Common Fraud Methods in the Chip Industry

In the complex trade chain of chips, there are carefully designed traps for scams. Below are several highly harmful fraud patterns in the industry that practitioners must be highly vigilant about:

1. “Pig Butchering” Supply Chain Fraud

1. Packaging Involvement: Scammers use false identities to register companies, rent office spaces, hire employees, and create the illusion of legitimate operations.

2. Deliberate “Credit Cultivation”: The company’s procurement department places small, high-frequency orders for chips from multiple suppliers, and then the owner sells them at a loss below cost. This process incurs continuous losses, but the core purpose is to accumulate credit with suppliers, gradually increasing the procurement amount and extending the payment terms.

3. “Butchering” to Close the Net: Once the credit is “fat” enough and the payment terms are long enough (such as weeks or months), the scammer places large orders far exceeding previous amounts (ranging from hundreds of thousands to millions) with many suppliers, requiring them to ship first with a promise of payment upon due date. Based on a long-term “good” cooperation record, suppliers usually let their guard down and agree to ship.

4. Running Away with the Money: After receiving goods worth tens of millions or even over a hundred million, the scammer and their gang quickly transfer the goods to sell off, then vanish. By the time suppliers realize, the place is empty.

5. Harm and Difficulty: This is a typical “pig butchering” scheme, laid out for fraud from the moment the company is registered. Its core lies in exploiting the time difference and the trust of suppliers. The scam is meticulously designed, using false identities and packaging, and all participants (including employees and landlords) are deceived, making tracing extremely difficult.

2. “White Dove” Scam (Information Asymmetry Fraud)

This is a classic “empty-handed wolf” scam in electronic markets like Huaqiangbei, utilizing information asymmetry to commit fraud, involving three victim entities (Companies B, C, D) and one scammer (A).

1. Identity Theft: Scammer A impersonates a buyer to contact well-known company B, requesting company information, contract templates, business licenses, and other materials, then cancels the “purchase” for various reasons, successfully stealing the entire set of information from company B.

2. Disguised Sales: A uses B’s information to impersonate a salesperson from B, contacting company C to sell chips. To gain C’s trust, A promises “payment upon delivery“, but sets a key obstacle: the delivery personnel are “interns”, prohibiting C from communicating directly with the deliverer, and all questions must be directed to A (cutting off direct communication channels).

3. High-Price Procurement Temptation: Simultaneously, A contacts company D under another identity (usually pretending to be an end user or large buyer) to place orders for chips at significantly higher than market prices, and requires D to deliver the goods directly to C’s address. A informs D that payment will be made once the goods are accepted by C, emphasizing that all communication must go through A (again cutting off direct contact between D and C).

4. Completing the Fraud Loop: D delivers the goods to C as agreed. C verifies the goods are correct (since the goods themselves are fine), and based on the contract signed with “B company” (actually A impersonating), pays the funds to the personal account designated by A in the contract (it is common in the industry to use personal accounts for payments). A disappears after receiving the payment from C.

5. Three Parties Suffer Loss: Company D loses the goods (did not receive payment); company C loses the payment (paid the scammer, not the real owner D); company B’s reputation is damaged (contract signed under false name). Scammer A incurs no actual costs, successfully extracting cash solely based on carefully designed information asymmetry and communication isolation.

3. Malicious “Advance Payment” Scam

This scam targets small and medium-sized companies in the supply chain, exploiting their cash flow pressures and the liquidity weaknesses of specific products.

1. Targeting and Product Locking: Scammer A continuously places orders for a specific model with poor liquidity (usually only A or its claimed customers use) from small company B. The order amounts gradually increase from small (thousands, tens of thousands) to large (hundreds of thousands).

2. Inducing Large Stock Preparation: Once B company establishes trust, A suddenly places a large order worth millions, requiring B company to advance payment for stock preparation, promising to pay later upon pickup.

3. Delaying Pressure: After B company exhausts its funds to complete stock preparation, A company indefinitely delays pickup for various reasons (such as customer delays, project suspensions, etc.), refusing to pay for the goods. B company faces immense pressure on cash flow due to large inventory backlog.

4. Related Party Low-Price Harvesting: When B company is in trouble, a sudden appearance of a “third party” C company (actually A or its related party) expresses willingness to purchase this batch of backlog chips but offers a price far below cost (such as 1/2 or 1/3).

5. Forced to Sell at a Loss: B company initially refuses to sell at a low price, but under the dual pressure of A company’s continuous delays and its own cash flow depletion, ultimately has to sell the goods to C company at a super low price.

6. Scammers Profit: A/C company acquires the goods produced by B company at an extremely low cost. B company not only loses profits but may also face operational difficulties or even bankruptcy due to the advance payment.

4. Forged Large Factory Order Scam

1. Impersonating Identity: Scammers (possibly external individuals or colluders within the factory) forge procurement contracts from large terminal factories (OEM/ODM), or illegally use their official seals and documents.

2. Designated Delivery Address: Scammers place orders with agents or authorized suppliers of the large factory under this identity, but specify a “Ship To” address that is not the real address of the factory.

3. Intercepting Goods for Sale: Suppliers deliver the goods to the designated location as per the “contract”. Scammers receive the goods here (instead of the large factory) and immediately transfer them for sale.

4. Account Reconciliation Exposes the Scam: When suppliers request payment according to the payment terms, the large factory discovers there is no such order, and the scam is exposed.

5. Loss Bearing: By this time, the goods and the proceeds from the crime have already been transferred. To maintain cooperation with the large factory, suppliers are often forced to bear all losses themselves.

Conclusion:

The above four scam methods are cunning and highly harmful. Practitioners in the chip industry, especially small and medium-sized traders and agents, must enhance their risk awareness:

• Strictly Review New Customer Qualifications: Do not be deceived by appearances; verify the authenticity of the company and personnel identities.

• Be Cautious of Abnormal Transaction Conditions: Such as sudden large orders, excessively long payment term requests, abnormally high/low prices, prohibitions on direct communication, etc.

• Control Credit Limits and Payment Terms: Remain cautious with new customers and rapidly growing orders, gradually extending credit.

• Standardize Contracts and Payments: Clearly define contract parties, delivery addresses, and payment accounts (preferably using corporate accounts), and retain complete documentation.

• Direct Communication Verification: For key information (such as order confirmation, delivery address, payment account changes), be sure to confirm directly with the large factory or core trading parties through official channels.

• Pay Attention to Product Liquidity: For highly proprietary and poorly liquid models, extreme caution is required when accepting large orders for advance production.

• Establish a Risk Control System: Improve internal processes and set risk warning thresholds.

Only by remaining vigilant and strengthening risk control can one effectively prevent these carefully designed traps and protect their rights.

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