Newegg drops supplier over counterfeit Intel processors

[Jos]

Newegg has issued an official update on the Intel Core i7 processor fiasco that came to light over the weekend. Turns out that IPEX, not D&H Distributing as initially believed, was responsible for supplying the bogus chips and as a result its contract with the online retailer has been revoked. In an initial statement, Newegg had referred to the issue as one of its partners mistakenly sending out "demo boxes" instead of functional units.

You could tell that was obviously not the case just by taking a closer look at the packaging and wording on the boxes containing the 'chips' in question. The news was first reported by HardOCP, which has now apologized to D&H Distributing for naming it as the supplying distributor, and clarified that it was merely reporting what a source from within Newegg's organization had told them.

In a statement issued to CRN, a senior D&H executive ratified his company has never bought anything other than genuine Intel products, sourced directly from Intel, and said they're glad to see the D&H name vindicated. Newegg for its part said it is reaching out to all customers who may have received the fake processors and has already sent out a number of replacement units. It's not often that a reputable retailer is duped into passing on counterfeit products to customers, but it seems that Newegg managed the situation quite well after all.

Permalink to story.

https://www.techspot.com/news/38161-newegg-drops-supplier-over-counterfeit-intel-processors.html

 

[Recipe7]

First!

It's quite an embarrassing moment for Newegg, but they shouldn't be blamed for the irresponsibility of a certain supplier.

I feel for the buyers of the fake 920s though, but Newegg will take care of them without a doubt.

 

[levar]

yea I guess they did manage it quite well, sorry for doubting one of my favorite sites. Regardless I'll still make purchases from newegg. LOL @Ainver Welles over at FB "well thats what ya get for going intel instead of amd... AMD for the win once again" AMD is the best

 

[TorturedChaos]

I wonder what it had to be like for the customer service agent that took the first call on these?
Customer "Yah you guys sent me a fake CPU"
Agent "Umm what?"

But I agree NewEgg handled this very well, and it won't slow me down in the future from buying from them.

 

[jon124597]

Newegg made the right choice in getting rid of that supplier. If they kept them around I might question their integrity.

Newegg is a great company to deal with though, customer service wise. If I were a part of that whole mix up I would rather it be with a company like Newegg vs another company.

 

[Vrmithrax]

I loved how in some other reporting sites, Newegg was being blasted for being fairly quiet about the whole thing, and all sorts of cover-up and conspiracy comments were being thrown around. Turns out, Newegg was just doing the responsible thing and investigating what happened internally, before they made a move. Bravo to them, for both axing the questionable supplier, and for immediately taking steps to rectify the situation with the customers involved. I knew there was a reason I use them for most of my hardware purchases.

 

[TomSEA]

"...but it seems that Newegg managed the situation quite well after all." Boy, no kidding. In less than a 24 hour period tracked down the real culprits and canned their butt.

And I'm sure they're setting into place new quality control mechanisms too.

 

[ryan29121]

Newegg is an excellent e-tailer. An issue like this will not hurt them.

 

[DJ83]

Anyone know more about IPEX, I do feel for D&H as being named as the the problem when they were not. Its always harder to gain reputation then lose it.

 

[ourboyblue]

I agree with what most here are saying. I'm a newegg customer and I will buy from them in the future.

 

[captaincranky]

And yet I continue to wonder, "why does Newegg even need a supplier". Being forced to buy through an intermediary obviously raises the per unit cost, and affords a steady source of Income to someone who does very little but syphon money from the system.

The whole affair sounds like some sector of organized crime might be involved, given the fact that it had to be a multi-staged enterprise, rather than a crime of opportunity. (Yeah I know, conspiracy theory)

Given Newegg's past performance and sterling reputation, I not quite sure why so many need to state their intention to continue doing business with them. It should probably be a given.

Newegg had referred to the issue as one of its partners mistakenly sending out "demo boxes" instead of functional units.
"

This approach coincides nicely with the legal premise of, "innocent until proven guilty"

Although the websites involved with the initial reporting of D & H being at fault, should perhaps rethink their reluctance to print a retraction as per D & H lawyers request.

 

[jjbeard926]

I stated in the initial story that I was confident Newegg would make things right and that they would not knowingly sell faulty merchandise. It seems Newegg is making a real effort to take care of this situation and once again has made me a loyal customer of theirs for years to come. I have never had a problem with their products or their service and I will always look there first for my computer products. It is a shame that they appear to have been duped though by this vendor. It puts a smudge on their good name.

 

[Puiu]

At least the one that was really at fault is now paying the price. Newegg actually came out as a winner in this situation getting praises on how well they handled the situation, although it would been better to for something like this to have never happened in the first place.

 

[thebluemeaner]

I don't really understand what all the fuss was about,What respectable company would sell counterfeit processors on purpose? It was obvious it was some sort of mistake.

 

[Kovach]

Newegg is doing great over past years, and I don't think that this going to ruin their high reputation and top position. I'm glad that they find the way out in this situation.

 

[Vrmithrax]

captaincranky said:
And yet I continue to wonder, "why does Newegg even need a supplier". Being forced to buy through an intermediary obviously raises the per unit cost, and affords a steady source of Income to someone who does very little but syphon money from the system.

It all has to do with distribution deals and speculating. Newegg is better off dealing with a supplier, who purchase mass quantities (and often contractually obligated minimum quantities) from the manufacturer. Then online shops like Newegg can purchase quantities of different items in lots, rather than huge bulk quantities, based on the demand from their customers. It's a way to minimize overhead and excess inventory issues, while paying a minimal premium for that benefit. The supplier is the one who takes the big risk, buying large amounts of product and betting that they will all sell for at least the bare minimum they need to stay afloat. If a product turns out to be a lemon, the supplier is left holding the bag, where a vendor like Newegg just has the limited inventory they acquired. So the middleman supplier isn't so much siphoning money, as being paid a small premium for taking fairly big risks, and fronting huge amounts of capital to be able to buy large quantities and get aggressive bulk pricing, which results in per unit savings that is passed on down the line to the vendors, then consumers.

 

[jasonk1229]

Good Call on NewEgg!

 

[Guest]

Newegg chose to source via a grey market supplier. Would seem doing this to blend lower cost supply with the authorized Channel Distributors (like innocent bystander D&H) to benefit their bottom line. The price the sold these i7 920s at wasn't any thing special... $289 in a market with wide availability from $260 to 299. Back to - blending product sourced via the grey market to add to a bottom line would appear to be the practice here.

Grey market sourcing can be risky - and there is definitely history with Intel processors from non-approved channels... remarks, pre-release samples, stolen units, partial functional counterfeits.... and these blatant fakes which slipped through both IPEX and into the Newegg stream and out to customers. instead of counterfeit, could have been something that worked and how many would have been the wiser?

Given intel's efforts to eliminate the grey channels and ensure its customers receive the genuine, full speced, legitimate, and fully warranted product - one has to wonder what conversations Intel may be having with Newegg that they used this IPEX supplier at all.

and even so - there are always deals, overstock, etc to be legitimately taken advantage of out there and nothing wrong with Newegg benefiting from such in general. I'd bet they'll have much better inspection/qc review in the future on product sourced in such a way as to not have this kind of thing happen again. Or better yet - they'll source via the authorized channels Intel has provided.

 

[captaincranky]

It all has to do with distribution deals and speculating. Newegg is better off dealing with a supplier, who purchase mass quantities (and often contractually obligated minimum quantities) from the manufacturer. Then online shops like Newegg can purchase quantities of different items in lots, rather than huge bulk quantities, based on the demand from their customers. It's a way to minimize overhead and excess inventory issues, while paying a minimal premium for that benefit. The supplier is the one who takes the big risk, buying large amounts of product and betting that they will all sell for at least the bare minimum they need to stay afloat. If a product turns out to be a lemon, the supplier is left holding the bag, where a vendor like Newegg just has the limited inventory they acquired. So the middleman supplier isn't so much siphoning money, as being paid a small premium for taking fairly big risks, and fronting huge amounts of capital to be able to buy large quantities and get aggressive bulk pricing, which results in per unit savings that is passed on down the line to the vendors, then consumers.

I fully see and mostly agree with your points. At some point in a product's life cycle, traffic and demand is fully established. This in when the intermediary becomes less necessary. I also realize it's probably not possible to "cherry pick" when to, and when not to, use a supplier.

It would be interesting to know if, when "end of life" blowouts are happening at Newegg, who has borne the brunt of the cost for these.

Although I'm even still baffled why the supplier has been accused. Working by your account of the retailer/ sales rep firm, relationship/ responsibilities, it doesn't seem likely the Ibex would do this themselves, they're more than likely a victim also.

 

[captaincranky]

Any Given Sunday........

Newegg chose to source via a grey market supplier. Would seem doing this to blend lower cost supply with the authorized Channel Distributors (like innocent bystander D&H) to benefit their bottom line. The price the sold these i7 920s at wasn't any thing special... $289 in a market with wide availability from $260 to 299. Back to - blending product sourced via the grey market to add to a bottom line would appear to be the practice here.

Hey, you can walk into Microcenter almost 365 days a year, and buy an i7-920 for $199.95. It does beg the question, "where do they get theirs", or possibly, "how much are they losing on each unit they sell".

 

[Wagan8r]

I'm glad to see that they've gotten to the bottom of the issue and dealt with those responsible. Newegg will always continue to be my first and favorite online retailer.

 

[raie_noire]

Newegg is amazing. They're the only place i buy computer stuff and they're in the right to drop that company.

 

[Serag]

New is an excellent online retailer, and I would say that for them it'd be a high priority to apply quality control on the choices of suppliers, but they couldn't be blamed for this completely,
And I don't think this would be a serious issue for their sales too.

 

[fastvince]

How do I know if there were other products that have/had fake parts in them ? I too like Newegg, but this does make me wonder if it happened before and nobody said anything . Newegg knew that it was not because 'demo boxes' were sent. How was this caught ? Did someone open up their computer and see the fake processors, or did NewEgg catch it internally before someone who bought one found it ?

 

[captaincranky]

How do I know if there were other products that have/had fake parts in them ? I too like Newegg, but this does make me wonder if it happened before and nobody said anything . Newegg knew that it was not because 'demo boxes' were sent. How was this caught ? Did someone open up their computer and see the fake processors, or did NewEgg catch it internally before someone who bought one found it ?

Dear Mr Fast, It seems that the "CPUs", were completely unusable, just "mock ups" as it were. It was probably not possible to install them in the first place. Well, except for those well beyond which we would normally think of as "quite dull of wit". But it's nice to see you gettin' your opinion out there. With Newegg's lightning fast shipping paradigms. do you really think it would be possible for the warehouse staff to inspect every package for authenticity? Not to mention that would be well above their pay grade.