Electronic parts: Counterfeit

Counterfeit electronic parts have become a common phenomenon across the globe. ERAI (a privately held global information services organization) revealed that more than 12 million counterfeit parts were reported during the period of Jan 2007 to April 2012, which indicates an occurrence of more than one counterfeit part in every 15 seconds. A year-long probe by the Senate Armed Services Committee, recently, observed the flood of fake electronic parts in the US military weaponry system, which has not only endangered the lives of soldiers, sailors and airmen but also threatened the national security.

The committee unearthed phoney electronic parts in the Air Force’s C-130J cargo plane, Special Operations helicopters and Navy’s Poseidon surveillance plane. More than 1800 incidents of fictitious electronic parts in the Department of Supply Chain in 2009 and 2010 were found during the investigation. It is estimated that one million counterfeit parts were supposedly involved in these cases. These fake parts cause huge economic loss to US. For example, $2.7 million is required to replace an artificial memory device in a Missile Defence Agency. US semiconductor companies loose more than $ 7.5 billion annually, which is equal to the loss of nearly 11,000 American jobs due to counterfeit trades.

The committee has highly criticised China as it was the main source for 70 per cent of more than 100 incidents of counterfeit parts which were traced back through the supply chain. The report explained that Chinese companies collect discarded electronic equipments across the globe, eradicate any identifiable signs, wash and refurbish them and then resell them as brand new products that have enhanced “significant risk” to the performance of US military systems. The report also claimed that China has not laid down any scrutinised process to combat this problem.

Criticising China cannot hide the “failures by defence contractors and the Department of Defence to report counterfeit parts and gaps in DoD’s knowledge of the scope and impact of such parts on defence systems”. Rory King of HIS (a global information company) has highlighted, “Companies in two different countries accounted for two-third of counterfeit incidents reported in 2011. China was actually No.2, while US ranked No.1. The two countries were neck to neck, with China at 32 per cent and the US at 33 per cent. So, in terms of counterfeiting, the enemy is also within.”

However, Obama has introduced a bill last December to stop the importation of counterfeit electronic parts.

Although, US might be reeling under this problem, other countries are not better off as counterfeit goods make up 5-7 per cent of world trade. Other countries should implement similar strategies taking a cue from the US.