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U.S. beefs up control of fake chips in supply chain

Posted: 17 Aug 2011 ?? ?Print Version ?Bookmark and Share

Keywords:fake chips? supply chain? counterfeit?

If the bill becomes law, the Justice Department's reach would extend to Web sites outside the United States and would include companies that do business with the offending Web sites.

But the government isn't waiting for the passage of new legislation to ratchet up the pressure on counterfeiters.

In June, ICE's National Intellectual Property Rights Coordination Center announced Operation Chain Reaction, targeting counterfeit parts in the supply chains of the Department of Defense and other U.S. government agencies.

The operation is a collaboration with eight other agencies, including the FBI; the Defense Criminal Investigative Service; the Defense Logistics Agency; and U.S. Army, Air Force and Navy investigative units.

"Pooling our resources will allow us to more effectively disrupt and dismantle criminal enterprises," says James Burch, DOD deputy inspector general for investigations.

Focus on China
While Operation Chain Reaction has its sights trained on the nation's borders to catch counterfeits as they enter the supply chain, the Senate Armed Services Committee is looking farther afield in a bid to stop counterfeiting at the source.

A group of investigators representing the committee had planned a March trip to Shenzhen, China, a short hop by train from Hong Kong, to investigate operations that have allegedly been supplying counterfeit components for U.S. weapons systems. According to sources, counterfeit parts that ultimately ended up in F-15 fighter jets and U.S. Missile Defense Agency systems had come from Shenzhen. But the Chinese government denied the investigators' visa applications, asking that the team postpone its trip.

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Source: Defense Industrial Base Assessment: Counterfeit Electronics, U.S. Department of Commerce, 2010

Senate Armed Services Committee chairman Carl Levin responded to the request by saying Chinese government officials could "not help themselves by denying access to their country for people on an official Senate mission." Rather, Levin said, the action would "hurt them."

Why the focus on China? And why Shenzhen? "Because between 75 and 80 percent of all counterfeit components come from China," says ECIA president Robin Gray, "and most of those come from Shenzhen."

Component makers agree, judging by the findings of the Commerce Department study. By a wide margin, China led the list of the top five sources of suspected or confirmed counterfeit parts as identified by respondents.

Several factors make Shenzhen a hotbed of counterfeit activity. First, the city is a primary manufacturing hub for China's vibrant electronics industry, hosting many of the largest international electronics companies. Second, it has a sophisticated network of independent electronics distributors and traders. And third, it has a ready supply of discarded electronic equipment, the source of many counterfeit parts.

The United Nations Environment Program estimates that China is the second-largest generator of electronics waste, after the United States. Ground zero for China's e-waste is Guiyu, Guangdong province, a four-hour drive west of Shenzhen along the South China Sea coast.

Some Guiyu residents scrape out a living dipping pc boards in open vats of acid to harvest components and reclaim metals such as lead, copper and gold from the boards. The materials make their way to cities like Shenzhen for refurbishment, repackaging and resale. Some of the packages are remarked, hidden in, say, karaoke machines and sold to unsuspecting buyers in the States.

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In Guiyu, China, some residents scrape out a living dipping pc boards in open vats of acid to harvest parts and materials.

Some shipments, such as the contraband-laden karaoke machines, are intercepted and seized before their substandard contents make it into the supply chain. But industry insiders increasingly fear that such cases are just the tip of a large and growing iceberg of counterfeits.

- Bruce Rayner
??EE Times

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