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Counterfeiting in Mobile Phones: looking for a call to action - Scan2know

We have all become accustomed to seeing fake products and maybe even have succumbed to buying one. The most visible types of products are bags, footwear, clothing, electrical equipment, watches etc. with the most dangerous items, from a public health perspective, being fake pharmaceuticals (which according to the WHO kill up to one million people every year). Sadly, though the incidence of counterfeiting is growing all over the world, according to the OECD and the EU’s Intellectual Property Office (EUIPO) trade in counterfeit goods globally currently stands at 3.3% of world trade (with 6.8% of imports from non-EU countries).

One product area rarely reported on in the press is counterfeit mobile phones. We all have at least phone and they are now an intrinsic part of our work and social life, with mobile CPUs in smartphones nearly as most desktop PCs (according to www.howtogeek.com in an article on 31st October 2018). However in purchasing a fake mobile phone not only are you getting ripped off, depriving a legitimate business of income based on their IP, depriving the state of taxes to help fund education and health care programmes, and also affecting negatively the job prospects of many hard working employees of that business and its suppliers. The damage to the legitimate brand´s reputation is also another cost. These devices are also made with potentially hazardous substances which can harm the user (leaking battery etc.): in test done in India by the Centre for Materials for Electronics Technology (C-MET), high proportions of lead (Pb) were found, which in some cases, the values were 35-40 times higher than the globally accepted limits for Pb.

However, there is an even more sinister side yet, According to a Security Boulevard article (August 20, 2019), “this counterfeit wave is particularly worrisome…faked phones flooding the market today are slicker than ever. And, increasingly, they come riddled with some of the most  invasive types of malware.” Due to the low ҅attractive ҆ price of these items counterfeiters make their real money with paid placement of malware, enabling thus “professional hacking collectives another means to compromise online accounts and break into company networks.” Essentially these devices are cram packed with “every version of malware you can think of pre-installed, onboard and unremovable, out of the box.” This is a danger waiting to unfold on not-so-innocent victims, but worse still is that the biggest losers are.the companies who employ these people who will also get hacked, in the case the company has a BYOD policy.

To add some numbers the EUIPO Report (The Economic Cost Of IPR Infringement in the Smartphones sector) in February 2017 reported that “approximately 4.2 billion € lost due to the presence of counterfeit smartphones in the EU marketplace, corresponding to 8.3% of the sector’s sales. Worldwide, the effect of counterfeiting on smartphone sales is estimated at 184 million units, valued at 45.3 billion € or 12.9% of total sales.” This is a very large percentage of total mobile phone sales, and apart from the price (usually one tenth of the original item which is more than a clue that the phone is a fake) the articles are near perfect in appearance and packaging, though this hides extremely sub-standard hardware – several generations old – under the craftily designed “real” appearance of the interface.


The set-up of these counterfeits is so good that they even have fake App stores whose provenance is unknown and the apps themselves could well contain even more w malware and ransomware (which is a type of malicious software designed to deny access to an electronic system or data until a ransom is paid and can also travel between devices on a network causing broader contamination than just the counterfeit device). One of the major issues with this current trend is that fake branded phones are becoming easier to purchase – most web sites selling cheap goods, including eBay and Alibaba, sell them, and they are becoming harder to spot. For the end-user this might seem positive – as their peers will think that they have bought the genuine article, but they will pay for it with the malware and hacking suffered subsequently.

A recent OECD report, Trade in Counterfeit ICT Goods, March 28, 2017 found that “smartphone batteries, chargers, memory cards, magnetic stripe cards, solid state drives and music players are also increasingly falling prey to counterfeiters. On average, 6.5% of global trade in information and communication technology (ICT) goods is in counterfeit products, according to analysis of 2013 customs data. That is well above the 2.5% of overall traded goods found to be fake in a 2016 report.” As can be seen from the graphic below mobile phones and accessories are the second largest product group that are counterfeited.

Percentage of fakes in each product category



An article in Sourcing Journal (on February 26, 2019) highlighted that the “counterfeit economy is creating a fast-growing set of serious problems for brands and suppliers that can’t verify authentic products, from source to shelf. If they are selling counterfeit products, however unwittingly, these suppliers face the enormous costs and risks associated with lost market share, damaged reputation, goodwill and diminished trust—and potential legal suits for claims proven to be untrue. They may also be contributing to non-ethical and social abuses, sustainability erosion and, the possibility of consumer harm resulting from substandard and potentially unsafe products.” The whole of the mobile phone industry needs to start to take this issue seriously, and putting in place systems that will help consumers be able to spot more easily a genuine branded mobile phone from a fake one, even though price alone should warn them. The most recent figures from the Global Brand Counterfeiting Report, 2018, claimed that counterfeiting has reached “1.2 Trillion USD in 2017 and is Bound to Reach 1.82 Trillion USD by the Year 2020”. This is a major growth industry that needs to be checked before it affects us all.

There are companies that can help identify whether a mobile phone that has been purchased is in fact a fake unit or not, but this is after the fact, which if it is proved to be so, is a major issue for the victim and their MNO (Mobile Network Operator) as well as contacts on the phone. HolaTECH prefer to take a much more proactive approach to this. If phone companies really want to protect their potential customers and others, they should protect the phones with a verification system that can verify authenticity and ensure that the phone is proven to be what it says it is and is not stolen. HolaTECH´s scan2know system can do just that, and because it is based on blockchain architecture is utterly secure.



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