Pssst! Wanna Buy Some Hot Silicon?

Attracted by the prices chips and the like command on a thriving international black market, thieves are increasingly targeting tech outfits

As the Internet grows, so does its dark side -- and it's not just cybercrime that's on the rise. The fastest-growing problem high-tech companies face these days lies in warehouses, shipping docks, and trucks, where billions of dollars of sophisticated equipment and software are being pilfered, then resold or distributed at huge profits for thieves.

The exact magnitude is unknown because no national clearinghouse tracks these statistics, but about $15 billion in cargo will be stolen this year, up from about $12 billion in 2000, most law-enforcement experts estimate. And that may be on the low side, as many businesses don't report the thefts to avoid negative publicity and possibly frighten clients, says Lou Tyska, chairman of the National Cargo Security Council (NCSC), an association of transportation and security professionals. And on Dec. 11, the U.S. Customs, Commerce, and Treasury Depts. announced an investigation into a multibillion-dollar, software-piracy ring operating over the Web in 21 states and 5 countries.


  About a third of all the stolen goods are computers and computer components, Tyska says. Consumers pay a steep price for this thievery. At least $200 in the price of an average computer comes from tech companies trying to recoup their losses on theft, says Tyska.

What's more, robberies of high-end, high-tech goods seem to have intensified the past three months, rocking the world of chipmakers and putting fear into the hearts of truckers toting silicon payloads. Heists of high-priced transistors have hit Oregon, California, Utah, New York, and New Jersey. In November and December alone, Oregon tech outfits say they lost hundreds of thousands dollars worth of cargo, including processors, during a series of six highly organized highway robberies.

In one case, criminals with what appeared to be advanced knowledge of the route stole four boxes of chips, costing about $17,000 total, from a truck during a delivery stop, says Detective Roger Bush, of the Hillsboro (Ore.) Police Dept. It's the biggest case of its kind in the area in 10 years, he says.


  Some law-enforcement officials say the recent rise in high-tech theft can be traced to a clear opportunity created by the war on terrorism, which has seen many police forces shift their focus. The September 11 attacks resulted in half of Brett Millar's FBI theft team being reassigned to counterterrorism duty. Criminals "think it's easy pickings," says Millar, supervisory special agent with the FBI.

The lure of silicon is strong. Most run-of-the-mill bank heists yield only about $800. Criminals have learned that stealing computer components can be exceedingly profitable.

A fingernail-size Pentium IV retails for $133 to $401, or as much as a few grams of cocaine. A truckload of computer chips -- hard to trace and easy to sell on the black market -- can net $1 million to $2 million. What's more, cargo thieves often avoid arrest and rarely face stiff prison sentences if they are busted, according to Officer Bush. "Usually, first-time offenders would get probation," he says.


  The criminals' modus operandi has grown more sophisticated. In the mid-1990s, thieves simply broke into company offices, warehouses, and terminals looking for the high-tech goods. Today, instead of risking encounters with security guards and police, they're stealing packaged components en route. "A trailer is basically a warehouse with no fences and only one guard -- it's an easy target," explains Richard Bernes, a former FBI operative and now the CEO of security consultancy Bernes Group.

A successful heist could easily mean $200,000 or more for a team of three or more people, including a leader, a locksmith, a driver, and some "lumpers" who unload the cargo. According to Millar, well-organized criminal groups can stage as many as three heists a week.


  Usually, a team of criminals spies on the loading and unloading at a tech company for a week and then makes its move. In some violent cases at the Port of Los Angeles, a hot spot for thefts, groups of 3 to 12 armed robbers have duct-taped guards and brought in tractors to haul off the trailers with especially valuable cargos, such as computer parts, says Millar, who adds: "The word is out that this is a good gig to be doing."

There have been between 25 and 30 similar armed robberies at L.A. trucking terminals so far in 2001, vs. one in 2000, says Millar, who believes career criminals are moving out of the drug trade and into this less dangerous and more lucrative field.

As much as 20% to 30% of the stolen goods end up overseas -- places like Mexico and Asia -- to be assembled into computers, says Millar. Many PCs are then imported back into the country and sold at deep discounts. That the machines are assembled from stolen parts is well hidden: How many people inspect their computers to look for a serial number on the processor and then check with the chip manufacturer to see if the product is legit?


  Costs of the crime spree have spread to the trucking and insurance businesses as well. U.S. companies will lose as much as $25 billion in stolen cargo this year, according to the NCSC. For large companies such as Intel (INTL ), the effects are negligible, according to a company spokesperson. However, smaller outfits can lose a week's worth of revenue or more on theft.

Insurance rates across the industry could rise as much as 30% next year because of the recent rise in crime, according to insurers. Never mind that chip and component prices have fallen by as much as 70% over the past year.

With the illegal profits so alluring, tech outfits are busy increasing parking-lot security and installing hidden cameras. The next step: Persuading judges to mete out tougher sentences to high-tech thieves. With semiconductor parts prices now beginning to rise again, the lure of hot silicon will only grow.

By Olga Kharif in Portland, Ore.

Edited by Alex Salkever

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