The US government's most recent defense-related anti-counterfeiting measures are well intended, but they are targeting the wrong links in the supply chain. This merely confirms what many in the electronics supply chain suspect: There is a big gap between the folks who are having a problem and the legislators who try to fix it.
According to a press release from IHS, incidents of counterfeiting have exploded in the past few years. Because many of those parts were destined for defense and other mission-critical equipment, the government is stepping in to curb the problem. (See: Counterfeiting: The Enemy Within.)
The action is long overdue. Counterfeiting has been around as long as the electronics industry has. Here's what IHS says the 2012 US National Defense Authorization Act (NDAA) requires:
- Contractors are now responsible for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit parts
- Contractors are also responsible for any rework or corrective action that may be required to remedy the use or inclusion of such parts
- Defense contracts will no longer allow the cost of counterfeit electronic parts and suspect counterfeit electronic parts or the cost associated with rework or corrective action to resolve the use or inclusion of such parts
- Qualification procedures and processes must be established to use trusted suppliers and procure electronics from authorized suppliers
See a pattern here? Contractors — not component manufacturers or distributors — are responsible for avoiding and detecting counterfeit parts. Here's why this is a well-intended but burdensome process that isn't likely to succeed.
- The sources of counterfeit parts: Where do these bogus parts even come from? They come from component manufacturers. Chip makers frequently produce batches of chips that don't work or are substandard. Those devices are supposed to be scrapped. Because of waste and recycling regulations, most chip makers outsource the destruction and/or reclamation of these chips. But rarely do these factories follow through to make sure the chips do get destroyed. Truckloads of chips get diverted and eventually enter the supply chain.
- The channels of counterfeit parts: Customers (or contractors, in DoD terms) can get products in a number of ways. They can purchase directly from the component manufacturer, through a distributor, in the open market, or on a subassembly. Buying direct reduces the risk of getting a counterfeit part to nearly zero. However, few contractors buy direct. The days of manufacturing parts exclusively for a defense customer are over. It's no longer that profitable. Many defense contractors, in an effort to cut costs, are using commercial products. Therefore, they are more likely to buy parts through a secondary channel. Since distributors take parts back from customers under certain circumstances, counterfeits have shown up even in authorized distribution. These distributors usually catch these parts, because they conduct stringent inspection and testing.
- The buyers of counterfeit parts: Thanks to outsourcing, even defense contractors do very little of their own subassembling. By the time components reach a contractor, it's likely they've been soldered to a board. If counterfeits are discovered at this point, tearing up or scrapping entire boards is prohibitively costly and time consuming. Incoming inspection and testing at this point is redundant and adds cost to the process.
Remember that these chips should have been tested at the factory, at the distributor, and at the subassembler.
Companies in the military/aerospace electronics industry must obtain systems and data to analyze, assess, and act on counterfeit and suspect counterfeit electronic parts… By making use of available tools and ongoing reports for counterfeit, substandard and high-risk parts, electronics makers can cut costs, avoid risk, and expedite NDAA compliance.
This method will no doubt weed out counterfeits, but there is an easier and less expensive way to accomplish this: requiring chip factories to verify substandard or outdated parts are disposed of properly. It won't eliminate all incidents of counterfeiting — some bogus chips are actually built from the ground up in fabs — but it will eliminate remarked, retopped, rebranded, and redisguised components. And since disposal companies are already paid to junk these parts, it shouldn't add cost. Just make sure they do what they say they are going to do.
You don't even need a new law for that.