If a counterfeit electronic part is installed in critical technology such as aircraft, spacecraft, or missiles, the consequences can be quite drastic. The equipment or the product could quit working or not work when needed or fail when put under stress. The cost to replace counterfeit electronic parts can be quite expensive as the Missile Defense Agency testified in November 2011 at the Senate Armed Services Committee (SASC) hearing on counterfeit electronic parts in the Department of Defense (DoD) supply chain: the cost to replace suspect counterfeit memory devices in the THAAD missiles was $2.7 million.

As a result of the 2011 hearing and related legislation, DoD through the Defense Acquisition Regulations Council was tasked to define what a counterfeit electronic part was along with other DoD contract requirements. DoD defines a counterfeit electronic part as: “An unlawful or unauthorized reproduction, substitution, or alteration that has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified electronic part from the original manufacturer, or a source with the express written authority of the original manufacturer or current design activity, including an authorized aftermarket manufacturer. Unlawful or unauthorized substitution includes used electronic parts represented as new, or the false identification of grade, serial number, lot number, date code, or performance characteristics.”

A slightly different definition was developed by industry and government participants during the drafting of the SAE International standard AS5553, Fraudulent/Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition: “A fraudulent part that has been confirmed to be a copy, imitation, or substitute that has been represented, identified, or marked as genuine, and/or altered by a source without legal right with intent to mislead, deceive, or defraud.”

A quick glance at how counterfeit electronic parts are manufactured leads one to be concerned about their entry into the global supply chain. Traditional electronic parts are manufactured from highly purified mono-crystalline silicon ingots in clean rooms with workers wearing “bunny suits” and controlled airflow, temperature, and humidity.

Counterfeit electronic parts are not “manufactured” from raw materials but from electronic parts removed from circuit boards found in discarded electronic waste (e-waste) such as recent model computers, smart phones, and laptops. The parts are removed from the circuit boards by using a soldering iron most likely on a sidewalk and subsequently cleaned in a river or rainwater before sorting and re-marking to the buyers' request. Sometimes the counterfeits will have legitimate shipping labels or placed on discarded industry reels.

Early counterfeit electronic parts were easily detected as the re-marking could be removed with an acetone wipe. As the awareness of counterfeits increased, the re-marking advanced to the stage where physical testing may now be required to tell the counterfeit electronic part from an authentic part.

The depth of the aviation, space and defense industries supply chains as well as the long life of the product most likely contribute to how counterfeit electronic parts can enter the supply chain. The supply chain of the three industries may be 7-10 tiers deep with the lowest tiers unaware of where their product will be used.

At the 2011 SASC hearing, several examples of how counterfeit electronic parts entered the supply chain were detailed. In one case, the subcontractors had purchased transistors from a company that was both an electronics recycling company and an electronics distributor. The transistors had previously been sold as e-scrap but appeared to be in their original packaging.

Aviation, spacecraft, and defense products are long-lived, unlike cell phones and computers that may be replaced every year or when the newest model comes out. The B-52, for example, has an expected service life of 90 years and the F-16, which has been flying since the late 1970’s, has no service termination date. Many electronic parts may have a life cycle of three years from introduction to production to low sales. When an electronic part reaches an end of life (EOL), customers will be notified so that they have an opportunity to make one last purchase.

The industries can purchase electronic parts from the original component manufacturer (OCM), an authorized distributor (AD), or an independent distributor (ID). Each of them have specific advantages and disadvantages. The OCM and AD will typically offer a manufacturers warranty but may have limited stock, particularly many years after the EOL. The ID may have large stocks but limited warranties.

Solutions to keeping counterfeit electronic parts out of the supply chain can include: legislation, industry standards, reporting of counterfeit electronic parts, authentication marking at the time of manufacturing, testing of every component received at a company, training of employees to avoid purchasing counterfeits, and reducing of e-waste by responsible EOL handling. A 2010 Department of Commerce Bureau of Industry and Security publication ended up receiving over 1300 best practices that industry and government could use.

The above listed solutions could be considered “today’s solutions” but what future solutions can we envision? The DoD budget will most likely decline putting more pressure on contractors to ensure authentic parts are in their product. The Defense Advanced Research Projects Agency is investing in the development of small components (100 micron x 100 micron) that will authentic electronic components. DoD could increase the use of the trusted foundry to manufacture needed electronic parts. The “No Fault Found” aspect of repair and maintenance may need to be more fully examined as counterfeit electronic parts may be causing the problem.

Working to keep counterfeit electronic parts out of the supply chain will need all tiers of the supply chain, from the lowest tier to the end user such as a prime contractor or government agency or department to work together in crafting solutions, responding to reports and encouraging reporting of counterfeit electronic parts, and reducing access to electronic waste.

This article was written for Aerospace Engineering by Kirsten M. Koepsel, author of the SAE International book titled "Counterfeit Electronic Parts and Their Impact on Supply Chain." Koepsel is an Intellectual Property Policy Analyst based out of Washington, DC.