In a move that may have consequences for the distribution channel, Xilinx is suing electronic manufacturing services provider Flextronics for allegedly fraudulently reselling its FPGA devices at a marked-up price.
Xilinx says that Flextronics has been buying its devices at a discount and selling them on to other users at a higher price. It also alleges that Flextronics has been dealing in grey market and counterfeit Xilinx devices.
The complaint filed late last week in the State Court, San Jose California, states that “Many of these devices are incorrectly remarked in order to appear to be more expensive, higher performing devices in order to sell for a higher price. Because some of these devices are defective, Xilinx incurs additional damages upon the warranty-mandated replacement.”
OEMs and contract manufacturers selling their excess inventory is nothing new. It has been going on for years. They buy components to make products, see demand drop, and are left with a stock of components they can’t send back to the supplier. So they sell them on, usually for much less than they paid for them, to an independent distributor or a broker. They then sell them, at a profit, to an already identified buyer or wait for the call from a materials manager desperate to keep his production line moving.
The official channel is of course disdainful of this process – well more than disdainful actually, very p***** off would be a better description. Actions to seal off this channel have met with little success.
They cite the danger, as has Xilinx of counterfeit parts entering the channel. Legal recourse may be the only way suppliers knock this channel off course. It will be interesting to see the reaction as the Xilinx/Flextronics case plays out.
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