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Counterfeit electronics parts at record high

Posted: 30 May 2012 ?? ?Print Version ?Bookmark and Share

Keywords:counterfeit chips? electronics supply chain? semiconductors manufacturing?

Information services organization ERAI Inc. reported that from the start of 2007 up to April 2012 more than 12 million electronic parts were involved in counterfeit incidents, according to Rory King, director, supply chain product marketing, IHS.

King said that in 2011, reported incidents of counterfeited parts amounted to 1,363. Because each incident can include thousands of separate parts, it is estimated that 12 million parts were counterfeited during that time, or about one counterfeit part made every 15 seconds.

"Last year there was a record number of counterfeit incidents reported," King said. "Altogether, the last five years has seen an all-time high in counterfeit reports."

While the increase in semiconductor counterfeiting is often blamed on China, King noted that the country is not the location where most counterfeits are reported.

"Companies in two countries accounted for two-thirds of counterfeit incident reports in 2011," King said. "China was actually No. 2, while the United States was No. 1. The two countries were neck and neck, with China at 32 percent and the U.S. at 33 percent."

As to the countries of origin of the counterfeit parts, Malaysia, South Korea, Japan and the Philippines together account for 64 percent of reports, according to ERAI data. However, the accuracy and value of this data is limited, King noted, given that counterfeiters are highly skilled at disguising the true origin of their wares.

Counterfeit chips data

Obsolete parts faked
For many companies, particularly those in the defense and aerospace industries, much of the counterfeit risk lies in obsolete parts.

"Slightly more than one out of every two counterfeit parts shipped during the decade from 2001 to 2011 are obsolete," King noted. "Obsolete parts are where a lot of counterfeit activity is occurring. This underscores the importance of obsolescence management and lifecycle planning. Although obsolescence management is critical, more than one-third of counterfeit incidents are for active components underscoring that this issue is not exclusively a matter of obsolescence management. Vigilance in managing continuity of supply is very important, and companies need knowledge of actual counterfeit parts that are currently in circulation in the supply chain."

King also highlighted the international impact of new U.S. Department of Defense (DoD) regulations on foreign suppliers to the U.S. government. The U.S. National Defense Authorization Act (NDAA) imposes strict regulations and severe criminal penalties on counterfeits supplied for government military and aerospace programs.

"The answer to the question of whether the NDAA counterfeit regulations will impact companies outside the U.S. is yes," King noted. "International companies participate extensively in supplying to the DoD, with the Middle East accounting for the largest portion. There are thousands and thousands of suppliers all over the world that are impacted by NDAA through flow-down. These companies are receiving inquiries on counterfeit avoidance and need to know how to understand and accommodate the issues related to fake parts and compliance with NDAA."

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