At Component Sense, we know a lot about the grey market. We are technically part of it, after all. Many electronic component buyers do not understand the different shades of the grey market. It is certainly not black and white.
During the supply chain disruptions of the COVID-19 pandemic, a lot of electronic manufacturers turned to the grey market to keep their lines running. This spotlight brought up concerns about which suppliers could be trusted. The blog will explain everything you need about the grey market, including why Component Sense is your safest option.
What is the electronics grey market?
The grey market is a secondary market for electronic components not directly from the original distributor. The issue is that the grey market is a broad term. Trustworthy sellers that provide full traceability, like Component Sense, are lumped in with sellers of dubious stock and counterfeits.
Generally, buyers turn to the grey market for one of three reasons:
- To buy parts for less money
- Because they cannot get the parts they need via a franchise or directly
- They want to prevent electronic waste
The relationship between original chip manufacturers and the grey market
The grey market comprises 6 to 8% of the wider electrictronic component market. This percentage equates to as much as $60 billion. It is easy to understand why some original chip manufacturers do not support the grey market, with other companies profiting from their redistributed parts.
Original manufacturers cannot have their cake and eat it too. Many of these companies are unwilling to sit on stock for long periods. Instead, tonnes and tonnes of E&O (excess and obsolete) components are scrapped daily. This not only wastes parts but also causes pollution. 
“I would like original manufacturers to get involved in the grey market from the point of view of ensuring quality. Supporting the grey market would ultimately reduce electronic waste (e-waste),” said Component Sense Chief Technology Officer, Grant Rutherford.
What makes Component Sense unique in the grey market?
If we could put Component Sense in its own market, we would. Given some negative connotations of the grey market, we do not like being associated with it. Some of these assumptions include counterfeits, parts with varying date codes lumped into the same reel, and particular brokers looking to make a quick buck. You can wholeheartedly trust Component Sense’s brand-new, never-used stock. Here is why.
Traceability
Counterfeit components are an issue in the electronics industry. Experts estimate that up to 15% of Pentagon components were counterfeit in 2011. This finding led to the introduction of the Defence Federal Acquisition Regulation Supplement regulations (DFARS 5.246.7008) to detect and avoid the use of counterfeits in military equipment.
A critical difference between Component Sense and other component suppliers in the grey market is that we provide full traceability. This means that you can trace the parts we sell right back to the original manufacturer. That way, you know exactly what you are buying.
We only source brand-new components from manufacturers with high safety levels built into their supply chains. Component Sense is proud to provide a 100% counterfeit-free guarantee.
Quality assurance
Just one bad component can tarnish a brand like Component Sense. So, our inspection team is highly trained and uses cutting-edge equipment. Our market-leading inspection process includes over 100 checkpoints to ensure customers receive authentic parts.
Many OEMs (original equipment manufacturers) and EMSs (electronics manufacturing services) only use components made within the last two years, with concerns over oxidisation and quality. Our inventory at Component Sense has genuine date codes and is stored in the correct environment. This includes ESD (electrostatic discharge) packaging and the proper temperature and humidity levels in line with msl (moisture sensitivity level).
Experience
The electronics industry is tricky to navigate, and a lot is on the line. Component Sense has built the trust of customers for more than 22 years. During this time, we have seen many fly-by-night companies looking to make a quick buck from market conditions.
A lot of grey market sellers take advantage of supply vs demand. Price gauging alienates customers and is not a long-term strategy. Ultimately, shafting the end user creates animosity toward the electronics industry and is not beneficial in the long run. We have seen many grey market dealers come and go and understand how honesty facilitates longevity in electronics.
“Some companies also try to lift themselves out of the grey market pack by becoming an authorised supplier for a smaller niche brand. They do this in the hope of creating trust by having authorised lines. However, at the same time, they could have a whole lot of unauthorised questionable components, too,” said Grant.
Other benefits of sourcing from the grey market
At Component Sense, we prefer to avoid claiming association with the grey market due to misconduct from some participants. However, there are genuine perks of opting not to buy components directly.
Quicker lead times
Even though the dust has settled from the COVID-19 pandemic’s component shortages, many semiconductors remain in low stock with significant lead times. These delays can prove costly for manufacturers, disrupt production schedules, and even delay product launches. In situations like this, perfectly suitable replacement components can often be found in the grey market.
Saving money
If an electronic manufacturer cannot obtain the components they need directly for a BOM (bill of materials), they may need to initiate a new product lifecycle, spending hundreds of thousands of dollars on redesigning circuit boards. OEMs can often prevent this pivot by searching the grey market. In some cases, the grey market can prevent needing to end of life a product.
“Rather than buying directly from a franchise, electronic manufacturers can often find genuine, fully traceable stock with new date codes from the grey market, all while saving money," explained Grant.
Sustainability
Leading electronic manufacturers toward zero waste is what started Component Sense in the grey market to begin with. If there were no grey market, the amount of e-waste would be exponentially higher than it is now (the world already processes upwards of 50 million tonnes a year as it is). Because of redistributing E&O component inventory, parts go back into a circular economy instead.
The grey market is also very beneficial for supporting repairs. For example, say that a large and expensive piece of industrial equipment that should have operated for over 20 years broke down. If the mechanical parts were fine and it was a chip failure, it may be impossible to find replacement components directly. Suppliers on the grey market, like Component Sense, often carry legacy components that could be useful and prevent large equipment from being scrapped.
“Component Sense has some parts in stock that are over 30 years old. We are not financially motivated to do this, but instead want to support the industry and reduce waste,” said Grant.
Want to view our range of new and unused inventory?
The grey market often receives a bad reputation due to a small segment of untrustworthy suppliers selling counterfeits. If you want to enjoy the benefits of sourcing components from the grey market without risk, buy from Component Sense.