Remarked chips: The continual bane of the PC market

Engineer TK Ong was in the middle of preparing a presentation for a
meeting when his brand new PC crashed. It had hung previously each time
he used Microsoft PowerPoint and Adobe Illustrator together, but did not
bother him much. Perhaps it was just a memory glitch, he thought. 

But this time when the Pentium 200MMX-powered PC crashed, he was upset
because it resulted in him losing a large amount of data. 

He complained to a cousin who had purchased a similar machine and, to
his surprise, discovered that the latter's PC was also giving similar
problems. Curious, Ong checked with two colleagues who had bought PCs at
a computer fair three months earlier. All four PCs--three with Pentium
200MMX processors and one with a Pentium 233MMX processor--were
purchased from the same retailer and were crashing without reason. 

Determined to locate the cause, Ong ran checks and discovered that the
microprocessors in their PCs were remarked. Investigations on the serial
numbers of the microprocessors revealed that they were in actual fact
Pentium 166 processors. "Being engineers we ran checks on the lot
numbers through our contacts in Intel and were told that the numbers
were invalid," said Ong. 

The group also discovered that the microprocessors were altered and sold
as higher-speed processors. "We would have never known if we hadn't
investigated ourselves," he added. 

Thinking that the matter could be easily resolved, the group contacted
the retailer to get the problem rectified. "The retailer kept stalling
and eventually avoided all calls," he revealed. 

The retailer only relented after Ong and friends went to the local
press. But the entire process took the group over a year to resolve. 

"We want computer vendors out there to know that they cannot con all the
users all the time," said Ong, his quest for justice complete. 

The group's predicament apparently is not an isolated one. 

Computer vendors and industry observers familiar with the illegal trade
are convinced that remarked microprocessors continue to filter into the
consumer market in Malaysia. 

A computer peripheral distributor who spoke on condition of anonymity
said he was once involved in altering speeds on processors. "As long as
the practise is lucrative enough, it can be done. I will not put
anything past the Taiwanese who are excellent in the field of reverse
engineering and are capable of anything," he added. 

Sidebar: What Are Remarked Chips?

These are altered chips designed to run faster than the processor
manufacturer intended it to run. Chip modification can result in
problems with reliability and more. Remarked and overclocked chips can
also void the manufacturer's warranty on its processors. However, there
is an underground for remarked chips as faster machines mean higher
prices.

How to remark

Marking processors is part of the chip manufacturing exercise. A former
engineer with a semiconductor company explained that wafers are first
sliced up to into individual chips and graded by quality. "The chips are
divided into different bins according to its quality. The best quality
is normally reserved for high-end customers," he revealed. 

After they are cut, these chips are attached to a piece of metal to be
bonded, wired, heated and sent for moulding, he added. "Once they are
moulded, these chips are marked according to their speeds and serial
numbers. Then they are tested again. If they are faulty in anyway, even
cosmetically, the processor would be rejected." 

The best quality chips end at OEMs such as IBM, Dell, Compaq and
Hewlett-Packard which buy processors in bulk. 

He pointed out that the excess OEM chips, and chips that don't pass
quality requirements end up in the gray market where they are brokered.
"These processors normally carry only a one-year warranty and don't come
with a fan/heat sinks," he added. 

Once they enter the gray market, it would pass through several
distribution tiers before ending up at the consumer's hand. "So you can
never tell if these processors are new, used, overclocked or remarked as
there is no guarantee from Intel," he said. 

Typically, "professional" remarkers normally erase the original markings
of the rejected processors and mark it to a higher speed. "For instance,
a P133 processor can be overclocked to run at a maximum of 166MHz. Some
unscrupulous vendors might alter a P133 to P200 or P233," he revealed. 

While he reckoned that most of the processors that end up in clone PCs
are likely to be remarked, he claimed that the majority do not pose a
problem as they are altered within limits. 

Intel fights back

The world's largest chipmaker Intel Corp claims that the number of
remarked chips floating in the market is very small and declined to
disclose figures. "If you look at the totality of the market, most users
either buy from well-known branded PC companies or from Genuine Intel
Dealers (GIDs). As these users make up the majority of the market, the
remainder is relatively small. Of that, we estimate that the number of
remarked processor products is relatively few," reasoned Intel
Electronics (M) Sdn Bhd country manager Yohani Yusof. 

She added that Intel is continually improving its packaging technologies
to prevent remarking of its processors. "We do a lot of this but don't
divulge technical enhancements as doing so would provide information to
the remarkers." 

Intel also encouraged consumers to buy their systems from its chain of
750 GIDs nationwide to avoid being duped. "Consumers must be wary and
should buy from an authorized reseller and insist on a certificate to
verify that it is authentic," she added. 

Boxed processors come with a three-year warranty from Intel and are
complete with a heat sink, fan and a certificate of authenticity. 

However, the four users that were conned had brought their PCs from a
GID. The company, ATEC Computer Sales and Services, has since been
stripped of its GID status and is now defunct. 

Educate the user

One of the largest local component distributors, Microtronica (S) argued
that the Pentium III processors are not that easy or cheap to remark as
they are boxed as integrated devices. 

"Serial numbers are embedded within the processor making it easier to
spot the real thing," said managing director Albert Lau, adding that the
threat of remarked chips will be further reduced as prices continue to
plunge, narrowing the gap between original and fake chips. 

But industry watchers are skeptical. They say Intel Celerons that use
the Socket 370 slot and the Pentium III 420MHz and 500MHz, although
packed in cartridges, can still be remarked. 

Managing director KK Tang of local PC dealer Megasoft Computer Services
agreed, adding that it is unlikely suppliers, second- and third-tier
distributors will check as it takes time and incurs cost. "Perhaps Intel
should have a Net service for people to check it out. The idea of
consumers being able to check things out may deter some but not all
unscrupulous dealers," he pointed out. 

Both Tang and Microtronica's Lau also proposed a more aggressive pricing
structure which should put the remarkers out of business for a long
time. 

There is a big gap in Intel's highest frequency CPUs and its
predecessors until volume picks up. "Today a Pentium III 550MHz costs
RM1,000 more than a Pentium III 500MHz, although the speed differential
is only 10 percent," said another dealer. He added that the gap was too
tempting for the remarkers to resist. 

Last year, CNET US reported an imbalance between the price and supply of
Intel microprocessors that led to a rise in the number of remarked chips
with bogus speed ratings in Europe and North America. 

Three weeks ago, CNET Asia reported that customs officials in Hong Kong
had seized HK$6 million worth of remarked CPUs in separate raids on
workshops in Kowloon Bay and Cheung Sha Wan. A total of 3,334 remarked
CPUs were recovered in the raid which led to the arrest of 17 people. 

Intel's Yohani reiterated that Intel's pricing structure was already
aggressive enough and that the company was constantly reducing the price
gap between different grade CPUs. 

The final card, however, lies in the end-user's hand. The majority of
computer vendors perceive that the average computer user today is still
unable to tell the difference between RAM and CPU. What more CPU speed
differentials? "The public must be educated on the issue and they must
learn how to make educated choices," said Lau. 

Users should familiarize themselves with the packaging, speed,
processor, RAM, SIMMs and other aspects related to PC purchasing to
avoid being cheated. 

Vendors also urged better enforcement by the authorities. "Culprits
these days just shrug off the temporary negative publicity and it's
business as usual the next day. They should be treated like
counterfeiters if they sell remarked chips," said Tang. 

For dealers like Tang and Lau who go by the book and sell strictly
original goods, it remains an uphill climb. "We have considered leaving
the low-end PC market. We can't beat the unscrupulous dealers, but we
certainly aren't going to join them. And we're too small to affect the
market in any way. Besides, our crying wolf to customers sounds too much
like sour grapes," confided Tang. 

By Anita Devasahayam, Published in CNET Asia, July 16, 1999