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Reports of Counterfeit Parts in Electronics Supply Chain Continue

The number of reports of counterfeit parts in supply chain has averaged about 107 per month over the past year.
The problem of counterfeit parts continues to plague the electronics industry as the number of counterfeit part reports in 2012 is about the same as the number that were reported in 2011 year-to-date, according to researcher IHS.

Counterfeit part incident reports from January through the end of August averaged 107.3 per month, up slightly from 107.1 in 2011. A total of 1,336 separate verified counterfeit-part incidents have been made for transactions involving a minimum of 834,079 purchased parts.

IHS reported that counterfeit parts are an escalating global supply chain challenge. “Counterfeit parts represent a serious and growing risk to the electronics supply chain in general and to the aerospace and defense industry in particular,” said Rory King, director, supply chain product marketing at IHS.

Each month, more than a hundred counterfeit incidents comprised of thousands of suspect parts are reported. “That’s why the spotlight is shining squarely on tighter policies and procedures aimed at counterfeit detection and avoidance,” said King.

He added that a growing number of supply chain companies are joining anti-counterfeiting organizations that monitor, investigate, and report on counterfeit electronic components. Alerts are issued to others in the supply chain of counterfeit parts in circulation.

Among all reporting entities in IHS figures, sources include the Government-Industry Data Exchange Program (GIDEP) and ERAI. Consistent with 2011, ERAI represents the majority of reports made accounting for about 88 percent of year-to-date 2012 totals.

Because of national security issues, the U.S. Department of Defense (DoD) is scheduled to update the Defense Federal Acquisition Regulation (DFAR) Supplement to the Federal Acquisition Regulation (FAR). The updates are part of measures intended to regulate the detection and avoidance of counterfeit electronic parts as a portion of the National Defense Authorization Act (NDAA) of 2012.

Among other requirements, NDAA seeks to improve systems for the detection and avoidance of counterfeit electronic parts at all tiers in the supply chain. The law shifts the burden of costs associated with rework or corrective action for issues involving these parts back upon defense contractors.

Incidents of counterfeit parts have quadrupled since 2009. On average, more than 1.4 million purchased parts have been involved in suspect counterfeit and high-risk transactions during each year for the past decade, according to IHS.