Exploding Pagers Reveal Dark Corners of Asian Supply Chains

Deadly hack The arrival of Hezbollah’s Asian pagers and walkie-talkies has sparked an intense search for a way to market the devices, exposing a murky market for older technologies where buyers can have little certainty about what they are buying.

Analysts and consultants say that while supply chains and distribution channels for higher-margin and newer products are tightly controlled, the situation is different for older electronics from Asia. Analysts and consultants say counterfeits, excess inventory and complicated contract manufacturing arrangements can sometimes make it impossible to determine the source of a product.

The response by companies at the centre of the booby-trapped bombings that killed 37 people and injured some 3,000 in Lebanon this week has highlighted the difficulties of establishing how and when they were used as weapons.

Taiwanese company Gold Apollo blamed the European licensee of its pager, sparking investigations in Hungary, Bulgaria, Norway and Romania to determine the origin of the deadly device.

Japanese company Icom initially said it could not determine whether the walkie-talkies bearing its name were real in a market flooded with counterfeits. On Friday, it issued a statement saying it was highly unlikely the exploding products were its own.

Icom cited a statement by Lebanese Telecommunications Minister Johnny Corm, who said the devices were not imported through a distributor and that counterfeits with the same model number were imported from other countries.

A physical examination of the devices would be necessary to determine that they were not Icom products, but based on the numerous disclosures, the chances that they were Icom products are “extremely slim,” the Japanese manufacturer said.

“Amazing Engineering”

“If the supply chain was breached to place explosives in it … that’s incredible engineering to do that. But actually breaching the supply chain is not that difficult. Probably the easiest part was breaching the supply chain,” said David Fincher, a technologist and consultant based in China.

He said counterfeits are common, especially in large manufacturing centers like China, where counterfeits can be easily produced, adding that it’s not a big leap from counterfeiting to compromise in the supply chain. “As a technologist, which I am, I can tell you that making a little bit of a bang on the radio isn’t that hard.”

Hezbollah acquired the devices about five months ago, a security source said, adding that the armed group believed it was buying the pagers from Gold Apollo.

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The portable radios, which were purchased around the same time as the pagers, had labels with the name of Osaka-based Icom and the words “Made in Japan,” the source said, photos of one of the exploding devices show.

Both companies have ruled out the possibility that any of the deadly components were manufactured in factories at either of their headquarters.

Taiwanese Economic Minister Kuo Jyh-huei also said that the components used in the pagers detonated in Lebanon were not made in Taiwan.

According to a letter from the Lebanese mission to the UN, an initial investigation by Lebanese authorities showed that the explosives were planted before they arrived in the country.

But that’s all that’s certain for now. It’s unclear how or when the pagers and walkie-talkies were armed so they could be remotely detonated.

Joe Simone, a partner at Chinese intellectual property firm East IP, said part of the problem is that smaller brands invest less in counterfeit control, largely because of the costs that can affect their profitability.

“The authorities are keen to crack down on low-tech counterfeits, but IP owners need to monitor, investigate and file complaints, and that doesn’t always happen as often as with high-tech and larger technology brands,” he said.

One problem for Icom is that it discontinued the IC-V82 model in question a decade ago, around the time it began introducing holographic stickers as a defense against counterfeits, the company said. The company has long warned against imitations, especially of older models.

In fact, more than 7% of companies in Japan reported business losses due to counterfeits in 2020, according to the latest available report from the Japan Patent Office, with about a third of the cases coming from China. Icom urged customers to only use its official network of distributors to ensure they are buying genuine products.

Mysterious Trail

Meanwhile, in China there are dozens of stores selling Icom brand walkie-talkies on e-commerce platforms such as Alibaba.com, Taobao, JD.com and Pinduoduo, including in some cases the IC-V82 model.

Of the three Chinese sellers of Icom products on Alibaba.com, none of which were listed as official suppliers on Icom’s website, Guangzhou Minxing Communications Equipment and Chengdu Bingxin Technology said they sell genuine products, while Quanzhou Yitian Trading admitted that it sells “Chinese imitations” in addition to genuine products.

Icom said it makes all of its products at its factories in Japan. It did not immediately respond to a request for comment on Icom-branded products sold on Chinese websites.

The discontinued IC-V82 model is also being sold in Vietnam via e-commerce platform Shopee, indicating the wide availability of such products.

In the case of Gold Apollo, which licensed its brand to Budapest-based BAC, the supply chain has turned into a mysterious production route that authorities in various countries are now trying to recreate.

“The wide availability of cheap, used manufacturing equipment has allowed counterfeiters to increasingly expand beyond single-component manufacturing to full-fledged products,” said Diganta Das of the University of Maryland’s Center for Advanced Life Cycle Engineering, who studies electronics counterfeiting.

“I wouldn’t call it a fake anymore, it’s more like illegal manufacturing,” Das said. Tim Kelly, David Dolan, John Geddie, Kiyoshi Takenaka, Casey Hall, Ben Blanchard and Francesco Guarascio, (c) 2024 Reuters

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