South Korean chip manufacturer LG Semicon claims it has discovered a ring of Southeast Asian counterfeiters who are sending fake memory chips into the U.S. distribution pipeline.
LG Semicon is a major manufacturer of DRAM memory chips for personal computers both in Asia and the United States and one of the largest South Korean manufacturers.
For the past several months, a counterfeit ring has been selling 16-megabit DRAM chips under the LGS brand, according to LG Semicon's own investigation. The company claims to have found proof that some as-yet unidentified counterfeiters are stamping the LGS name brand on substandard memory chips and selling them as the real thing.
The counterfeit chips are apparently originating in Singapore and turning up in the United States through the San Francisco Bay Area, according to an LGS spokeswoman.
The substandard memory can be easily identified. Rather than having a blank underside, the fake chips bear a bogus serial identification.
The packaging also indicates that the chips come from Singapore, rather than South Korea, where LGS makes its chips. The counterfeit chips are stamped "T4174OC 69A4TC Singapore"; the markings on the genuine chips are done with a laser.
The fake chips are marked in gold ink. A sudden drop in the company's memory prices alerted LG Semicon to the problem.
"The price had been going up in the dealer market," said an LG Semicon executive who declined to give his name. "But since April, it had been falling. We thought the price would [continue] to go up." Like other manufacturers, LG Semicon held back production at that time to avert price declines.
LG Semicon, the American subsidiary of the South Korean company, started the investigation nearly three months ago after a rash of complaints from distributors and dealers regarding memory failure.
Conducting its own sting operation, LGS bought some of the LGS chips circulating in Southeast Asian markets, tested them, and discovered someone else had made them.
The LG Semicon executive would not comment on the extent of the problem or on the identity of the counterfeiters. The company, however, plans to pursue the culprits through legal channels.
DRAM counterfeiting is not unheard of, but it has always been a fairly limited problem. "There are companies remarking CPUs," said Larry O'Connor, president of Other World Computing, a component reseller based in Woodstock, Illinois. "This is the first time I heard about it in memory."
"People are probably taking the C-grade chips and remarking them," commented a principal at Huntington Beach, California-based Digital Connection. Fake DRAM has been a minor problem at best, he added, mostly because the current average cost of a 16-megabit DRAM module is around $80, made counterfeiting other products more profitable.
"We have not had any problems," said Tom Philban, manager of marketing for module maker VisionTek. Philban nonetheless added that the nature of the market creates the potential for abuse. "There are a lot of memory brokers who don't inventory and don't manufacture. They don't know what they are selling," he said.
The LGS executive said that, before the 1995 worldwide shortage of DRAM, the market was relatively tightly controlled. That shortage, however, brought more board makers and dealers into the arena.