The Gray Markets

*Disclaimer: The context of this article was written by assignment of an educational institution for coursework. The assignment was to present an ethical argument related to our industry/field. No company that I have worked for nor supplier I have purchased from is associated with the negative elements of this article.

The Gray Markets
From prized baseball cards to lifesaving prescription drugs, the production of counterfeits appears to have no limit. This is a painful part of life for most industries and electronic design is most certainly no exception. Despite these troubles, the production of counterfeit electronics has been viewed in various lights. While a consumer may appreciate a dirt cheap apple laptop battery, a governing official may not appreciate a downed satellite. Since the scope of the issue is enormous, I would like to focus on a specif case of the use of gray market parts on safety critical electronics.

What are gray market parts?
During production, some companies may resort to the use of "gray market" parts. What are gray market parts? They are parts that are not purchased directly from the manufactures and consequently do not come with the same legal guarantees. Cheap backwater electronic suppliers are sometimes utilized by companies when seeking a price reduction or a short delivery time. While the purchasing of these parts are generally a perfectly legal option, they do not come without risk. Despite the guarantees provided by some resellers, counterfeit parts have begun to infest the gray electronic market. Counterfeits ranging from fully functional duplications to hollow capacitors, there is no shortage to the variety of counterfeit parts appearing in the gray market. As demand for the gray market parts has increased, so has the amount of counterfeits that have been mixed into it. On the other hand, failures due to gray market parts are incredibly rare and the number of counterfeits still remain at a very low level. In addition, there are numerous quality electronic distributors that primarily buy directly from the manufacture in order to guarantee the integrity of their part supply.

Industry specific views
Surprisingly, counterfeit parts are not labeled as an absolute evil in many realms of industry such as the giant consumer electronic industry. Numerous consumer electronic products are produced with only price in mind and consumers are generally willing to appreciate this. Consumers do not expect a 15 dollar mp3 player to last for a lifetime. In addition, the failure of that mp3 player would not likely result in life threatening injuries. However, the same case cannot be made for all industries such as military and automotive industries. Failure as a result of a counterfeit part in these industries could most certainly result in loss of life during a critical application.

Possible dilemma of the gray market
Consequently, many OEM producers are faced with a challenging question as a result of these gray market parts. During production of a given safety critical product, a part shortage may occur. These shortages result from a variety of factors such as an overly aggressive schedule, last minute redesigns of a circuit, or possibly a natural disaster such as the earthquake in Japan. Regardless of the reason, executives are faced with the question of delaying production of a product or the use of unverified parts from a gray market. This case can present a ethical dilemma for companies since using these parts may result in the failure of a safety critical application. Likewise, delaying production of the product may equally be challenging since it may result in a significant loss in revenues or may even bankrupt the company. When faced with a slight risk or losing an entire company, executives generally will lean towards a minor risk.

Dangers of a careless use of the gray market
As an engineer, I would tend to disagree with approach that executives may take on the use of the gray market. Careless use of the irresponsible distributors in the gray market will only encourage its increase. This could result in a growing chance of counterfeit parts being used in safety critical products. One's life may often depend on the safe operation of a product such as the vehicle they may use on a daily basis. With unverified gray parts, it is harder to guarantee with absolute certainty the continued operation of such a vehicle. Parts purchased from untrustworthy suppliers can void design specifications for they are not confirmed to be produced by the advertized manufacture. As an engineer bounded by a code of ethics, I feel strongly that the safety, health, and welfare of the public should be our top priority throughout the design of a product including production day. While it may be costly hold up production, the cost of using counterfeit parts could certainly be higher.