capitalise on AI.
It can find and prevent fraud at every step throughout a component’s journey. As more businesses implement these technologies, the industry will become both safer and more cost-effective.
