Counterfeit Parts Awareness
Avoidance, Detection, Mitigation, and Disposition
Requirements Are Based On:
• SAE AS5553 (Aerospace Standard)
• IDEA-STD-1010-B (Distribution Industry Standard)
• DODI 4140.01 (DOD Supply Chain Material
Management Policy)
• LMSSC TFUF-002599 (PMP Supplier Requirement)
• PSEMC SQC 100 (Counterfeit Prevention)
• PSEMC DI-ENG-322(HL) (PMP Engineering)
Last Revised March 19, 2014
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Topics To Be Covered
1. What is a counterfeit part?
2. Is counterfeiting really a problem?
3. The real impacts of counterfeiting
4. Why are parts counterfeited?
5. Description of the supply chain
6. How do counterfeit parts get into the supply chain?
7. How are parts typically counterfeited?
8. Re-marking methods and changes
9. Indicators of reclaimed parts
10. How can counterfeit risks be reduced?
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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What Is A Counterfeit Part?
DODI 4140.01: “Material whose identity or characteristics have
been deliberately misrepresented, falsified, or altered without
legal right to do so.” Examples:
1. Improper internal construction (dies, mounting, wire bonds,
etc.)
2. Used, refurbished, or reclaimed but represented as new
3. Different package style, surface plating / finish
4. Did not successfully complete the OCM process and test
5. Up-screened parts (MIL, Hi-Rel, etc.) but not fully tested
6. Modified labeling or marking (manufacturer, country of origin,
form, fit, function, grade, or date of manufacture)
 Note: Parts that have been refinished, up-screened, or uprated,
and have been represented and documented as such are not
counterfeit.
 Parts are considered “suspect” until proven counterfeit by the
OCM and/or suitable advanced methods.
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Is Counterfeiting a Problem?
From a U.S. Department of Commerce, Office of Technology
Evaluation (OTE) Survey Report, January, 2010:
“OTE data revealed that 39 percent of 387 companies and
organizations participating encountered counterfeit electronics
during the four-year period (2005 – 2008). Moreover, information
collected highlighted an increasing number of counterfeit incidents
being detected, rising from 3,868 incidents in 2005 to 9,356
incidents in 2009.”
Specific findings from the survey:
 46% of surveyed discrete component manufacturers and 55% of
surveyed microcircuit manufacturers encountered counterfeit
versions of their products.
 Counterfeit products were discovered in all 14 discrete electronic
component and six microcircuit product categories listed in the
survey.
 QPL and QML known counterfeits increased by >10X in four
years.
 The large majority of reported counterfeit parts were in the $1.00 $100.00 retail price range. The full range was <$.01 to >$10,000.
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Is Counterfeiting a Problem?
From a 2012 U.S. Senate Committee on Armed Services Report:
Conclusion 1: China is the dominant source country for counterfeit
electronic parts infiltrating the defense supply chain.
Conclusion 2: The Chinese government has failed to take steps to stop
counterfeiting operations that are carried out openly.
Conclusion 3: The DOD lacks knowledge of the scope and impact of
counterfeit parts on critical defense systems.
Conclusion 4: The use of counterfeit parts in defense systems can
compromise performance and reliability, risk national security, and
endanger the safety of military personnel.
Conclusion 5: Permitting contractors to recover costs incurred as a result
of their own failure to detect counterfeit components does not encourage the
adoption of aggressive counterfeit avoidance and detection programs.
Conclusion 6: The defense industry’s reliance on unvetted independent
distributors … results in unacceptable risks.
Conclusion 7: Weaknesses in the testing regime for electronic parts create
vulnerabilities that are exploited by counterfeiters.
Conclusion 8: The defense industry routinely fails to report cases of
suspect counterfeit parts, putting the integrity of the defense supply chain at risk.
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ENERGETIC MATERIALS CO.
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Is Counterfeiting a Problem?
General findings:
 All elements of the supply chain were directly impacted.
 Nobody in the U.S. supply chain talks to anybody else.
 Common assumption: somebody else is testing the parts.
 Lack of traceability and accountability in the supply chain.
 Recordkeeping is very limited – or non-existent.
 Who do you report counterfeit parts to?
 Inventories need better testing and controls.
YES, there IS a problem!
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ENERGETIC MATERIALS CO.
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Impact of Counterfeiting
Given: Counterfeit parts exist in the supply chain. So what?
 Safety concerns – military systems, satellites, medical devices /
healthcare systems, aerospace, and automotive
 Erosion of business confidence:
 Intellectual property & brand damage
 Loss of sales
 Reduces ability to sustain technology development
 Adds costs to compensate for loss of trust in suppliers
 Costly rework, corrective actions, and full legal liability. No
government contract funding may be used to repair or
replace products found to contain counterfeit parts.
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ENERGETIC MATERIALS CO.
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Why Are Parts Counterfeited?
Because it is profitable!
 Source material is cheap – production scrap, reclaimed salvage
(“E-Waste”), obsolete revisions, or out-of-date for use.
 High product demand is created by:
 Out of stock (high short-term demand, lack of availability),
 Out of production (obsolescence),
 Manufacturer-limited (poor yields, allocation to select customers),
 Restrictions on country of origin, and
 Pressure to reduce costs.
 Ready sources of low-cost labor and lack of legal and
environmental oversight – China, Taiwan, Malaysia, Singapore
 Under-utilized and low-cost manufacturing facilities in developing
countries – wafer fabs, device packaging lines, etc.
 Ability to steal, buy, or reverse-engineer designs for high-value
components.
 Low risk – poor record of detection, identification, and prosecution.
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ENERGETIC MATERIALS CO.
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The Supply Chain
 OCM – the Original Component Manufacturer, the top of the
supply chain. Sales are made to all the organizations below.
 Authorized (Franchised) Distributors – Authorized by contract
with the OCM to stock and sell the OCM’s product, often
including marketing and technical support from the OCM.
 Independent Distributors – Do not have OCM agreements,
purchase inventory on the open market, maintain stock, and
resell back into the open market and to end users. They may or
may not have the technical ability to evaluate components.
 Brokers – An agent with market knowledge who arranges
transactions between two parties usually unknown to each other.
Brokers are sometimes also called independent distributors, but
do not typically carry inventory.
 Sub-tier Suppliers – PWA and contract assembly houses with
turnkey procurement programs.
 Outside Service Providers – Testing labs, special process
houses, chemical processing, lead forming, repackaging
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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How Do Counterfeit Parts Get In?
As many as 20% of the counterfeit electronic component
incidents reported have involved the OCM/authorized
distribution channels. There are multiple ways this can happen:
 47% of authorized distributors buy parts from independent
distributors, 29% from brokers, and 27% from Internet-exclusive
sources. (OTE Report)
 OCM or distributor employee fraud. Rejected wafers, dice or
assembled parts are diverted from scrap containment and sold to
counterfeiters for completing.
 OCM’s accept returns or buy back “surplus parts” without
adequate safeguards. Counterfeit parts are linked to legitimate
traceability for previously purchased parts and are restocked.
 Lack of verification of OCM shipments by legitimate authorized
distributors because of the assumed integrity of the source.
 Most OCM’s still will not verify suspected counterfeit parts for
independent distributors or end users.
 U.S. front companies are set up to fraudulently sell mismarked
Chinese-made parts as made in the U.S.
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Good, Bad, Really Ugly…
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How Are Parts Counterfeited?
 The most common is re-marking:
 Legitimate parts to a newer date code.
 Down-rev parts to a higher or current level.
 Change the manufacturer or country of origin of parts to be
more salable to a wider market.
 Similar but unequal parts to a different device type.
 Next most common is reclaiming used parts from the E-waste
stream and presenting them as unused, or as feedstock for remarking. A counterfeit and ecological disaster.
 Packaging surplus or rejected wafers or dice as if they were good
parts from the original manufacturer.
 Reverse-engineering and manufacturing in low-cost facilities,
marking and selling them as the legal OCM’s parts (the proverbial
Chinese copy).
 Sale of non-functional components (dummies to dummies).
 Providing false traceability for all of the above.
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Multiple Packages, Same Date Code
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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“Blacktopped” Parts
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Re-marking Methods and Changes
 Markings were originally sanded off, leaving sanding scratches
and rounded edges.
 Covering materials were painted or sprayed on (blacktopping) to
cover original markings, but left a very different surface finish.
 Powdered package material was added to the blacktopping and
screened on to improve the surface appearance.
 Application methods were improved to keep mold indentations
from filling or losing their smooth surface.
 Laser marking capability became available with used/surplus
equipment, but wear and poor maintenance leave visible signs.
 Printing methods have been improved, but alignment is still
mostly manual and character/logo formation are not up to OCM
standards.
 The part bottom is not usually modified or re-marked, and top-tobottom differences are visible until the parts are assembled.
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Re-Marked Parts
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Blacktop in the Mold Cavity
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ENERGETIC MATERIALS CO.
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Reclaiming Indicators
 Excess solder or flux, or cracks in solder, from re-tinning.
 Missing, shortened, or bent leads
 Leads extended by welding or soldering
 Changes in lead width or diameter
 Different degrees of oxidation on leads
 Lead damage, evidence of mishandling
 Insertion or probe marks on leads, showing prior use
 Component body damage, pry marks, contamination
 Heat marks, scorching
 BGA spheres oxidized, misaligned, or missing
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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Insertion Marks on Pins
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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How Can Risks be Reduced?
1. Purchase only from OCMs or verified authorized distributors –
required by customer flow-down, DI-ENG-322, and Form 842
(SQC-100).
2. Require only original signed certs and documents - no
photocopies or scanned and printed documents that hide changes.
3. Verify and preserve packaging labeling, seals, and materials.
Counterfeiters don’t invest heavily in things that usually get thrown
away at the receiving dock.
4. Verify LDC’s and quantities for all parts in a lot against OCM and
Distributor invoices (trace). Date codes can be checked on many
OCM websites to verify they were actually used. (70% of known
counterfeit date codes were after OCM end of production.)
5. Verify part carriers, labeling, part orientation, etc. Carriers are
often reclaimed by counterfeiters, never by OCM’s. Parts loaded by
hand don’t have the repeatability of machines, or the OCM’s QC.
6. Verify part number, manufacturer, part quantity for the full lot –
mixed date codes never come from the OCM.
7. Visual part inspection per IDEA-1010-B checklist (100% or large
samples).
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ENERGETIC MATERIALS CO.
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Counterfeit Labels
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Counterfeit Labels
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How Can Risks be Reduced?
8. Perform sample part marking tests (non-destructive) – detects
cheap or improperly cured inks.
9. Perform sample surface tests (non-destructive) – detects the
presence of “blacktopping” covering the original markings.
10. Verify and record sample dimensions (non-destructive) – most
commonly overlooked but useful for discrete components.
11. Perform and record sample electrical, XRF, and leak tests
(non-destructive) – many counterfeit discrete components are not
the correct value (saves inventory!).
12. Perform and record de-lid or x-ray inspection (destructive) –
done on lot samples for each date code, or whenever another
inspection or test identifies a lot as “suspect”.
13. Document, verify, report, and properly dispose of suspected
counterfeits so they cannot re-enter the supply chain.
14. Regularly review counterfeit alerts (GIDEP, customer, etc.).
15. Plan for obsolescence well in advance of possible need.
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ENERGETIC MATERIALS CO.
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After Device Marking Test…
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After Device Surface Test…
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In Summary
Avoid Counterfeiting:
 Select, qualify, audit, and monitor suppliers
 Enforce and verify flow-down to sub-contractors
 Monitor customer/government sources of counterfeit information
Detection of Counterfeits:
 Associate awareness, training, and responsibility
 A robust inspection and testing program
 Integration into the PMP plan – part of the Quality culture
Reduce Counterfeit Part Impact:
 Select high-yield and available components from reputable OCM’s
 Qualify alternate parts
 Prepare for obsolescence before end-of-life
Safely Dispose of Counterfeit Parts:
 Comprehensive containment procedure
 Full documentation and reporting of all incidents
 Drive corrective actions back to the supplier
Form 2498A 04/07
ENERGETIC MATERIALS CO.
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