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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Watch Out for Fishy Chips

They may go faster -- but not for very long

By Robin Ajello


DO YOU KNOW WHAT'S inside your computer? Those who bought their PCs from an authorized dealer can probably disregard that question. Those who were tempted by bargains at "gray markets" may not want to know the answer -- because there is a fair chance the chip inside is not what was advertised.

Consider the case of the Singapore do-it-yourselfer who bought a cheap microprocessor from a store at Sim Lim Square. After hours of trying to get his bargain-price purchase to work, he discovered he had been cheated. The chip had been tampered with to make it look like a faster version. Odds are that it was a reject stolen from a plant in Malaysia.

The re-marking of stolen chips is big business in Asia. And so is high-tech theft in general -- aided, in part, by the fact that the average police officer can't tell a chip from, say, a piece of Lego. The phenomenon began in Silicon Valley in the gung-ho, new-frontier days when security came a poor second to the next big thing. Finally, when armed gangs began raiding chip-fabrication plants, Valleyites woke up to the menace.

Not that they always reported the crimes. One story going around tells how an engineer untied himself after the bad guys left and rushed straight to his desk. To inform the cops? No, while bundled up, he had solved a puzzle that had eluded him all day. So excited was he about getting his idea on-screen that, oops, he just forgot everything else.

That kind of attitude troubles insurance companies, which must cover thefts that are increasingly surpassing $1 million per raid. This explains why Marylu Korkuch, a senior executive with Chubb Insurance, was in Singapore and Hong Kong last week, urging the likes of Intel, Motorola and Fujitsu to be on their guard. "This is not just a Silicon Valley phenomenon," Korkuch reminded her audience. "This is a worldwide problem -- one that has reached epidemic proportions."

The violence that has typified chip theft in America has generally not been duplicated in Asia. There has been only one reported armed attack on a plant -- at an installation in Thailand last year. "In Asia, there is a different threat," says Daniel Grove, a former FBI officer who runs Security Support in Hong Kong.

Rather than raid plants, Asia's high-tech thieves often hijack trucks transporting the chips from factory to warehouse to airport. After a lull, this kind of theft is again on the rise in Hong Kong, say industry insiders. It possibly reflects growing demand in the microprocessor market and the recent launch of sophisticated video chips. Hijackings are also prevalent in Malaysia, where companies in Penang now try to beat the thieves by sending their shipments to Singapore by taxi.

Last week, Grove received a call from a firm in Thailand, where 7,000 memory chips had gone missing. He will call on his 30-odd years in Asia to try to establish where they went. He knows it won't be easy. Within a couple of weeks, they could be on sale just about anywhere in the world. During shortages, there have even been cases of brand-name manufacturers buying back their own chips.

Very often, theft is an inside job. In some cases, staff have been known to remove the goods from cartons and replace them with wood or sand. The ruse is discovered only when the shipment arrives at its destination. By then, of course, the thieves and chips are long gone. By one estimate, $8 billion worth of electronic components were stolen worldwide in 1994. If the industry continues to sustain this level of losses, PC prices could rise.

For the most part, though, the consumer is immune to high-tech larceny. Not so with chip re-marking scams. These have been going on since the 1980s, when the 286 was a hot item. With the onset of "PC envy" -- the latest incarnation of "mine is better than yours" -- there is a growing demand for faster processing speeds and more memory.

Fraudsters are now using sophisticated equipment to grind the original name off lesser chips and resell them, at almost twice the price, as high-end versions. Some Asian gangs obtain the chips from outfits that specialize in recycling rejects. Others source them from the trash outside fabrication plants. Earlier this month, Singapore's Criminal Investigation Department seized 400 doctored Intel chips and nailed a gang that was re-marking 133-megahertz chips as the faster 166-megahertz version.

Intel's response to this kind of activity has included "disabling" its chips so that they will not operate at higher speeds. Normally, a re-marked slower chip will run faster for a while, but it will then burn out. When this happens, users often complain to the maker. Some will absorb the loss and replace the product; others, including Intel, will not. Grove complains that chip makers had been slow to react to these scams, "until they realized it could affect the integrity of their trademark."

As for the customer, only the most discerning can tell a real chip from a fake. "If people can be conned, they will be," says Superintendent Graham Lander of the Hong Kong crime prevention bureau. "If people think they have hit on a bargain, they will blindly believe that what is said to be inside the computer is really there." As the maxim doesn't quite go: garbage inside, garbage out.


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