Reports of counterfeit electronic components quadruple since 2009

The analyst warns that this presents huge challenges for electronics manufacturing and, in particular, the military and aerospace industry. According to IHS, in 2011 global supply chain participants reported 1363 separate verified counterfeit parts incidents, compared to 324 in 2009. This marked the first time the reported number of incidents in a single year exceeded 1000 – a total that could encompass millions of purchased parts. Total counterfeit parts for the period of 2001 to 2011, compiled by IHS, reveal that the bulk of the incidents were reported by US based military and aerospace electronics firms. However, the parts themselves may impact any worldwide company using the same electronics within their products. With each report possibly encompassing thousands of parts - and millions of dollars in revenue - Rory King, director, supply chain product marketing at IHS, believes the use of potential counterfeits will result in grave financial consequences for the companies. The phenomenon, he notes, could also pose a serious threat to human life or national security. "The counterfeit issue is serious," said King. "It's growing and it's a major problem for electronics makers – especially military and aerospace companies. The problem has grown increasingly hard to ignore, as reports of counterfeits have risen exponentially and most companies lack the awareness and capability to effectively detect and mitigate the growing problem. The reporting done by the industry can help other organisations pinpoint risky parts or suppliers. And now that United States legislation will hold defence suppliers accountable for counterfeit issues, access to these incident data becomes a critical decision support capability for business systems." According to IHS, a typical BOM or parts list for a military/defence programme can have anywhere from a few hundred to more than tens of thousands of purchased parts – of which between 0.5 to 5% typically match incidents of counterfeit parts reported to the ERAI. The same is true for medical equipment. IHS warns that when one counterfeit poses a major risk, the fact that a typical company has hundreds or thousands of matches to known problematic parts in circulation, should be a major cause for concern. IHS suggests that companies in the military/aerospace electronics industry should obtain systems and data to analyse, assess and act on counterfeit and suspect counterfeit components. The analyst adds that firms also need to use trusted suppliers – pointing out that, with thousands of parts and suppliers scattered across programmes and throughout the supply chain, this will not be easy. However, IHS believes by making use of available tools and ongoing reports for counterfeit, substandard and high risk parts, electronics manufacturers can cut costs and avoid risk.