It has all the elements of a good thriller: a stolen secret formula, bungled corporate espionage, untraceable goods, and lone wolves saving the little guy from the misdeeds of multinational corporations. In this case, a mistake in the stolen formulation of the electrolyte in a capacitor has wrecked hundreds of PCs and may wreck still more in what is an industrywide problem.
Aluminum electrolytic capacitors with a low equivalent series resistance (ESR) are high-capacitance components that generally serve to smooth out the power supply to chips. Throughout 2002, they have been breaking open and failing in certain desktop PCs. Motherboard and PC makers contacted by IEEE Spectrum have stopped using the faulty parts, but because the parts can fail over a period of several months, more such failures are expected.
So far, the only motherboard maker to admit to the problem is ABIT Computer Corp. (Taipei), and the only major PC maker to acknowledge being affected is IBM Corp. But the problem is likely to be more widespread. Indeed, those who have repaired the damaged boards say that they have encountered crippled motherboards from Micro-Star International, ASUSTek Computer, Gigabyte Technology, and others.
For Gary Headlee, who repairs electronics in Midvale, Utah, the trouble surfaced at the end of 2001, when users of PCs with ABIT motherboards began to complain of leaking capacitors. Headlee's solution was to replace all the low-ESR aluminum electrolytic capacitors of 1000 microfarads or over. By last summer he was receiving as many as 10 broken boards through the mail every day, and he estimates he has fixed 1200 boards so far. At about the same time, Carey Holzman, who builds and sells custom PCs, noticed the identical problem in non-ABIT computers he had sold and others he was asked to repair [see ]. In 12 years of PC repair, "I've never seen anything like it," says Holzman, owner of Computer Performance Specialists (Glendale, Ariz.).
It is clear now that a faulty electrolyte is to blame for the burst capacitors. The mystery is: where did it come from and which manufacturers used it? Citing Japanese sources, initial reports claimed that major Taiwanese capacitor firms, including the island's market leaders, Lelon Electronics Corp. and Luxon Electronics Corp., had turned out faulty products. But both companies have denied the accusations.
Most of the leaking capacitors pulled from bad boards in the United States, according to repair people, were labeled Tayeh, not a brand affiliated with known capacitor makers. Many others were unmarked.
Some, however, did bear the trademarks of Taiwanese passive components firms such as Jackcon Capacitor Electronics Co. (Taipei). Jackcon claims that it has been out of the motherboard market for two years but received some complaints from U.S. consumers in 2002. John Ko, its managing director, blames the motherboard design and remains confident in the quality of Jackcon products. According to Ko, the company's low-ESR capacitors passed quality tests at the Industrial Technology Research Institute (Hsinchu, Taiwan), a nonprofit R&D organization partly funded by the Ministry of Economic Affairs (Taipei), which is also often the source of Taiwanese firms' electrolyte formulas.
What happened? The origins of the motherboard malaise seem a lesson in how not to commit corporate espionage. A well-placed source in Taiwan, who did not wish to be identified, largely confirmed for Spectrum accounts published in the United States that were based on sources in the Japanese electronics industry. According to the source, a scientist stole the formula for an electrolyte from his employer in Japan and began using it himself at the Chinese branch of a Taiwanese electrolyte manufacturer. He or his colleagues then sold the formula to an electrolyte maker in Taiwan, which began producing it for Taiwanese and possibly other capacitor firms. Unfortunately, the formula as sold was incomplete.
Exploding capacitors blow the lid off a case of intellectual property theft in the electronics industry
"It didn't have the right additives," says Dennis Zogbi, publisher of Passive Component Industry magazine (Cary, N.C.), which broke the story last fall. According to Zogbi's sources, the capacitors made from the formula become unstable when charged, generating hydrogen gas, bursting, and letting the electrolyte leak onto the circuit board. Zogbi cites tests by Japanese manufacturers that indicate the capacitor's lifetimes are half or less of the 4000 hours of continuous ripple current they are rated for.
Electronics makers are ordinarily very careful about capacitor quality. "The large volumes of passive content in any electronic device means that you have that many more chances for a product to fail," says Zogbi, who also runs The Paumanok Group (Cary, N.C.), a market analysis firm focused on the passive components industry. Electronics firms generally supply their manufacturers with a list of parts and materials they can use from suppliers whose quality they trust. Zogbi suspects that, in an effort to cut costs, contract manufacturers used dodgy component sources that were not on the approved list.
Major Taiwanese capacitor makers have vigorously denied having made any bad components, but the crisis has had a chilling effect on the island's whole industry, which produces 30 percent of the world's aluminum electrolytic capacitors.
"Many buyers refused to maintain their relationship with Taiwanese firms," says Francis Tsai, spokesman for Luxon Electronics (Taipei), the second-largest aluminum electrolytic capacitor maker in Taiwan. ABIT, which is arguably the hardest hit, now is going to Japan for its capacitors.
The effect on Lien Yan (Taichung, Taiwan), the company accused of buying the stolen formula and selling the faulty electrolyte, has been just as devastating. The firm has vehemently denied the accusations, but it has lost 30 percent of its orders since the problems came to light, says C.H. Lee, a manager at Lien Yan. The company normally produces more than 60 tons of electrolyte monthly for customers in Taiwan, China, and Japan. Currently, Lee says, orders are only from small local firms.
Lien Yan and Taiwanese capacitor makers claim they are the victims of a smear campaign by Japanese competitors who are saying that all Taiwanese capacitor makers are tainted. The price ratio of Japanese products to Taiwanese was about four to one, according to Lee, and Japanese firms may be trying to win back lost market share.
Lien Yan's Lee says that Japanese customers who stopped buying from his company even showed the firm internal documents written in Japanese that state that any relationship with Lien Yan would lead to boycotts on the part of the Japanese firm's customers. (The notices often misspelled Lien Yan as "Lein Yan" or "Lenyan.") "After checking all names of [capacitor] companies accused by Japanese companies, we discovered that almost all had never purchased our products," Lien Yan said in a statement.
Soldering in Silence While Taiwanese passives makers are trying to shore up relations with their customers, some of the computer firms affected are doing the same. ABIT says it will replace or fix defective boards its customers send it. IBM says it alerted those customers it believes are most likely to be affected and is handling repairs under warranty.
Other manufacturers have been less helpful. As Gary Headlee's capacitor replacement side business grew, he began receiving damaged boards built by other companies besides ABIT. But when he posted the list of other boards on his Web site, he received letters from lawyers representing two manufacturers, prompting him to pull the posting.
Carey Holzman, as a builder of custom PCs, has been trying to raise awareness about the defects since last spring. He thinks manufacturers should be more public about the problem and issue a recall. "Main board replacement is a big job. It's a huge amount of downtime for the user," he says. Failures can also occur after the warranty has expired, he points out. "The manufacturers should do the right thing."