News / Press Releases

Sacramento Bee
November 11, 1993

Author: Jane Meredith Adams
Bee Correspondent
Page: A1 / A13

Computer Chip Heists Swarming the Industry

SANTA CLARA – When a white-and-orange U-Haul truck pulled up to the loading dock at Wyle Laboratories on Thursday morning, workers at the computer chip distributor prepared to unload it.

But before they could begin, police described later, the doors of the truck opened and six masked men in identical blue coveralls emerged, two from the front of the truck, four from the back where they’d been hiding.

Gruesomely disguised by nylon pantyhose or cloth hoods on their heads with slits for eyes and nose, the men brandished two guns and ordered the 25 loading dock employees to the floor, Santa Clara police said.

Four of the robbers went to a caged storage area and began loading boxes of Intel 486 microprocessor chips into a duffel bag, police said. Then the men stashed the bag in the U-Haul and fled, taking with them nearly $1 million worth of chips in what police called the largest heist of the year in Silicon Valley and the latest in a series of invasion-style armed robberies that has changed the nature of high-tech crime here.

In this valley of low-slung beige office buildings and neat green lawns south of San Francisco, stealing chips used to be a discreet, white collar crime in which employees would smuggle the small and valuable chips in their lunch boxes or participate in sophisticated scams. Now the chips appear to have caught the interest of criminal more often associated with drug trafficking.

At least seven armed robberies have been executed this summer in and around the valley, police said. Julius Finkelstein, deputy district attorney who heads the Santa Clara County high-technology unit, called the heists “a new trend.”

These chips are becoming the dope of the nineties,” Finkelstein said. “They’re more valuable than cocaine and a heck of a lot easier to dispose of.” Criminal punishments for selling stolen property also are less ever than for drug dealing, he added.

Burglaries of chips have historically been more of a problem for companies than armed robberies. One of the largest burglaries in the industry occurred in March 1991 at the Hewlett-Packard plant in Roseville. Thieves smashed the glass on a locked door in the early morning and made off with $1.1 million worth of Intel 386 and 486 chips.

The Intel 486 chip, which sells for as much as $500 and is sandwiched in a package the size of a cracker, still is among the hottest items. Also popular is the Single In-Line Memory Module, or SIMM chip, which comes in a strip of four that sells for as much as $250.00. The chips, made of the silicon that gives the valley its name, are manufactured in limited supply that is outpaced by demand.

After a July fire in Japan destroyed a plant that produced more than half the world’s supply of a material used in making memory chip packaging, industry leaders feared prices of memory chips would rise further. But other companies stepped in to fill the gap and shortages were averted, according to the Semiconductor Industry Association in San Jose.

“You have chips more valuable by weight than gold that are highly mobile and difficult to identify because they don’t have serial numbers,” said Sgt. Jim McMahon, chief of the high-technology crime unit of the San Jose Police Department. “It’s a very serious commodity for theft.”

Investigators said they first heard of such robberies in the Los Angels and Orange County areas about four years ago. Soon a trickle of armed robberies of chips began around Silicon Valley and now the number appears to be increasing. Warehouse-type companies where chips are brokered or stuffed onto circuit boards have been targeted.

“We look at it as more and more prevalent,” said Rick Smith, special agent of the FBI in San Francisco. Many of the armed thieves have been members of loosely organized Asian gangs, said Smith.

But Kevin Fairchild, a high technology security consultant who works in Silicon Valley, said this particular criminal activity isn’t limited to any one group. “It’s in vogue,” he said.

Santa Clara Police Sgt. Mark Kerby said he believed the Wyle Laboratories thieves had been hired for the job in the Los Angeles area, where the U-Haul van was rented. “In my experience this is typically a contract situation, maybe with an offshore manufacturer,” he said. They will be paid for the product and they don’t have a clue what an Intel 486 microprocessor does.”

The theft follows two armed robberies of chips in San Jose in July, one armed robbery in Milpitas in August, one in Hayward in August, one in Campbell in September, and one in Fremont in September, police said. In several of the crimes, including the Fremont robbery of $250,000 worth of chips and equipment at All Quality and Services Inc., some of the robbers wore suits, apparently to look like customers.

Police and high technology experts in two other regions in the country – Route 128 near Boston and the Research Triangle near Raleigh, N.C. – say they haven’t heard of such crimes in their areas.

“If it hasn’t happened there yet, it’s going to,” said Fairchild.