IHS in its annual event "2012 ERAI Executive Conference"
has discussed the growing problem of fake/counterfeit parts.
Below are points the points shared by IHS in its release:
The scale of the counterfeit problem has growth dramatically
in recent years, with reports of counterfeit parts quadrupling
from 2009 to 2011. Supply chain participants in 2011 reported
1,363 separate verified counterfeit-part incidents worldwide,
a fourfold increase from 324 in 2009.
Much of the counterfeit-parts problem can be traced back
to the enormous amount of electronic waste (e-waste) generated
each year, according to Bob Braasch, senior director, supply
chain, for IHS.
"People don't hold onto their old electronic devices,"
Braasch told the event attendees. "A three-year-old
cellphone is ancient, so people are constantly upgrading
to the latest device. As the world economy improves and
as technology continues to develop, people increasingly
will be looking for the latest technology. All of this electronics
consumerism translates into e-waste."
Braasch noted that 58 percent of e-waste generated by the
United States is shipped to developing countries. All too
often, electronic components such as semiconductors are
culled from this waste and then returned to the U.S. and
other developed countries in the form of counterfeit parts.
As the number of counterfeit parts has grown, government
regulations covering fake parts have grown more stringent.
The U.S. National Defense Authorization Act (NDAA), which
was signed into law on Dec. 31, imposes strict regulations
and severe criminal penalties on counterfeits supplied for
government military and aerospace programs. While this phenomenon
is impacting all electronics market, including consumer,
communications and computing devices, much of the attention
has been focused on defense, due to the NDAA.
One major problem companies face when attempting to comply
with the new regulations is the vague language and difficult-to-comply-with
requirements contained in the NDAA, noted Kirsten M. Koepsel,
director of legal affairs and tax at the Aerospace Industries
Association (AIA).
For example, section 818 of the NDAA calls for the Department
of Defense (DoD) to "establish a process for analyzing,
assessing, and acting on reports of counterfeit electronic
parts and suspect counterfeit electronic parts…"
The NDAA also mandates that DoD contractors and subcontractors
must obtain parts "from the original manufacturers
of the parts or their authorized dealers, or from trusted
suppliers who obtain such parts exclusively from the original
manufacturers of the parts or their authorized dealers."
However, the definitions of "suspect counterfeit part"
and "trusted supplier" are unclear, Koepsel noted.
Despite such ambiguities, the burden appears to fall on
DoD contractors and subcontractors to report any cases of
suspect counterfeit parts to the Government Industry Data
Exchange Program (GIDEP).
The NDAA also places the onus for detecting counterfeit
parts upon importers of devices, calling upon them to arrange
for examination and release of the goods.
Nevertheless, it can be very difficult to detect imported
counterfeits. Koepsel highlighted a recent case where criminals
in New Jersey conspired to conceal the import of counterfeit
goods, using various means including generic outer lids
on boxes and generic labels on products to hide the counterfeit
brand-name labels beneath. The criminals also falsified
paperwork and used fraudulent personal identification documents,
such as Social Security cards, to carry out the scheme.
"All someone needs to do is make the boxes of counterfeit
parts look like there are shoes inside-and you will never
know that fake parts are coming in," Koepsel said.
Companies that purchase electronic components also face
a threat from increasingly sophisticated counterfeiters
working to overcome even the most diligent methods to test
for fake parts.
"Counterfeiters are escalating-they know what we are
looking for and move on to the next step," said Tom
Sharpe, vice president at SMT Corp., an independent distributor
of electronic components to the defense and aerospace industry.
This issue underscores a more fundamental problem: regardless
of what steps companies take, the danger of counterfeit
parts will continue.
"No matter how much testing there is, there will never
be zero risk," said Mark Northrup, vice president at
contract manufacturer IEC Electronics Corp. "Even the
most accurate testing measures can only give a range-and
not a single result."
Author: Srinivasa Reddy N
