GERMAN MAGAZINE REPORTS FLOOD OF COUNTERFEIT PENTIUM IIs

May 15, 1998

Frankfurt, Germany — As Reuters reported, an increasing number of illegally altered Intel Corp. processors are turning up in computers in the United States and other countries, a German magazine asserted this week.

To fight the problem, the magazine, CT, has begun distributing a program that can identify Pentium II chips manipulated to run at higher speeds and fetch higher prices in the “gray market” for critical computer components.

“We have no idea how many falsified chips are out there, but in one week we had reports of more than a thousand,” CT editor Christian Persson said. “Worldwide, it could be many tens of thousands of chips.”

Georg Albrecht, an Intel spokesman in Munich, said the company has worked aggressively to stop the tampering. He said such “counterfeit” chips make up a small part of the millions of Pentium II processors in the market. “It is very hard to estimate how many are out there,” Albrecht said. “Even if you are talking about 2,000 or 5,000, that is very small because we make millions and millions of chips per year.”

Falsely labeled chips may overheat at their enhanced speeds and can cause other parts of a PC to fail, Persson said. CT’s “ctP2info” test program, available from its Internet Web site, has been downloaded more than 3,000 times, Persson said.

Thus far, CT has heard of 333 cases of falsely labeled Pentium II processors, 210 of them from the United States. Germany was next with 42, followed by Australia with 13 and Canada with 12 cases. “That was surprising,” Persson said. “It is not true that these chips are only in certain areas of the world.”

The reports come about a month after Taiwan authorities seized about 1,000 counterfeit Pentium II chips.

The counterfeit chips actually are in fact produced by Intel but are often illicitly altered to run at speeds of 300 or 350 megahertz instead of the 233 or 266 megahertz set by Intel, Persson said.

CT’s program can tell if a chip has logic that supports error-correcting code (ECC) memory. Official 300 megahertz Pentium II chips have this logic, while older, slower versions don’t.

Albrecht said Intel acknowledges that the program correctly identifies the ECC functionality. “It is not an Intel program, but it can be a useful tool.”

Counterfeiters take advantage of price drops for slower chips no longer in high demand and tweak them to appear to be speedier models. Official 350 and 300 megahertz Pentium II chips have list prices of $621 and $375, respectively. The 233 megahertz version sells for $198, although several months ago it was selling for $600 or more.

To alter a chip, counterfeiters usually have to put it into a new plastic housing and recreate a hologram that Intel uses to identify genuine processors, Persson said.

It is a process that requires some level of technical expertise and proper chip-assembling equipment, but it is not overly difficult, he said. “It is easier than counterfeiting money,” Persson said.

Counterfeit chips usually are sold into a gray market where brokers buy components and sell them to computer makers that need them right away and are willing to pay higher prices.

These chips often find their way into “no-name” computers, or machines made by off-brand “assemblers.”

But Persson stated that they also can end up in brand-name PCs because the major manufacturers sometimes have to buy chips on short notice when demand spikes, and some turn to the gray market.

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