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Reports of Counterfeit Parts Rise

The number of verified incidents of counterfeit parts in the electronics supply chain surpassed 1,300 in 2011.
The number of counterfeit parts in the electronics supply chain increased to more than 1,300 in 2011 from 815 in 2010, according to a new report by researcher IHS.

In 2009 there were 324 incidents of counterfeit parts reported in the electronics supply chain, with the bulk of them at defense and aerospace manufacturers, IHS reported. In 2010 that number grew to 815 and in 2011, the number of reported counterfeit part incidents swelled to 1,363, according to IHS. It was the first time that the reported number of counterfeit parts reported exceeded 1,000.

The IHS data included incidents reported from ERAI Inc., a privately held global information services organization and the Government-Industry Data Exchange Program (GIDEP).

Counterfeit parts often are cheap substitutes or salvaged waste components that fail to meet strict military and aerospace specifications. Fake parts can cause systems to fail and put lives in danger.

While the issue of counterfeit parts is not new, it continues to pose a major problem for electronics manufacturers, especially military and aerospace companies, according to Rory King, director, supply chain product marketing at IHS. “The problem has grown increasingly hard to ignore, as reports of counterfeits have risen exponentially and most companies lack the awareness and capability to effectively detect and mitigate the growing problem,” he said.

The federal government agrees that counterfeit parts pose a serious problem. President Obama signed the U.S. National Defense Authorization Act (NDAA), which adds regulations for counterfeit part detection and avoidance.

The law requires all tiers of the supply chain put counterfeit risk mitigation procedures in place and certain steps must be completed within 270 days of the president’s signature, which occurred on Dec. 31, 2011.

Defense contractors are now responsible for detecting and avoiding the use of counterfeit electronic parts or suspect counterfeit parts, according to the new regulations. Contractors are also responsible for any rework or corrective action that may be required to remedy the use or inclusion of such parts. Corrective action can be expensive.

For example, the U.S. Missile Defense Agency learned that mission computers for Terminal High Altitude Area Defense (THAAD) missiles contained suspect counterfeit devices that could have led to an entire system failure. The cost to fix those systems was nearly $2.7 million.

The new regulations also require that qualification procedures and processes be established and only trusted suppliers be used. Electronics must be purchased only from authorized suppliers.