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Counterfeit Parts: It’s Worse Than We Thought

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.

An article in the China Defense Mashup on May 25 stated:

    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.)

14 comments on “Counterfeit Parts: It’s Worse Than We Thought

  1. rohscompliant
    June 25, 2012

    Buying from Hong Dark in Shenzen……..getting counterfeits?…………DUH who knew?…………

  2. prabhakar_deosthali
    June 26, 2012

    IT is really a surprising fact that the US department defense has its own products full of counterfeits and on top of that the blame has been put onto the Chinese .

    In my opinion the DOD has to put its own house in order , find the channels thru which these counterfeit parts are entering their purchase systems and where is the lapse on part of their internal authorities in ignoring such infiltration.

  3. kmanchen
    June 26, 2012

    I must agree. While China bears some responsibility the DOD sure does too.

  4. syedzunair
    June 26, 2012

    @prabhakar: I think you are right. Instead of blaming the Chinese the DoD should try to fix its own supply chain and figure out the points where counterfeit products are entering the legit supply chain. 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 instead of playing the blame game. 

  5. owen
    June 26, 2012

    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:
    Calm Down: Counterfeiting Can Be Stopped 

  6. syedzunair
    June 27, 2012

    Owen, thanks for sharing the link. Douglas has done a wonderful job indeed.

  7. Eldredge
    June 28, 2012

    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.

  8. kmanchen
    June 29, 2012

    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?.

  9. owen
    June 29, 2012

    @kmanchen,

    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.

    http://counterfeitparts.wordpress.com/

  10. Barbara Jorgensen
    June 29, 2012

    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.

  11. Eldredge
    June 30, 2012

    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.

  12. kmanchen
    July 2, 2012

    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:

    http://www.element14.com/community/docs/DOC-46810/l/us–federal-electronics-legislation).

    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.

  13. Barbara Jorgensen
    July 2, 2012

    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.)

  14. kmanchen
    July 2, 2012

    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.

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