CounterfeitParts_02_EffectsOfCounterfeitParts

Consequences of using counterfeit parts:

  • Schedule slippage
  • Added cost
  • Reduced performance
  • Poor (or unknown) reliability
  • Product failure, affecting both
    • Personnel Safety
    • Mission Success
  • Decline in mission readiness
  • Lower life expectancy

The U.S. Federal Aviation Authority estimates that each year, 2 percent of the 26 million parts installed on airplanes are counterfeit. The total 520,000 substandard parts create a risk to the safety of the aircrafts (Source: The Business Journal of Phoenix - October 17, 2006 http://phoenix.bizjournals.com/phoenix/stories/2006/10/16/daily10.html). “The market for counterfeit parts has passed the billion-dollar mark. Kevin Parmenter, technology director of worldwide EDMS sales at the South Portland, Maine-based Fairchild Semiconductor. Counterfeit Parts Still Flood the Supply Chain By Rob Spiegel Electronic News, 1/18/2005

It was estimated that the cost of counterfeiting and piracy for G20 nations was \$450 to \$650 billion in 2008 and will grow to \$1.2 to 1.7 trillion in 2015. Only 25% of electronic waste has been properly recycled in 2009 in US (U.S. Environmental Protection Agency, May 2011). The Semiconductor Industry Association estimates that counterfeit electronics cost the industry over $200 billion each year. It is estimated that 10% of parts are actually counterfeit (NASA EEE Parts Bulletin, May 2011, Vol 3, Issue 1).

According to the U.S. Department of Commerce, counterfeiting accounts for more than 8% of global merchandise trade and is equivalent to lost sales of as much as \$600B and will grow to \$.2T by 2009. The following graph shows the problem through the years:

Figure: GIDEP Alerts / Problem Advisories Reporting Counterfeit Electronic Components (as of July 2007)

How big is this problem?

  • It is an industry-wide, global problem. “Since 1982, the global trade in illegitimate goods has increased from \$5.5 billion to approximately \$600 billion annually. Approximately 5%-7% of the world trade is in counterfeit goods”.
    Source: International Anti-Counterfeiting Coalition (IACC)
  • “Counterfeiting and piracy costs the U.S. economy between \$200-\$250 billion per year, and has contributed to the loss of approximately 750,000 American jobs”.
    Source: FBI estimates.
  • Current value of counterfeit components is between \$1 and \$10 billion annually. Most counterfeit cases are not documented.
  • “U.S. companies suffer \$9 billion in trade losses due to international copyright piracy. Counterfeiting poses a threat to global health and safety.”
    Source: IACC
  • ERAI, Inc. receives ~200 suspect counterfeit part complaints/month and confirmed more than 2800 brokers selling counterfeit components.

The following table presents the GIDEP Counterfeit Case Summaries:

GIDEP Alert Findings
J5-A-07-01 Parts marked as Philips QML product with 2003 date code, but contained Intel die manufactured in 1980
J5-A-07-02 Parts marked as Analog Devices QML product, but markings were not consistent with standard Analog Devices markings for the device and device contained die of a different function
J5-A-07-03 Parts marked as Cypress commercial product but parts were salvaged from scrapped assemblies
J5-A-07-04 Received parts Jan-O6 through May-O6 marked as On Semiconductor commercial product, but On Semiconductor did not manufacture these parts
J5-A-07-05 &
J5-A-07-07
Received parts marked as Seeq commercial product, but parts were salvaged from scrapped assemblies and remarked to appear as legitimate/unused product
J5-A-07-06 Parts marked as Philips QML product with 9852 date code, but Philips discontinued manufacture 31 December 1997
J5-A-07-08 Parts marked as National QML product, but major discrepancies in marking format and content. including date code and manufacturing location; Die contained in these parts were not manufactured by National Semiconductor
J5-A-07-09 2001 date code. but Intersil discontinued this product in 2000; marking missing country of origin; parts had wrong lead finish
J5-A-07-10 2004 date code, but Linear Tech discontinued this product in 2001
J5-A-07-11A Parts marked as Analog Devices QML product, but incomplete or absent marking; incorrect lead finish vs. part number reclaimed or refurbished; invalid test report
J5-A-07-12 Part number and date code do not match the lot number identified in Cypress production records
J5-A-07-13 Suspect marking: evidence of remarking; part number and date code do not match Cypresslot number
J5-A-07-14 Parts marked as Analog Devices "883" product, but incomplete or absent marking; incorrect lead finish vs. part number reclaimed or refurbished; invalid test report; evidence of prior marking
J5-A-07-15 Parts marked as Cypress commercial product; leads have been re-soldered; evidence of a resurfacing on device package
J5-A-07-16 Parts marked as Xicor/lntersil QML product, but marking is not compliant to Xicor/lntersil brand layout; die not associated with QML product
J5-A-07-17 Discrepancies in device marking, lead finish and lead quality
J5-A-07-18 Parts appear to be reclaimed; the surface roughness the devices markings were stripped and remarked

In June 2006, the Semiconductor Industry Association (SIA) established the Anti-Counterfeiting Task Force (ACTF) consisting of semiconductor manufacturing company members involved in the investigation of counterfeiting and in coordination with law enforcement.

Semiconductor Manufacturer disclosures:

  • Company A: Over 100 part numbers have been counterfeited in last 3 years.
  • Company B: 19 cases reported involving 97,000 units.
  • Company C: Since June 2006, there have been 4 seizures of counterfeits of our products by U.S. Customs; units seized ranged from 6000 to 60,000.
  • Company D: “We estimate that 2-3 percent of purchases of our brand are counterfeit”.
  • Company E: A broker website indicated 40,000 or our devices available, but our company had only made less than 200 units of that device with the specified date code. If all 40K were available it would result in a \$34 million loss.

 

EPA estimates that 205 million computer products were disposed of in 2007. Electronic recyling is now the fastest growing solid waste stream in the world. E-waste stream creates opportunities for counterfeiters. The following graphs show the effects and  importance of counterfeit parts problem: