The US Senate Armed Services Committee recently released a report detailing the extent of counterfeit electronic parts present in the Department of Defense (DOD) supply chain. It is worse than we thought.
The committee confirmed that counterfeit parts are making their way into critical defense systems, leaving these systems and our service people vulnerable. The committee uncovered approximately 1,800 cases of suspected counterfeiting over a two-year period. These cases involved more than a million parts. One Air Force supplier alone (Hong Dark Electronic Trade of Shenzen, China) supplied 84,000 counterfeit devices.
The committee pointed out several weaknesses in the defense procurement supply chain. Defense contractors have not been reporting to the DOD all instances in which counterfeit parts are discovered. Defense contractors are also not undertaking sufficient due diligence to ensure their supply chains are free of counterfeit parts. The recently enacted National Defense Authorization Act of 2012, part of only a small number of US federal anti-counterfeiting laws, will address these issues. It will require DOD reporting and due diligence actions by defense contractors. It will also impose tough penalties on contractors that supply counterfeit parts to the US military.
China identified as the primary source of counterfeit parts
The Committee confirmed something we already suspected: that companies located in China are the primary source of counterfeit parts. Approximately 70 percent of the counterfeit parts infiltrating the defense supply chain are believed to come from China. The committee concluded that the Chinese government has failed to take the necessary steps to stop counterfeiting operations there. China disagrees.
The U.S. government has found yet another reason to ignore its own problems and bash China, this time accusing the country of compromising national security via the manufacture of counterfeit electronic components used by the U.S. military...
The accuracy of the claims is questionable at best, but bigger questions should be answered first: how did counterfeit parts end up slipping into the U.S. military system in the first place? And for what purpose were the parts originally shipped for?
The U.S. has maintained a military embargo on China for 23 years. Military components and weapons aren’t supposed to be officially traded between the two countries to begin with. Taking this into consideration, the U.S. ought to find out precisely who purchased the parts and how they passed muster before accusing China of wrongdoing.
Are you alarmed by the increase in counterfeit parts? Are you taking any actions to avoid counterfeit parts? Is China really the culprit? Let me know what you think.
(See here for more information on legislation affecting the electronics industry in the US.)
Good points Barbara. It is important that factory rejects and distributor scrap parts not wind up exported and salvaged. A number of large global OEMs are requiring their authorized distributors to confirm that customer returns and scrap inventory are appropriately handled and destroyed. We use "e-stewards" recognized electronics waste disposers who are required not to export, and to submit to third party audits. The EPA also encourages electronic recyclers to meet vountary R2 standards.
I should have guessed that our desire to push our waste off on someone else would mean there are no controls on exports. Yet, aren't there all kinds of prohibitions about exporting new technology? When IHS reports that something like 80 percent of all counterfiets are obsolete parts, we should be worried about securing our "old technology" as well as our new. (Also, what won't pass Intel's performance specs could still be better than anything else out there. So even factory rejects should be considered.)
The problem with electronic waste disposal in the USA is that there is no national law prohibiting export. There is a proposed federal law (HR 2284)but it hasn't been able to get out of committee:
So far 26 states have enacted their own laws on electronic waste disposal in their states, but only the federal government can regulate exports. Most cost effective way to dispose is to send it to low cost disposers who often export it for reuse or salvaging.
Where w ecan implement cotrols over the disposal of electronic components we should do so. I assume thet part of the problem comes from the disposal process at the sites where these components are produced.
Ken--thanks for backing the perspective I've had for awhile. If we have identified factory "seconds" or scrap parts as the problem, wouldn't the solution be to make sure the parts are destroyed? Clearly, the majority of the parts aren't being churned off of fabs in China (or elsewhere) originating as counterfiets. They are real parts, just bad ones. Instead, we penalize the buyers of these parts, rather than keep them from getting into the supply chain in the first place.
Obsolete parts are harder to manage becuase they started out as the real deal. This issue is more difficult and definitely deserves the attention it is getting in terms of solutions such as DNA.
Yes, yes and yes. I couldn't agree more. BTW, you might be interested, if you aren't aware of it already, in Henry Livingstons' "Counterfeit Parts" website. It's updated regularly with his comments and related links. I highly recommend it to all interested in the topic.
No question China could and should do more. But aren't we also at fault for not regulating the export of electronic waste? Scrap components are salvaged and reused, frequently in counterfeiting. Shouldn't the DOD also do more? Doesn't relying on the unauthorized independent vendors for obsolete parts invite problems?.
Are you alarmed by the increase in counterfeit parts? Are you taking any actions to avoid counterfeit parts? Is China really the culprit?
Of course they are the culprit, at least in large measure. And they have willing accomplices who don't want to perform the due diligence required to detect and eliminate couterfeit parts.
Since, a lot of debate is going around these days on how to stop these products from entering the legit supply chain the DoD can come up with a technological solution to this problem...
@syedzunair, You may be interested in Douglas Alexander's article published today:
This new version will expand coverage to all electrical and electronic equipment, require special marking of finished goods and more compliance documentation, and increase penalties for non-compliance.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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