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DoD Policy Takes Aim at Counterfeit Electronics

In the military sector, counterfeit microelectronics components have the potential to put lives in danger. With that in mind, the Department of Defense (DoD) is trying to stop the problem at the source.

In the past, fake parts have been a measurable problem. For example, 2012 Senate Armed Services Committee investigation identified 1,800 cases of phony parts (implicating more than a million components). Components used in the Air Force’s largest cargo plane, in assemblies intended for Special Operations helicopters, and in a Navy surveillance plane were found to be bogus. Many of the suspect components came from China.

Late last summer, the DoD issued a new regulation that hopes to greatly reduce the number of counterfeit microelectronics entering the military supply chain. The Defense Acquisition Regulation Supplement final rule, posted and effective Aug. 2, puts new guidelines in place for a DoD procurement practices to limit the risk of counterfeit parts getting integrated into critical military systems.

Under the new rule, military contractors and subcontracts will be required to buy electronic parts from the original parts manufacturers or an authorized franchised distributor. Only if these sources fail to produce results, can purchasers consider using alternative sources that might introduce risk into the equation.   

The Semiconductor Industry Association (SIA) and semiconductor manufacturers think that a lot of thought went into this ruling, and the Department of Defense got it right,” Dustin Todd, director of government affairs for the SIA told EBN. “When you start with credible sources, you are much less likely to get counterfeit parts. Pentagon-wide, the lowest price, technically acceptable, but when you are buying semiconductors you don’t want the cheapest source, but rather the trusted source.”

The rule applies to both legacy and new systems. “Across the board, it creates a tiered buying approach for contractors,” said Todd. Tier one, of course, is the original parts manufacturer. Tier two includes authorized sources for the parts.

Further, once these sources are exhausted, procurement departments are encouraged to put safeguards in place, including testing and traceability of parts. “When you step down that chain, the requirements increase to make sure you are taking necessary steps to avoid problems,” said Todd. “Before, there were no rules about this at all.”

In addition to being more stringent, the rule also is being applied more broadly. Two years ago, the previous rule was applied only to large contractors. This new rule affects contractors of all size, including the prime contractor to subcontractors. It applies to contractors that are used only once.

Of course, time will tell how much impact these new directives may have. At the very least, it will take pressure off DoD procurement to defend using a more expensive source when necessary. “Most of the major contractors agree that this is best practice for avoiding buying counterfeits,” said Todd.

Currently, military/defense semiconductor buys account for a fraction of the total semiconductor market. The 2014 total global semiconductor market accounted for $336 billion in sales. Of that, military was just 1%, according to the SIA. Further, the largest market sectors (communications, computers, and consumer electronics) command lower margins and might be less able to accommodate the added cost of component testing. These factors may make it difficult to expand these guidelines outside of the military market.  However, automotive and industrial applications, which account for 21% of the total market, may be more able to foot the bill, and incentivized by a clear need for safety.

Do you think similar guidelines and regulations would benefit commercial electronics? Let us know in the comments section below.

1 comment on “DoD Policy Takes Aim at Counterfeit Electronics

  1. ThomasPalmer
    April 28, 2017

    As I can remember a few years ago that rule was applied to big contractors and that idea didn't appeal to many. And this new rule affects contractors in a larger scale along with prime contractor to subcontractors however to contractors for only time use.
    To my mind, only time will show how those new directives will affect the sitiation and we will see the results from media. At any rate, it will take weight off DoD acquisition to guard utilizing a more costly source when vital.

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