Approved for public release; distribution is unlimited. Counterfeit Electronic Components Overview and observations from recent counterfeit detection experiences Henry Livingston, BAE Systems

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 2 What is a Counterfeit Electronic Component? … An Aerospace and Defense Equipment Manufacturer’s View Counterfeiting often involves cases where parts are offered that present a risk both to the Government Equipment Manufacturer and to the Government user. Examples include … Parts remarked to disguise parts differing from those offered by the original part manufacturer (e.g. original manufacturer, country of origin, specified performance) Defective parts scrapped by the original part manufacture Previously used parts salvaged from scrapped assemblies … These are incidents that jeopardize the performance and reliability of electronics Marking indicates an Op Amp from ADI… … but contains die for a Voltage Reference from PMI Evidence of prior marking for a part with inferior performance … … accompanied by bogus test report Device lead condition shows parts were used Part number indicates a CLCC package, but this package is a CDP…

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 3 What is not a Counterfeit Part? (BAE Systems view) The following methods are not associated with counterfeiting … “Refinishing” parts to support assembly producibility and ensure equipment reliability “Upscreening” parts to satisfy customer requirements “Uprating” parts to assess their capability to meet the performance requirements of the application in which the part is used outside the manufacturer’s specification range … These are methods applied by Electronics Manufacturers and Government users to assure parts will fulfill equipment performance and reliability requirements

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 4 Electronic Component Counterfeiting Is On The Rise The incidence and detection of counterfeit electronic and semiconductor components has been on the rise over the last few years. Companies [e.g., independent distributors] doing business in China are especially prone to this problem Enforcement of laws regarding counterfeiting and IP theft is poor in China China has been rapidly building up its electronics and semiconductor infrastructure over the past few years with knowledgeable and experienced engineers and managers and by building near start-of-the-art semiconductor fabs. This increasing capability to produce competitive product implies, among other things, an improved capability to produce counterfeits of higher value, more complex devices. Design Chain Associates, LLC ( Trend data specific to electronic components is limited. “… perhaps 10 percent of the technology products sold worldwide are counterfeit … electronics companies miss out on about $100 billion of global revenue every year...” M. Pecht and S. Tiku, “Bogus: Electronic Manufacturing and Consumers Confront a Rising Tide of Counterfeit Electronics”, IEEE Spectrum, Vol.43, No.5, pp.37–46, May 2006.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 5 GIDEP Alerts / Problem Advisories Reporting Counterfeit Electronic Components (as of July 2007) Many other counterfeit cases have been discovered by users, but were not reported via GIDEP. Data shown does not reveal instances where a GIDEP notice alerted another user who subsequently found counterfeits as a result of the notice. Component manufacturers are aware of counterfeit cases involving their products, but generally do not report those cases via GIDEP or industry “watch dog” organizations. We have been informed that one Government organization has reportedly discouraged such GIDEP notifications for fear of undermining a government investigation, but have had other Government agencies applaud GIDEP notifications Data courtesy of GIDEP

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 6 Semiconductor Manufacturer Survey 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 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. Types of problems: Remarked product (most common), incorrect die, inferior packaging materials, reproduction of chip designs, packages without die, different labels on packages, and false RHOS notifications (whether the product contains lead.) Counterfeiters are now buying legitimate products from a distributor, making counterfeits with the same date code, and sending the counterfeits to the distributor as a customer return. Source: Semiconductor Industry Association (SIA) Anti-Counterfeiting Task Force (ACTF) [From “SIA Talking Points” (16 May 2007) provided by J Stradley, Chairman]

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 7 “EU, U.S. vow crackdown on computer counterfeits” BRUSSELS (Reuters) - Feb 22, 2008 “EU and U.S. senior officials said … they would crack down on counterfeiting of computer components after they seized over 360,000 fake items in just two weeks in a joint operation at the end of last year.” “Integrated circuits and computer components of over 40 trademarks including Intel, Cisco and Philips, worth more than $1.3 billion, were seized during the operation …” ‘Traffickers and counterfeiters have become much more sophisticated... They are no longer confining themselves to trafficking in some of the traditional goods we used to see them in, such as footwear or handbags’ ‘There are increasing numbers with high-tech goods, goods that impact our critical infrastructure.’ “Integrated circuits are used in a wide range of products including computers, aircraft, cars and telecommunications.”

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 8 Observations From Recent Counterfeit Detection Experiences BAE Systems issued eighteen (18) GIDEP Alerts from December 2006 to July 2007 reporting suspect counterfeit parts. This briefing presents observations from these examples … Case summaries and supply chain analysis Observations from counterfeit detection efforts

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 9 Counterfeit Case Summaries

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 10 Supply Chain Analysis Parts exchange hands several times before reaching the end user. Eight (8) out of our eighteen (18) cases trace back to sources in China… … Perhaps more. Same unique part type obtained through several suppliers. Seventeen (17) unique part types. Broad variety of device functions. Ten (10) manufacturers represented. Twenty (20) USA based suppliers Eleven (11) China based suppliers Full details available to GIDEP Participants. Others may apply for membership at the GIDEP Help Desk ( ) Origin unknown for all cases All involve Independent Distributors Similar bogus test reports One (1) UK based supplier

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 11 Observations from Counterfeit Detection Efforts (summary) Industry and Government inspection and test methods are designed to verify the integrity of authentic parts … not to detect counterfeits. When applying industry and government standard inspection and test methods, must make adjustments to detect various counterfeiting techniques. External visual inspection methods Marking permanency methods Representative sampling for physical and materials analysis Electrical test plans Visual inspection of marking for correct and accurate content can provide conclusive evidence of suspect counterfeits. Observations based exclusively on marking quality, legibility, and conditions, however, may be misleading Production records may not be available for older parts Original component manufacturer data retention practices may limit access to production records for older parts Documentation may not be authentic Two cases involve bogus test reports intended as proof that parts were authentic Some parts show evidence of multiple exposures to tests Unable to judge the potential for damage or the effect on total product life expectancy Many parts show evidence of … Poor storage and handling conditions Termination refurbishing or reclamation

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 12 Observations from Counterfeit Detection Efforts Industry and Government inspection and test methods are designed to verify the integrity of authentic parts … not to detect counterfeits. External visual inspection methods (magnification levels, failure criteria) may not detect indications of resurfacing and remarking, termination refurbishing, reclamation. Marking permanency test methods may not be aggressive enough to detect indications of resurfacing and remarking.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 13 Observations from Counterfeit Detection Efforts Industry and Government inspection and test methods … (cont.) Ensuring representative sampling for physical and materials analysis can be problematic. If part marking has been forged, however, a single lot/date code marked on counterfeit devices can disguise Parts originating from multiple inspection lots Parts produced by multiple manufacturers Different versions of the same part Devices of completely different functions Samples sizes must be large enough to account for this potential The user must make adjustments to physical and materials analysis evaluation criteria detect various forms of counterfeiting.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 14 Observations from Counterfeit Detection Efforts Industry and Government inspection and test methods … (cont.) Electrical testing can help reveal suspect lots, but may not detect counterfeit parts without a test plan designed specifically for the device type under test. DC electrical tests are frequently used as a low cost and fast detection technique, but will not detect dynamic performance deviations at temperature extremes. While AC electrical and functional tests are most likely to reveal suspect product, testing of complex devices requires intimate knowledge of the original manufacturer’s test protocols. In addition, electrical testing alone may not detect damage induced by inadequate handling and storage, termination refurbishing, or reclamation.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 15 Observations from Counterfeit Detection Efforts Marking quality, legibility, conditions vary significantly Visual inspection of marking for correct and accurate content can provide conclusive evidence of suspect counterfeits. Observations based exclusively on marking quality, legibility, and conditions, however, may be misleading. Quality in device marking, marking legibility and overall marking conditions for both authentic and counterfeit product can vary significantly. BAE Systems has observed “bad looking” authentic parts “good looking” counterfeit parts.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 16 Observations from Counterfeit Detection Efforts Production records may not be available for older parts The older the parts are, the less likely production records exist to aid in authentication. Original component manufacturer data retention practices may limit access to production records for older parts. In a few cases discovered by BAE Systems, the original component manufacturer no longer had production records to support our investigations In these cases, however, BAE Systems found other evidence sufficient to conclude the parts were suspect counterfeit.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 17 Observations from Counterfeit Detection Efforts Documentation may not be authentic In one specific case, a test report was provided by the Independent Distributor as evidence of Authentic parts Traceability back to the original component manufacturer Feedback from the original component manufacturer revealed that this test report was not valid. The manufacturer did not have test data for parts with the same date code as those sold to BAE Systems. BAE Systems, therefore, concluded that the original component manufacturer did not produce this specific product with this date code The manufacturer does not use the “Military Certification of Conformance” label and its content on authentic test reports.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 18 Observations from Counterfeit Detection Efforts Some parts show evidence of multiple exposures to tests BAE Systems discovered a case where additional marking on the device indicated prior multiple exposures to electrical, mechanical or environmental tests. Without knowledge of the application of these tests or their specific conditions, BAE Systems was not able to judge the potential for damage to these devices or the effect of this previous testing on total product life expectancy. In addition to acquisition traceability documentation, the user should consider requiring documentation from Independent Distributors that reports all tests performed throughout the supply chain back to the original manufacturer. This requirement should be considered by industry and government standards organizations for incorporation into existing standards and specifications governing the procurement of electronic components.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 19 Authentic perhaps, but where have they been? … Many parts acquired from Independent Distributors may be authentic, but show evidence of … Poor storage and handling conditions Termination refurbishing or reclamation To ensure confidence that parts are of the same quality and reliability as when first shipped by the original component manufacturer, users should apply a suite of test and inspection protocols to … Detect counterfeits and eliminate defects associated with handling and storage, and with termination refurbishing or reclamation. Consider life testing as an option to obtain a high level of confidence of failure free performance and to produce test results needed to support an assembly/system level reliability assessment.

Approved for public release; distribution is unlimited. 3/4/2008 H. Livingston 20 Summary In today’s supply chain environment, electronic equipment manufacturers and Government users must be vigilant in order to avoid counterfeit electronic components. The vast majority of counterfeit cases reported are associated with purchases through independent distributors. The most effective approach to avoiding counterfeit electronic components is to purchase product directly from the original manufacturer, or from a distributor, reseller or aftermarket supplier who is franchised or authorized by the original manufacturer. A substantial number of products, however, are no longer available through franchised or authorized suppliers. While they provide a necessary function within the electronic component supply chain, independent distributors are not all created equal. Electronic equipment manufacturers and Government users need to understand the independent distributor’s operations and business processes. When considering purchases through independent distributors, electronic equipment manufacturers and Government users should use mitigation methods and strategic approaches to reduce the potential for acquiring counterfeit parts.