AN OVERVIEW OF HISTORICAL TRENDS RELATING TO SUSPECT COUNTERFEIT, NON-CONFORMING AND HIGH RISK ELECTRONIC COMPONENTSMark Snider, President, ERAI, Inc.

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• Founded in 1995, ERAI is an information services organization that monitors, investigates and reports issues affecting the global electronics supply chain.

• ERAI provides tools to mitigate risks on substandard parts, counterfeit parts, vendors and even customers.

• ERAI operates and maintains the world’s largest database of non-conforming material.

• Subscribers include all sectors of the global semiconductor supply chain.

• Actively involved in a number of committees and task forces addressing the counterfeit issue.

Introduction to ERAI, Inc.

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In June 2007 The US Department of the Navy (NAVAIR) asked the Bureau of Industry and Security’s Office of Technology and Evaluation to conduct a defense industrial base assessment of counterfeit electronics.

NAVAIR suspected an increasing number of counterfeit/defective parts were infiltrating the DoD supply chain and sought to verify and quantify their suspicions.

BIS Study – June 2007

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Survey Period

• 2005-2008

Data Source

• 387 companies representing 5 segments of the supply chain

– 83 OCMs – 98 distributors and brokers (45 authorized | 53 unauthorized)– 32 circuit board assemblers – 121 prime contractors and subcontractors – 53 Department of Defense (DoD) agencies

BIS Data Source & Survey Period

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Data was collected under authority delegated to the U.S. Department of Commerce under Section 705 of the Defense Production Act of 1950, as amended (50 U.S.C. App. Sec. 2155) and Executive Order 12656.

What We Discover When Information Sharing Is Not Optional:39% encountered counterfeit electronics during the 4 year period

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50% of OCMs encountered

counterfeit parts

26% of DOD agencies

encountered counterfeit parts

55% of distributors encountered

counterfeit parts26% of prime contractors and subcontractors encountered

counterfeit parts 34% of circuit board assemblers encountered

counterfeit parts

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29,910 Counterfeit Encounters Reported- BIS Study 2005-2008 | 90% from OCMs

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2005 2006 2007 20080

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

3369

7295 74868644

454

750938

613

OCMs Distributors (AD & ID) Circuit Board AssemblersPrime Contractors DOD

OCM = 26,794

Distributors = 2,755

CB Assemblers = 154

Prime Contractors = 207

DOD = ?

26% (14 out of 53) of the DoD agencies sur-veyed encountered counterfeits. The inci-dents were not tracked. The number of inci-dents is unknown.

Coun

terf

eit P

art E

ncou

nter

s

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2,528 Counterfeit or Nonconforming Incidents- ERAI & GIDEP 2005-2008

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NDAA – July 8, 2013

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DFARS – May 6, 2014

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• The training of personnel.

• The inspection and testing of electronic parts, including criteria for acceptance and rejection.

• Processes to abolish counterfeit parts proliferation.

• Processes for maintaining electronic part traceability.

• Use of suppliers that are the original manufacturer, sources with the express written authority of the original manufacturer or current design activity, including an authorized aftermarket manufacturer or suppliers that obtain parts exclusively from one or more of these sources.

DFARS Requirements

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• The reporting and quarantining of counterfeit electronic parts and suspect counterfeit electronic parts.

• Methodologies to identify suspect counterfeit electronic parts and to rapidly determine if a suspect counterfeit electronic part is, in fact, counterfeit.

• Design, operation, and maintenance of systems to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts.

• Flow down of counterfeit detection and avoidance requirements.

DFARS Requirements

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• Process for keeping continually informed of current counterfeiting information and trends.

• Process for screening the Government-Industry Data Exchange Program (GIDEP) reports and other credible sources of counterfeiting information.

• Control of obsolete electronic parts.

DFARS Requirements

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Trends cannot be accurately measured without industry-wide cooperation and participation.

Data sharing is vital to the effectiveness of ERAI & GIDEP.

Data Sharing is Vital

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ERAI & GIDEP Historical Data Reporting Trend

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Does Counterfeit Activity Fluctuate along with Market Demand?

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ERI Reported Parts 10-year Linear Trend2003-2014

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ERAI Most Frequently Reported Part Types

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ERAI Reported Part Types Trend Over Time

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ERAI Obsolescence Trend

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ERAI Obsolescence Trend

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ERAI Obsolescence Incidence

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ERAI & GIDEP Reporting Trends Post DFARS

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It is widely stated that counterfeiters are evolving their processes; however, the incidents being reported to ERAI and GIDEP are detected using widely accepted screening processes like those called out in AS5553-A, AS6081, CCAP-101, IDEA-STD-1010-B, etc.

How are Most Counterfeits Identified?- Are Counterfeits Slipping through the Cracks?

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Are more sophisticated counterfeit parts slipping through the cracks?

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Revisions to the ERAI Nonconforming Parts Database provide:

– Standardized language to be used throughout the entire supply chain.

– Measurable data set.– Searchability by

nonconformance type.– Photo library by

nonconformance type.– Downloadable

Screening Checklist.

ERAI Counterfeit Data Standardization

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• Counterfeit incidents appear to have a correlation to market fluctuations.

• Today the majority of reported counterfeits have a direct correlation to component obsolescence.

• Counterfeit trends are relatively consistent over time.

• Data trends can help us with assumptions not conclusions.

• Despite being encouraged to voluntarily report, data is not being widely shared.

ERAI Data Trends Conclusions

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Send questions and requests for information to:

mark@erai.com

THANK YOU

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