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Counterfeit Intel chips may be rising

An imbalance between the price and supply of Intel microprocessors is leading to a rise in "remarked" chips with bogus speed ratings.

An imbalance between the price and supply of Intel microprocessors is leading to a rise in "remarked" chips with bogus speed ratings in Europe and North America.

Computer makers in the United States claim that there have been recent instances of chips sold as 200-MHz Pentium Pro processors were in fact 166-MHz Pentium Pros that had been repackaged and renumbered by unscrupulous chip brokers to look like their 200-MHz counterparts. The German magazine c't has reported on a rash of 266-MHz Pentium II chips being sold as 300-MHz versions in Germany.

c't said that using 266-MHz Pentium IIs as 300-MHz chips can lead to system "instablities."

Remarking has sporadically occurred with Pentium and Pentium MMX chips, other sources said.

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While the practice is not widespread, it points up the potential dangers facing consumers trying to find the ultimate bargain on IT equipment. To move aging inventory, or to make a little more money on each chip, some chip brokers will change a chip's package to make it appear to belong to a faster group of processors.

These chips typically wend their way through second- and third-tier distributors, which in turn try to sell them to smaller PC manufacturers. More often than not, these parties have no knowledge of the remarking and are not part of any scheme.

Remarking generally heats up when there is too much product on the market or when significant gaps in supply or price exist between two similar grades of microprocessors.

"It shows up whenever there is a substantial price delta between speed grades," said Dean McCarron, principal analyst at Mercury Research. "You see it in Third World countries, the Eastern bloc, Asia...It takes place in the very bottom of the well in North America."

A report in c't states that the remarked chips come in two varieties. With the first type, the part number on the 266-MHz Pentium II has been changed to correspond to the 300-MHz version. The area where the old marks have been removed shimmers, according to the magazine.

In the second variety, the entire chip package has been changed. The "Pentium II" lettering is too small and moved too far down the case on these processors.

If the report proves true, it will mean that remarketers have been able to confound one of the purposes of the Pentium II package. The casing, which contains a hologram, was designed to deter the fraud that became a problem with 486 and Pentium chips.

"It was fairly common with the Pentium," commented Craig Conrad, vice president of marketing at Nexar, a PC manufacturer. Other executives confirmed this observation.

At the moment, the remarked Pentium IIs appear to be a European issue. No one has reported seeing these in North America. However, other irregulars have been occurring.

"We have not yet seen any remarked Pentium IIs. However, we've seen some previously used chips. We've also seen a lot of Pentium Pro processors remarked," said Roland Baker, chief executive officer of Net Express, which makes computer systems for scientific users. With Pentium Pro chips, the remarkers try to pass off 166-MHz versions of the chip for 200-MHz versions of the chip. The remarking is likely occurring because there is a relative shortage of 200-MHz chips, he said.

Remarked chips can be identified through careful inspection, he added. The labeling on legitimate Pentium Pro chips is done in off-white, he said. Remarked chips use a bright white.

Computer vendors get around the problem by buying through authorized distributors, he noted.

Intel is an investor in CNET: The Computer Network.