Analysis: Hack of Hezbollah devices exposes dark corners of Asia supply chains
20/09/2024 11:32
By Tim Kelly, Casey Hall and Ben Blanchard
TOKYO/SHANGHAI/TAIPEI, Sept 20 (Reuters) - The lethal
hack of Hezbollah's Asian-branded pagers and walkie-talkies has
sparked an intense search for the devices' path, revealing a
murky market for older technologies where buyers may have few
assurances about what they are getting.
While supply chains and distribution channels for
higher-margin and newer products are tightly managed, that's not
the case for older electronics from Asia where counterfeiting,
surplus inventories and complex contract manufacturing deals can
sometimes make it impossible to identify the source of a
product, analysts and consultants say.
The response from the companies at the centre of the
booby-trapped gadgets that killed 37 people and wounded about
3,000 in Lebanon this week has underlined difficulties in
discerning how and when they were weaponised.
Taiwan-based Gold Apollo put the blame on a Europe-based
licensee of its pager, sparking investigations in Hungary,
Bulgaria, Norway and Romania into the origins of the deadly
device. Japan's Icom 6820.T said it could not tell if the
walkie-talkies bearing its name were real, in a market awash
with fake products.
"If the supply chain was compromised to put explosives
inside ... it's incredible engineering to do that. But the
actual supply chain compromise is not that hard. Probably the
easiest part was the supply chain compromise," said David
Fincher, a China-based technologist and consultant.
He said counterfeit products are prevalent, especially in
big manufacturing centres like China where fake components can
be easily produced, adding that it isn't a big leap to go from
fake components to supply chain compromise.
"As the technologist I am, I can tell you getting a little
explosive in a radio is not that hard."
Hezbollah acquired the devices around five months ago,
according to a security source, who added that the armed group
thought it was buying the pagers from Gold Apollo.
The hand-held radios, which the source said were purchased
around the same time as the pagers, had labels bearing the name
of Osaka-based Icom and the phrase "Made in Japan", images of
one exploded device showed.
Both companies have ruled out the possibility that any of
the deadly components were made in factories in either of their
home locations.
Taiwan's Economy Minister Kuo Jyh-huei has also said the
components used in the pagers that detonated in Lebanon were not
made in Taiwan.
A preliminary investigation by Lebanese authorities into the
devices found that the explosives were implanted before they
arrived in the country, according to a letter to the U.N.
Security Council by Lebanon's mission to the United Nations.
FAKE GOODS
But, for now, that's about all anyone is certain of. It's
not clear how or when the pagers and walkie-talkies were
weaponised so they could be remotely detonated.
Joe Simone, partner with Chinese intellectual property firm
East IP, said part of the problem is that smaller brands tend to
invest less in policing counterfeits, due in large part to costs
that could impact their profitability.
"Authorities are happy to deal with low-tech counterfeits
but the IP owners need to monitor, investigate and file
complaints and that doesn't always happen as much as it might
for high-tech and bigger technology brands," he said.
For Icom, one problem is that it stopped making the IC-V82
model in question a decade ago, around the time it started
introducing holographic stickers as a protection against
counterfeit products, the company said.
The company has long warned about imitation products,
especially of its older models.
In fact, more than 7% of firms in Japan reported business
losses from counterfeit products in 2020, according to the
latest available report by the Japan Patent Office, with around
a third of cases linked to China.
Icom has urged that customers only use its official
distributor network to ensure they are buying genuine products.
But in China, there are dozens of shops selling Icom-branded
walkie-talkies on e-commerce platforms such as Alibaba.com,
Taobao, JD.com and Pinduoduo, including in some cases the IC-V82
model, according to Reuters checks.
Among three China-based vendors of Icom products on
Alibaba.com, none of which were listed as official suppliers on
Icom's website, Guangzhou Minxing Communications Equipment Co
and Chengdu Bingxin Technology Co Ltd both said they sell
authentic products, while Quanzhou Yitian Trading Co
acknowledged selling "Chinese made imitations" in addition to
original products.
Icom has said it makes all its products in its factories in
Japan. It did not immediately reply to a request for comment on
Icom-branded products sold in Chinese online sites.
The discontinued IC-V82 model is also sold in Vietnam on
e-commerce platform Shopee, a Reuters check showed, indicating
wide availability of such products.
For Gold Apollo, which licensed its brand to Budapest-based
BAC, the supply chain devolved into a mysterious production
trail that authorities in various countries are now trying to
piece together.
"The widespread availability of cheap, second-hand
manufacturing equipment meant counterfeiters were increasingly
able to go beyond single components and even make full-fledged
products," said Diganta Das from the University of Maryland's
Center for Advanced Lifecycle Engineering, who studies
counterfeit electronics.
"I wouldn't call it counterfeiting anymore, it's like
illegal manufacturing," Das said.
(Reporting by Tim Kelly, David Dolan and John Geddie in Tokyo,
Casey Hall in Shanghai, Ben Blanchard in Taipei, Francesco
Guarascio in Hanoi; Writing by John Geddie; Editing by Miyoung
Kim and Edmund Klamann)
((John.Geddie@thomsonreuters.com; +81 80 7264 2833;))