The counterfeit semiconductor market is estimated to be multi‑billion‑dollar in scale. OBSIDIA's own customer interviews put the true toll above $100 billion a year, touching everything from foundries losing 5%+ of revenue to counterfeits to failures downstream that cost reputation, business, or lives.
As semiconductor devices become increasingly central to artificial intelligence, critical infrastructure, automotive systems, and national security applications, trust in the underlying hardware is emerging as a strategic concern. While the industry has made significant progress in tracking materials, documenting supply chains, and improving cybersecurity, questions remain around authenticity, provenance, and whether organizations can truly trust the devices powering modern technology.
To explore these challenges, SEMI’s Mayura Padmanabhan and Nishita Rao spoke with Erik Hosler, Founder and CEO of OBSIDIA Semiconductors Inc, about counterfeit electronics, traceability, trusted hardware, AI infrastructure, and the role industry collaboration can play in securing the semiconductor ecosystem.
For readers who may not be familiar with OBSIDIA, what challenge is the company trying to solve?
Hosler describes OBSIDIA's mission through a comparison that many technology professionals immediately understand.
"OBSIDIA is focused on delivering security at the hardware level for the semiconductor industry. A great way to think about that is the analog of antivirus in software."
While software has long benefited from tools that help validate and protect systems, he believes the semiconductor industry has lacked an equivalent capability at scale for hardware.
"Nothing really exists in the semiconductor ecosystem on a large scale for hardware security. The ability to really trust that the semiconductor devices that we rely on every day are authentic and conforming."
That gap is what OBSIDIA aims to address. By examining the physical characteristics of devices, the company seeks to verify authenticity at multiple points throughout the semiconductor lifecycle.
"Through our technology, we're able to authenticate the integrity and quality of devices at any level of integration within the semiconductor supply chain, from the wafer level all the way up to and including the application."
This capability was demonstrated as part of a DARPA Small Business Innovation Research (SBIR) Phase II award OBSIDIA completed a few years ago as well as projects with MITRE and Kostas Research Institute for Homeland Security.
Why has semiconductor authenticity become such an important issue today?
According to Hosler, semiconductor authenticity is no longer a niche concern. As the world becomes increasingly dependent on electronics, the potential impact of counterfeit and non-conforming devices continues to grow.
"There have been a lot of studies over the past couple of years analyzing how many of these types of devices are actually in our ecosystem. Even at the highest level of scrutiny within the Department of Defense in the U.S., anywhere from 10 to 15 percent of their electronics contain counterfeit devices. That's a very scary statistic."
The issue extends beyond critical systems and into everyday life.
"The chance that you have a counterfeit device in one of your electronics within arm's reach at any point in time during the day is very real."
Interestingly, Hosler does not characterize counterfeiting primarily as sophisticated malicious activity.
"It's not a targeted event. It's a crime of opportunity."
He pointed to supply chain disruptions as examples of how legitimate shortages can create openings for non-conforming devices to enter the market.
"Counterfeits aren't just something bought off the back of a truck. They're sprinkled into our ecosystem and appear seemingly at random."
SEMI's Traceability Phase Zero discussions highlighted industry concerns around provenance, authenticity, lifecycle visibility, and supply chain assurance. From your perspective, what are the biggest traceability challenges facing the semiconductor industry today?
When discussing traceability, Hosler pointed to a challenge that extends beyond tracking high-value chips themselves.
"Let's say we have a $30,000 NVIDIA GPU. Tracking that through the supply chain is dollar-for-dollar kind of equivalent to tracking a car through the supply chain. You're going to want to make sure you know where that asset is at any point in time."
The challenge begins after that component becomes part of a larger system.
"Where this paradigm breaks is at integration."
Modern electronics consist of hundreds of interconnected components. Even when a high-performance processor has been carefully tracked and validated, a much smaller supporting component can introduce unexpected risk.
"If one of those five-cent devices on that PCB is counterfeit, it compromises the entire performance of that board, and by extension, that $30,000 GPU."
That observation became one of the defining themes of our conversation:
“A $30,000 GPU can be compromised by a five-cent component.”
For Hosler, true traceability cannot stop at flagship devices. It must extend across entire assemblies and systems.
OBSIDIA was recently named among the seven companies signing U.S. CHIPS and Science Act letters of intent for compute supply chain R&D. What does this recognition say about the growing importance of hardware trust and security within the semiconductor ecosystem?
Hosler views the recognition as evidence that the industry is paying increasing attention to the importance of trusted hardware.
"What the CHIPS R&D money allows us to do is accelerate the commercialization of the technology."
He noted that OBSIDIA has already moved beyond the lab and into commercial deployment.
"We already have a system deployed at a commercial site today. We are in the field running our machine, collecting data with our customer, providing feedback to their customers and suppliers about what's happening in the ecosystem."
The funding, he explained, helps accelerate the journey from research to industry adoption while enabling the company to scale its technology across a growing number of use cases.
Hosler also contrasted OBSIDIA's approach with current industry practices.
"If you receive a thousand devices, you typically send three of those devices out for validation at a third-party lab. Then you have to assume the other 997 were authentic."
OBSIDIA's vision is to move beyond sampling.
"What OBSIDIA allows you to do is measure every single device that you receive."
By reducing dependence on sample-based validation, organizations gain the opportunity to improve confidence in every component entering their manufacturing process.
Many companies already have authentication, tracking, or security technologies. What is still missing to achieve true end-to-end traceability across the semiconductor lifecycle?
A recurring theme during industry traceability discussions is the tension between sharing information and protecting intellectual property.
Hosler acknowledged that companies are understandably protective of their manufacturing knowledge, process data, and design information.
"There is a strong desire to control IP, control process data, and control yield data."
Rather than attempting to change that reality, OBSIDIA designed its technology around it.
"So OBSIDIA really looked at its technology and asked how we can be IP and data agnostic."
That philosophy led to one of the most memorable statements from the interview:
“We're the company that knows nothing.”
Hosler explained that customers can maintain existing workflows, processes, and controls without exposing sensitive data.
"You can maintain whatever structures and regulations and procedures you have already and we will be an addition to that without any need to know anything about what you are doing."
By focusing on spectroscopic measurements rather than imaging or design extraction, the company seeks to strengthen trust without requiring access to proprietary information.
As AI systems become increasingly important in commercial and national security applications, how does trust in the underlying hardware affect trust in AI itself?
Artificial intelligence emerged repeatedly throughout the discussion, particularly as organizations invest heavily in AI infrastructure and advanced computing systems.
"The AI infrastructure buildout is one of the greatest projects within the U.S. from a manufacturing perspective that has happened in decades."
Hosler sees this expansion as both an opportunity and a responsibility for the semiconductor industry.
"AI is going to be active in the systems that we directly engage with on a daily basis, whether that's the plane you're flying on, or the car you're driving."
As AI becomes integrated into transportation, industrial automation, critical infrastructure, and consumer applications, trust in the underlying hardware becomes increasingly important.
Drawing a comparison to the evolution of cybersecurity, Hosler believes the industry is approaching an important moment.
"We don't want to end up with a major incident that we all look back on as a major misstep by us in the industry, just like we saw with cybersecurity."
"We are poised for a similar incident when it comes to hardware security."
Where do you see the greatest opportunities for progress in the next three years, and how can SEMI help support that progress?
Despite the challenges, Hosler remains optimistic about the industry's direction.
"I think where we are seeing the most progress is the recognition of the problem."
He pointed to increasing attention from government, industry, and technology providers as evidence that momentum is building around hardware trust and infrastructure assurance.
"This is a major opportunity for the industry to rally around that call and deliver a solution that not only covers AI space but covers the rest of our infrastructure as well."
Hosler also sees a critical role for standards organizations.
"SEMI is the perfect place, given that all the partners are already there, all the end customers, all the interested parties."
Reflecting on SEMI's Traceability Phase Zero effort, he described it as an important starting point that helped identify both challenges and opportunities.
"The Phase Zero study was a great first step to realize what the challenges are and what the potential opportunities are. Now a Phase One is required to consolidate the feedback and align on a solution."
One trend worth watching going forward: the industry's accelerating shift toward chiplets and multi-vendor advanced packaging means a single finished package can now contain die from several different suppliers, assembled by a third party - a structural change to the supply chain that raises new provenance questions of its own.
Closing Thoughts
At the conclusion of our discussion, Hosler offered a simple piece of advice for organizations focused on quality, trust, and supply chain security:
“Be skeptical.”
He encouraged leaders to look beyond documentation and assumptions and spend more time understanding what is happening on the factory floor.
"Even though everything looks okay on the outside, what's happening on the factory floor could be a very different story."
"Don't assume everything is okay. Dig that next layer deeper."
As semiconductor supply chains become increasingly complex and AI systems become more deeply embedded in everyday life, trust can no longer be viewed solely as a matter of paperwork, compliance, or process. As Hosler emphasized throughout our conversation, building confidence in modern technology ultimately begins with confidence in the hardware itself.
About Erik Hosler
Erik Hosler is Founder of OBSIDIA Semiconductors, a company focused on semiconductor authenticity, hardware trust, and supply chain security through advanced RF-based device verification technologies. OBSIDIA's mission is to enable scalable, non-destructive verification of semiconductor devices across the electronics lifecycle
Mayura Padmanabhan is a Technical Project Manager at SEMI, focused on advancing semiconductor cybersecurity, traceability, and supply chain resilience through industry standards and collaborative initiatives.
Nishita Rao is Director of Product Marketing at SEMI, leading global marketing initiatives that drive industry engagement, thought leadership, and awareness across the semiconductor value chain.
