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China Counterfeit Surprise
by James Dunnigan
January 13, 2008

Discussion Board on this DLS topic

One reason China tolerates the widespread manufacture of counterfeit products is because some of them have some military benefit for China's Cyber War effort. This came to light recently when the FBI arrested two Americans for running a computer parts company that was selling counterfeit computer parts (especially Cisco router components), manufactured in China. The phony parts had counterfeit labels, and were delivered in counterfeit boxes. The two brothers had a contract to sell these parts to the Department of Defense and other government agencies.

Actually, the Chinese got lucky with this one. Normally these counterfeit parts are sold by transitory operations. Eventually, the user has reason to contact the manufacturer of the shoddy part. At that point, the buyer discovers that, say, Cisco, has no router component with the serial number the scammed buyer is reading over the phone. It is then that the buyer realizes they have been screwed.

Counterfeit computer parts can be made to very low standards. They will work for a while, but not for the long periods of time that justify the high price of the authentic parts. The Chinese manufacturer sells the counterfeit parts at, say, 20 percent of what a real part would cost, to a foreign distributor. This guy then peddles the counterfeit parts to dealers who may, or may not, know they are getting cheap, but fake, parts at a deep discount. The dealer can then sell the counterfeits at a discount. Discerning buyers can check serial numbers on these high price components (some have a list price of thousands of dollars), but others are more trusting, and get burned.

Counterfeit high-tech items are a growing business, and a growing danger. In addition to computer gear, auto and aircraft components are also being faked. Some aircraft and auto accidents have been traced to the fakes, which makes it a public safety issue. But with the Department of Defense installing counterfeit computer components, it becomes a national security issue. There's also the fear that the Chinese, or some other hostile nation, might get their hands on real computer components, and replace some of the chips with modified ones that will make government networks easier to hack. Yes, it just gets worse.

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