Silicon Is Hotter Than Bank Loot
Theft of computer chips grows worldwide
BOSTON — THE typical caper goes like this: A gang of seven to 10 people breaks into a company with sawed-off shotguns, cellular phones, and a map of the grounds. After penetrating the security system -- often just one guard -- they tie up employees and fill a van with loot. Average take: $450,000. The booty: computer chips.
Welcome to the new world of larceny. Forget banks. Computer chips -- the brains of any modern computer, microwave, or VCR -- are where much of the money is now. Pound for pound, semiconductor chips are more valuable than gold.
For this reason, thieves across the United States, as well as in Britain, Singapore, Japan, and other industrialized countries, are going after silicon wafers like Intel's 486, which is no bigger than a saltine. ''Everybody's getting into it,'' says Paula Silva of the American Electronics Association in San Jose, Calif.
Though chip thievery has long been a problem, authorities say it has grown dramatically in the past six months, and the thieves have become far more brazen and sophisticated.
Gangs, mostly Asian, now watch the chip market as closely as a commodities trader watches pork bellies. Any change in the supply -- as occurred recently when the recent earthquake in Kobe, Japan, wiped out a major chipmaking plant -- can lead to a sudden demand for chips and a rash of thefts.
In California's Silicon Valley, a region with the world's highest concentration of high-technology companies, robberies are now occurring at the rate of one a week -- adding up to more than $1 million in lost equipment, police estimate.
But the problem extends well beyond the Golden State:
* In Richardson, Texas, a Dallas suburb, masked bandits stole $359,000 worth of 486DX2 microprocessor chips from Cyrix Corporation in December. The thieves surprised the lone, after-hours security guard, who was taking a break outside the building.
* In London last month, burglars entered the accounting firm of Touche Ross late one night, claiming to be air-conditioning engineers. By morning, they had stripped the computers of about $1.9 million of memory chips, replacing the backs of the computers afterward.
* A Boston-based company that rents personal computers was raided in December by thieves who smashed open the machines for the chips and memory boards inside.
''There is not a PC company in New England that hasn't been victimized in one way or another,'' said Jim Blackburn, an intellectual property-theft expert for the Federal Bureau of Investigation at a recent seminar in Burlington, Mass.
Many of the gangs get inside help. Often, employees or ''ghost applicants'' will scout out a building for the robbers.
''These guys do a lot of research and they look for a specific product,'' says Sgt. Douglas Zwemke, head of the robbery unit at the San Jose Police Department. ''It's a supply and demand world out there.''
Preventing chip thievery isn't easy. Internally, the cost of screening applicants and hiring more security can be exhorbitant for ''mom and pop'' companies that assemble computers to order.
Moreover, some executives say even these steps aren't enough without the help of local police. Emory Garth, former president of Xetel Corporation, an Austin, Texas-based circuit board assembly company, says his company had been robbed and burglarized four times since 1987.
The first time was an inside job, with two employees taking a number of circuit boards after hours. Polygraph tests pointed to these employees later, but no charges were pressed.
''The police claimed they were overworked,'' he says.
Finally, after three other heists -- one by an armed Vietnamese-American gang -- Mr. Garth says his company set up a sting with Austin police. They eventually made an arrest.
Police find it hard to crack down on such crimes, too. Many chips still have no serial numbers, making them impossible to trace.
Once chips are stolen, they enter the ''gray market'' and often exchange hands eight to 15 times before being sold to a manufacturer. To aid detection, many chip manufacturers are now following the lead of Intel, the world's largest chipmaker, which burns serial numbers onto its chips.
The cost of high-tech theft, for the most part, has not been sent on to the consumer, because most companies are eager to keep their products competitive. But more recently, says Tom Cornwell of the Chubb Group of Insurance Companies in Warren, N.J., consumers may be adding another $100 to the average price of a personal computer as high-tech theft begins to take a toll.
With up to $8 billion in high-technology goods disappearing each year from US firms, the $100-billion-a-year electronics industry still manages hefty profits. And with a conservative growth rate of 15 percent a year, the industry will double in size in five years, says Kevin Brett, spokesman for the Semiconductor Industry Association in San Jose, Calif. But companies such as Chubb that insure these firms are keen to see them take charge of their security.
''Few companies are willing to reveal their security problems,'' Mr. Cornwell says, ''because it can affect stockholder confidence and they don't want the public to think that their facility is vulnerable.''
Chubb and the American Electronics Association have been sponsoring seminars on factory security for high-tech companies across the country. Some of the suggestions: use armored cars to deliver chips to customers, and setup off-site, secure storage areas.
Some companies delay the costs of increased security, Mr. Cornwell says, but a robbery often makes them sudden believers. ''In one instance,'' he says, ''thieves stole the disc drive that stored the R&D [research and development] for that company's next project.''