Counterfeiting has spread from credit cards to microchips to circuit boards and entire networking appliances, prompting semiconductor makers worldwide to pioneer a new billion dollar market for smart authentication microchips.
Smart cards have pioneered in the anti-counterfeiting market by perfecting authentication microchips, which ensure that credit and security cards are genuine and authorized. Now major microchip makers are diversifying into authentication chips for a variety of markets rife with counterfeiting. The chips can be used in everything from computer circuit boards to networking devices that connect to cloud computers.
"Counterfeiters are cloning a range of electronic components, prompting networking companies like Cisco to start using authentication chips in their devices," said John Devlin, senior practice director for AutoID and smart cards at ABI Research (Scottsdale, Ariz.). "The market is small now--only around $100 million--but will grow to over $4 billion by 2016."
The authentication microchip market is small today, but will grow rapidly in a diverse anti-counterfeiting market expected to be worth $6 billion by 2016.
Authentication chips cast into hardware the identity-based cryptography protocols that exchange secure keys to guarantee that the manufacturer who claims to have made a device is genuine. Encryption is usually also employed to prevent the kind of eavesdropping on the secure key exchange that counterfeiters can use to fake identity-based protocols. The exact algorithms used are often kept a closely guarded trade secret by the authentication microchip manufacturers, which include the makers of smartcard microchips, such as NXP, STMicroelectronics, Infineon, Inside Secure, Maxim and Renesas.
Today, microchip-based security solutions amount to just five percent of the total anti-counterfeiting, brand protection and authentication market, but it is one of the most profitable segments accounting for as much as 32 percent of total revenue, according to ABI Research. And going forward, the firm predicts that authentication microchips will be the fastest-growing segment of the market for the next five years.
Counterfeit components are being found in nearly every category of device, according to Devlin, who claims that even President Obama's Air Force One aircraft has detected and replaced counterfeit components, prompting the Federal Aeronautics Administration to introduce special training procedures to spot counterfeits. The National Electronics Distributors Association estimates that in 2010 the IT industry alone lost $100 billion to counterfeit components.
Secure memory chips have been used for several years in many anti-counterfeiting applications, according to Devlin, but authentication microchips have only been widely available for about a year and a half, permitting almost any type of electronic device to employ smart algorithms that guarantee that they are genuine.
Authentication microchips typically add less than a dollar to the cost of manufacturing an electronic device and are usually mounted on printed-circuit boards alongside other components. Prices are dropping too, which will permit even cost-sensitive devices like radio-frequency identification tags to include authentication protocols in the near future, according to Devlin.