Enclosures, Packaging & Interconnects
6 October 2013
By Anne Ting, Components Direct,
an Avnet Company,
Buyers of electronic and semiconductor com- ponents have long been a prime target for exploitation by the gray market. More often than not, the gray market, the unauthorized
sale of new, branded products diverted from autho-
rized distribution channels, takes advantage of shifting
market demand, inconsistent industry regulations,
and errors in forecasting in order to gain profit to the
detriment of the end buyer. According to research con-
ducted by the industry group Alliance for Gray Market
and Counterfeit Abatement (AGMA) and KPMG in
March 2012, the value of gray market products ranges
from five to 30 percent of all IT sales, with an impact
on profits between $8 billion and $10 billion (AGMA
March 2012 press release). Buyers of electronic compo-
nents understand that the gray market is an increasing
danger but haven’t always been clear on how to avoid
it or even identify how or at what point in their supply
chains products are leaking in from the gray market.
Fortunately, franchised distributors, with a business
model built around identifying and curtailing the threat
posed by gray markets, are working to protect buyers
and their supply chains.
The magnitude of the problem for suppliers
According to a 2010 survey conducted by the U.S.
Department of Commerce (DoC) Bureau of Industry and
Security’s (BIS) Office of Technology Evaluation (OTE),
the procurement process has become a main entry point
for counterfeits due to the use of unapproved suppliers.
When purchasing from the gray market, a buyer does
not have the reassurance that the product was properly
stored, handled, or packaged. Buyers as well as consumers and other technology end-users, including military
and defense, are negatively impacted when products are
advertised as new and authentic, but in reality could be
used, refurbished, or even worse, counterfeit. The consequences of using counterfeit or non-conforming parts are
significant, and in the case of military and other critical
components, can be catastrophic.
components and the gray market
Figure 1a. Secondary market analysis:
Figure 1b. Secondary market analysis: snapshot.