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Xilinx-Flextronics lawsuit puts the spotlight on gray market

Posted: 30 Jan 2014 ?? ?Print Version ?Bookmark and Share

Keywords:Xilinx? Flextronics? gray market? lawsuit? counterfeit?

A second example, however, is less convincing. Flextronics notified Xilinx when a part purchased for Ericsson failed Flextronics' quality testing. When the part number on the failed part didn't match with the parts Xilinx sent to the distributor (Arrow Electronics), Xilinx investigated further.

Xilinx then tested the part itself and found it to be a lower-quality Xilinx part that had been relabeled as high performance. The complaint stated that Xilinx confirmed that Arrow had shipped the right parts to Flextronics, and so concludes that "it was at Flextronics that the device was switched with a defective and remarked chip in order to permit Flextronics to make a higher profit from selling to Ericsson. Flextronics then sold the original, authorized Xilinx chip to an unauthorized customer for an even more substantial profit." A lot of that seems conjecture, without much evidence to back it up in the complaint.

Finally, the suit charges something that seems incredible: that Flextronics has designed its cost procurement system to make it impossible to trace the origin of parts. The contract manufacturer has eight to 10 unauthorized distributors that scour the gray market for low-performance Xilinx chips to switch for the higher-priced devices in customer products, the suit claims. Xilinx charges that Flextronics' procurement system masks these purchases and deliveries.

If this lawsuit goes to trial, even more of the machinations of the gray market might be revealed. I hope it does. Someone needs to turn on the lights in this dark area of the supply chain.

- Tam Harbert
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