How Hezbollah’s hack exposed murky market for counterfeit electronics

The recent lethal hacking incident involving Hezbollah's pagers and walkie-talkies has triggered a rigorous investigation into the devices' origins, exposing a complex and often opaque market for older technology.

Unlike newer, high-margin products with tightly managed supply chains, older electronics from Asia are rife with issues such as counterfeiting and surplus inventories, making it difficult to trace their sources, according to an analysis by Reuters.

The explosion, which resulted in 37 fatalities and approximately 3,000 injuries in Lebanon, has drawn scrutiny to the manufacturers behind the faulty gadgets. Gold Apollo, a Taiwan-based company, has implicated a Europe-based licensee in the incident, prompting investigations in several Eastern European countries. Meanwhile, Japan’s Icom has expressed uncertainty about whether its walkie-talkies were indeed genuine, as the market is flooded with counterfeit versions. Icom stated it was "highly unlikely" that the devices were authentic and emphasized that proper channels were not used for their import.

Experts highlight the ease with which counterfeits can be integrated with functional devices, noting that incorporating explosives into existing technology is not particularly challenging. David Fincher, a consultant, explained that while supply chain compromises might seem complex, they are often easier to achieve than expected. Hezbollah reportedly obtained the devices approximately five months before the incident, believing they were acquiring genuine products from Gold Apollo. However, both manufacturers have denied that any components originated from their factories.

A preliminary investigation by Lebanese authorities has indicated that the explosives were added prior to the devices reaching Lebanon, raising further questions about their weaponization timeline. Joe Simone, an intellectual property expert, noted that smaller brands typically invest less in counterfeit enforcement, making them more vulnerable to such issues.

Icom's challenges are compounded by the fact that it discontinued the IC-V82 model a decade ago, during which it began using holographic stickers to combat counterfeiting. Despite these efforts, counterfeit products remain a significant issue, particularly with more than 7% of Japanese firms reporting losses due to such goods, primarily linked to Chinese markets.

In China, numerous vendors offer Icom-branded products on popular e-commerce platforms, with some openly admitting to selling imitations. Gold Apollo's situation illustrates the pitfalls of a convoluted supply chain, where the traceability of components is compromised. As counterfeit manufacturing becomes increasingly sophisticated, experts warn that it blurs the lines between simple counterfeiting and illegal manufacturing.