Your Chips Or Your Life!

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Unlike rare jewels, chips have had the advantage of being untraceable, so they can be quickly unloaded on gray and black markets. "Computer components are fast becoming the dope of the '90s because they're so easy to get rid of," says Kerby. In Silicon Valley thieves typically sell batches of chips for 50% of their market value, so the brokers they work with pay about $250 for an Intel 486 chip that might otherwise cost up to $500. The chip may change hands a dozen or more times within 72 hours, with each transaction pushing up the value. All that leaves an unsuspecting computer maker to purchase the chip at its regular price and install it in his product. "Then John Q. Public walks into a computer store, and he can't tell whether it's a legitimate chip or if it started out in a crook's pocket," says Sergeant Jim McMahon, who heads a four-member San Jose Police Department task force that focuses on high-tech crime.

What the consumer doesn't know can hurt him because he could wind up with a computer chip that failed a quality-control test but still reached the market. This is less likely to happen to purchasers of big-name computers such as Apple, IBM or Compaq, however, since major companies either make their own chips or purchase them straight from the manufacturer.

Recent sting operations have slowed the Silicon Valley heists a bit but have shown few signs of stopping them. In campaigns with code names such as "Operation Gray Chip" and "Winter Sting," law-enforcement officers rounded up 43 suspects in January, including 13 who were caught while trying to steal more than $1 million worth of computer parts from an electronics warehouse. Officers seized a total of $2 million worth of chips and other computer equipment, together with nylon masks, duct tape, ropes, gloves, walkie-talkies and five loaded guns. But while 20 suspects were swiftly tried and convicted, most face sentences of no more than six months to a year in jail and could soon be on the street again.

To discourage theft on a worldwide basis, Intel last month began etching serial numbers on its Pentium chips, and will do the same with its 486 line this summer. That will enable the company and law-enforcement officials to trace the chips to their source, and thus could make stolen goods harder to fence. With the numbers in place, Intel hopes its hottest products will avoid becoming hot chips.