MOUNTAIN VIEW, CA—Counterfeit parts are increasingly finding their way into mission critical military and healthcare equipment, with the number of fake electronic parts soaring dramatically over the past couple of years, according to market research organization IHS iSuppli.
IHS reported a fourfold increase in counterfeit-part incidents worldwide from just 324 in 2009 to 1363 in 2011, after a thorough investigation of OEMs (original equipment manufacturers), contract manufacturers, component suppliers, buyers, and other supply chain participants.
The firm said this marked the first time the number of reported incidents in a single year had exceeded 1000 and warned that the actual total could encompass millions of purchased parts.
IHS said the increase was just one of the latest developments in "a rapidly escalating global supply chain trend toward increased counterfeiting and piracy of global products," noting that counterfeit part reports had risen by nearly a factor of 700 over the last decade.
The most disturbing aspect of the uptick in counterfeiting, however, is the increased frequency in which fake parts are surfacing in the military and aerospace industry, posing a serious threat to both human life and national security, not to mention the financial implications of fixing the errors once they're discovered.
"We have men and women out there, serving in Iraq and Afghanistan, using potentially dangerous equipment made with counterfeit parts," one engineer noted in a recent focus group EE Times attended.
"The counterfeit issue is serious, it's growing and it's a major problem for electronics makers—especially military and aerospace companies," said Rory King, director, supply chain product marketing at IHS.
The problem, said King, was becoming increasingly hard to ignore, with many companies blind to the risks owing to lack of awareness for the issue and the difficulty in detecting fake parts.
"The reporting done by the industry can help other organizations pinpoint risky parts or suppliers," said King, noting that the US government was just starting to implement stricter regulations to stem the proliferation of fake components, making defense suppliers accountable for counterfeit issues.
On Dec. 31, 2011, US President Barack Obama signed the fiscal year 2012 US NDAA (National Defense Authorization Act), in part to try and make members at all tiers of the defense supply chain accountable and to encourage counterfeit risk mitigation procedures.
The act means contractors are now responsible for detecting and avoiding the use of counterfeit or suspected counterfeit electronic parts, while making them face the financial burden of fixing any problems caused if fake parts are found. It also demands the implementation of qualification procedures and processes to weed out fakes by using only trusted and authorized suppliers and testing equipment with tools able to analyze and assess parts.
According to IHS, a typical bill of materials for a military/defense program can have anywhere from a few hundred to over tens of thousands of purchased parts, of which between 0.5 to 5 percent typically match incidents of counterfeit. The same is true for medical equipment, said IHS.
Cheap substitutes and Trojan horses
Most of the current counterfeit parts discovered are just cheap substitutes or salvaged waste components that fail to meet strict military and aerospace specifications, said IHS, increasing their risk of potential failure.
Accidental failure aside, there is also a concern that some counterfeit devices like integrated circuits could act as malicious Trojan horses, capable of being disabled remotely to sabotage a mission at a critical junction.
The cost to fix and secure equipment once it has been found to be compromised with counterfeit parts can also be huge. IHS cited an example of the US Missile Defense Agency discovering that its mission computers for THAAD (Terminal High Altitude Area Defense) missiles contained suspect counterfeit parts that could have caused the entire system to fail. Fixing it cost the government $2.7 million.
For a further explanation of the counterfeit electronics economy and how it's affecting our lives, watch this video.
This story was originally posted by EE Times.
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