PC Parts And Accessory Shoot – August 2011Getty
Data storage giant Seagate has a counterfeiting problem. A quick search online reveals numerous guides to help ensure users the hardware they’re putting in their computer is real.
But the problem is actually larger than just retail customers buying USB sticks dressed up to look like hard drives. Not only are counterfeits making it onto some mainstream platforms like eBay, but something called the reverse supply chain, when customers return goods, is also vulnerable, increasing the risk that Seagate itself, which generated $11.8 billion revenue this year, is accepting counterfeits back into its own supply.
To prevent that from happening, the Cupertino, California firm has devised a two-fold plan aimed at cutting off the $100 billion counterfeit hardware industry from every angle. On one side, the hardware itself is coming under increased protection using cryptographic signatures similar to those that ensure each bitcoin is unique.
But to ensure the supply chain itself—the actual process by which every part of every product is accounted for when it is moved—is also safe, Seagate has been quietly working with IBM for the past two months to move that process to a blockchain.
If the proof-of-concept, which is expected to be completed as soon as the end of this year, is successful, it could help shine a light on the larger vulnerable computer hardware supply chain that is increasingly being seen as a matter of national security.
“We found a unique way of tying the physical product to the virtual world, through the blockchain,” says Seagate managing technology Manuel Offenberg, who is overseeing the project. “We think that’s where some of the novelty is, where we really can go from a physical product to the virtual blockchain world.”
While this effort marks Seagate’s first public push into blockchain, it’s also just a continuation of a years-old professional relationship with IBM, according to Offenberg. At least as far back as 2009, Seagate has been providing hard drives for IBM products, and after a brainstorming session in June helped confirm Seagate’s interest in the underlying technology, the companies formalized their latest project.
Still in the early stages of the build, Offenberg and his team of six based in Freeport, California are using the enterprise grade IBM Blockchain that incorporates the open-source Hyperledger Fabric, to track the movement of goods from the point of manufacture to the point of sale, and if necessary back again.
While the traditional Seagate supply chain consists of numerous middlemen each manually scanning and entering each computer part into their own accounting software, Offenberg hopes the IBM Blockchain solution will help move the process to a single append-only database that would accelerate the process and give users increased certainty fraud wasn’t being committed. In addition, Offenberg says some steps such as the process of actually checking a product is authentic are replicated by IBM, Seagate and other counterparties, and could be reduced to a single action.
The same is true for the reverse supply chain, when a customer returns a product to IBM, which returns the product to Seagate, which returns it to a reprocessing facility, and only then can be determined if it is suitable to sell on a refurbished market.
But the blockchain supply chain is only part of the cryptographic solution. Also announced today, Seagate will integrate its own cryptographic signatures, or electronic IDs (EIDs) at the point of manufacture to serve as a fingerprint for each piece of hardware along each step of the supply chain. When a hard drive is returned, cryptographic proof that the item was erased within the originating jurisdiction will also be hashed on the blockchain.
“Based on the information in the blockchain we can also quickly verify the provenance of the device, in which case, we could cut out several steps,” says Offenberg. “The proof of concept will tell us more succinctly which steps can be removed.”
In addition to this being the first instance of an enterprise computer hardware supplier publicly exploring IBM Blockchain, the partnership is unusual because the software provider, IBM, is also a potential user.
As a customer of Seagate, IBM uses the hardware being tracked on this supply chain in their servers, and if the platform is approved for pilot testing following a planned demo to executives from both companies next year, IBM will likely be the first to actually use the platform.
“Initially, the application will be used between Seagate and IBM as we use it inside of our own server production operations,” says Bruce Anderson, IBM global managing director of the electronics industry, and head of strategy for all the computer giant’s high-tech customers.
At later stages of adoption, Anderson expects that some smaller companies with low supply chain volumes may decide to license access to IBM or Seagate’s blockchain node, thereby reintroducing the middleman concept to the shared ledger. Larger companies on the other hand, may have more of an incentive to spin up their own node on the blockchain platform. “If someone’s business is currently counterfeiting, this is going to take a big chunk out of the way they do business,” Anderson added.
Given the unique relationship, where IBM is both providing the blockchain software and cloud computing support, and is a participant in the supply chain, Anderson says he took the unusual step of committing multiple members of this team to helping build out the solution side-by-side with the Seagate team.
“We see that solving the counterfeiting problem as a customer of Seagate is definitely worth it,” says Anderson. “We also see this at an industry level that others are going to be asking about.”
Supply chain applications of blockchain and other distributed ledgers are increasingly being sought out as a possible evolution of the technology first popularized by bitcoin. At stake though is more than just system efficiency that results from removing middlemen and syncing up accounting records.
Industry concerns go far beyond potentially fraudulent Seagate products moving on the supply chain. The administrations of both former U.S. President Barack Obama and current President Trump have issued statements about potential national security threats that could result from poorly managed supply chains.
Most recently, Bloomberg published a hotly contested report claiming that a poorly managed server supply chain may have resulted in the surreptitious placement of malicious hardware. While blockchain might not necessarily stop such alleged fraud, a shared, immutable ledger could dramatically simplify investigations, giving those who believe the fraud existed, and those who don’t, the evidence to support their case.
As for Seagate, Offenberg declined to comment on whether the blockchain solution he is helping develop could address the issues brought up in the Bloomberg report. Instead he explained that these are still very early days for the project and that his company is predominantly focused on “bringing the levels of trust in our products up. Though he did add: “We are looking at the bigger picture.”