Theft of high tech products and components from US manufacturers and their customers could cost the industry more than $5 billion annually in direct and indirect costs.
About half of all reported product losses occur overseas, however, and sixty per cent of offerings disappear while in transit, according to a two year study released on Thursday by market research company, Rand. The report was commissioned by The International Electronics Security Group (IESG) and the American Electronic Association (AEA).
High tech manufacturers and distributors lose about $250 million per year due to products that have gone missing, while indirect costs such as lost business, added security and insurance requirements raise the total to more than $1 billion.
Theft of high tech offerings from customers is estimated to cost the industry another $4 billion, bringing total estimated losses to more than $5 billion a year.
James Dertouzos, Rand?s senior economist, who led the study, said: "Our findings are apt to be conservative because there are many types of cost such as warranty fraud and disruption of business, that we did not attempt to quantify."
He added that much of the cost of high tech theft was not borne by the victimised firms, however, but was passed on to customers and other third parties.
"This demands a large role for collective action on the part of the industry and the public sector," he said.
Such collective action might include focusing on standards for shipping freight, developing methods and technology to help identify and disable stolen property such as the "poison cookies" that inactivate products obtained illegally, and information exchange between the industry and law enforcement agencies.
Other recommendations included improving the ability to track the problem and to anticipate changes in theft patterns. John O'Loughlin, Sun Microsystems? director of security, said that: "beefing up private sector security efforts helps. Participating companies investing in improved security measures had dramatic declines in total theft losses."
But the study also found that, while the theft of more than $100,000 worth of equipment represented less than five per cent of all crime incidents, it accounted for more than 60 per cent of all reported losses. Some eighty per cent of crime incidents result in losses of less than $5,000, however.
And it is the US and Europe that are most vulnerable to this crime wave because they are the largest consumers of high tech products. Other parts of the western hemisphere such as Canada, Latin America and Asia suffer little more than seven per cent of all thefts.
Rand surveyed 95 high tech manufacturers that collectively account for 40 per cent of total sales volume in the computer, semiconductor, hard disk drive and cellular phone industries. The team compiled data on 1,700 US theft incidents reported in a nine month period during 1997-1998.
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