0
An Overview of Historical Trends Relating to
Suspect Counterfeit, Non-Conforming and
High Risk Electronic Components
Mark ...
Introduction to ERAI, Inc.
2









Founded in 1995, ERAI is an information services
organization that monitors, inv...
Today’s Objectives
3

Analyze the number of counterfeit incidents vs. the number of reporting entities
and measure reporti...
BIS Study – June 2007
In June 2007 The US Department
of the Navy, (NAVAIR), asked
the Bureau of Industry and
Security’s Of...
NAVAIR was correct
- Industry leaders ring alarm bells
5

January 2002 - ERAI began collecting and publishing counterfeit ...
Counterfeit Incidents Steadily Rise
- As of June 1, 2007, ERAI had reported 1,554 incidents
6
BIS Data Source & Survey Period
7

Survey Period
-

2005-2008

Data Source
-

387 companies representing 5 segments of the...
What We Discover When Information Sharing Is Not Optional

39% encountered counterfeit electronics during the four year pe...
29,910 Counterfeit Encounters Reported
- BIS Study 2005-2008 | 90% from OCMs
9

10000

OCM = 26,794

9000

613

Counterfei...
2,5555 Counterfeit Encounters
- ERAI & GIDEP 2005-2008
10

1/28/2014
Data Source Reporting Comparison
- 2005-2008
11

GIDEP

BIS

BIS Study Period

BIS Study Period

OCM = 3
Distributors = 3
...
Data Source Reporting Comparison
- 2009-2013
12

GIDEP 2005-2008

GIDEP 2009-2013

BIS Study Period

Post BIS Study Period...
Data Source Reporting Trend
- 2009-2013
13
Data Source Reporting 10-year Trend
- GIDEP 2003-2013
14
Reported Parts 10-year Linear Trend
ERAI 2003-2013
15
Who is Most Likely to Share?
16
Why More Data can be Found Within ERAI
17








ERAI’s membership is open to all sectors of the supply chain, withou...
Reporting Should not Damage a Company’s
Reputation
18

The defense and aerospace industry has
recognized the reporting of ...
19

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

Data sharing is vital to th...
Does Counterfeit Activity Fluctuate along with
Market Demand?
20
Most Frequently Reported Part Types
21
Reported Part Types Trend Over Time
22
Obsolescence Trend
23
Obsolescence Trend
24
Obsolescence Incidence
25

1/28/2014
How are Most Counterfeits Identified?
- Are Counterfeits Slipping through the Cracks?
26

It
is
widely
stated
that
counter...
27

© 2013 ERAI Inc.
Counterfeit Detection Methods
28

Revisions to the ERAI
Nonconforming Parts
Database will provide:
• Standardized language...
Data Trends Conclusions
29










Counterfeit incidents appear to have a correlation to
market fluctuations.
A dec...
THANK YOU
Send questions and requests for information to:
mark@erai.com

Join- ERAI: Counterfeit Part
Avoidance, Detection...
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An overview of historical trends related to suspect counterfeit and nonconforming or high risk electronic components in the global supply chain

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In recent years, the global electronics supply chain has seen a dramatic rise in the reporting of suspect counterfeit and nonconforming parts. Counterfeit parts are frequently born from salvaged e-waste or are cheap substitutes that fail to meet the original manufacturer’s stringent quality requirements. A recent study concluded counterfeiters are sensing market demand and are introducing a greater number of counterfeit products into the supply chain in unison with legitimate producers; as the market picks up, counterfeit incidents increase.

This study will analyze historical trends using data collected by ERAI over the last decade. Along with annual incident report totals, the data will break down the incidents by component types as well as whether the parts in question were obsolete or active. The correlation between the number of reported incidents versus the number of reporting entities will also be examined along with the inspection methods that led to the reports. We will additionally explore how supply chain fluctuations and product availabilities affect the counterfeiting trends and why, despite the increased levels of information sharing, the number of counterfeit escapes has not declined.

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  • Thank you Richard. I sincerely appreciate the kind words and am glad you found this data beneficial. Member participation is the key ingredient for organizations like ERAI and GIDEP. When data is shared and organizations participate in our efforts we are able to identify trends and reduce risk.
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  • Kristal, This is an outstanding presentation and is a credit to your organization and the work the You and Mark have done for the last 10+ years. Keep it up!!!!
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  • I want to begin today’s presentation by going back and looking at the study that was responsible for alerting much of the supply chain to the rapid rise in counterfeit activity. 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.
  • NAVAIR was correct in their assumption. While the findings of this study would not be published until 2010, numerous industry leaders had already been sounding alarm bells. In January 2002 ERAI began collecting and publishing counterfeit and nonconforming part dataIn January 2004 we went to China to see first hand the recycling and refurbishing activities that were fueling the supply of counterfeit parts. Later in 2004 the US Chamber of Commerce launched the Coalition Against Counterfeit and Piracy (CACP)In June 2006 SIA Launched the Anti-Counterfeiting Task ForceIn October 2006 the IDEA-STD-1010-A Acceptability of Electronic Components Distributed in the Open Market was released. The first and only standard that specifically addresses counterfeit identification. Industry leaders were convening at conferences such as ERAI’s Executive Conference, CTI’s Counterfeit Detection & Prevention SymposiumAnd discussions were already underway within SAE to create a Standard that would supplement ISO9000 and AS9120 that would specifically address counterfeit avoidance.
  • By the time the BIS study was initiated ERAI had already documented a counterfeit activity was increasing at a rate of ____% per month.
  • Semiconductor sales will see a slight up-tick in 2013. Based on ERAI’s current reported part data collected and projections we expect the number of reported incidents in 2013 to exceed 2012 but to come in slightly lower than 2011.
  • Transcript of "An overview of historical trends related to suspect counterfeit and nonconforming or high risk electronic components in the global supply chain"

    1. 1. An Overview of Historical Trends Relating to Suspect Counterfeit, Non-Conforming and High Risk Electronic Components Mark Snider President, ERAI, Inc. DMSMS December 4, 2013 www.erai.com © 2013 ERAI Inc. 1/28/2014
    2. 2. Introduction to ERAI, Inc. 2     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. Subscribers include OEMs, CMs, Distributors, OCMs, government agencies and industry associations. Actively involved in a number of committees and task forces addressing the counterfeit issue. © 2013 ERAI Inc.
    3. 3. Today’s Objectives 3 Analyze the number of counterfeit incidents vs. the number of reporting entities and measure reporting trends. Evaluate the amount of data collected when sharing data is mandated vs. voluntary. Assess if counterfeit encounters are or are not on the decline. Identify the most frequently counterfeit product type. Confirm who is most likely to report and when. Compare counterfeit activity against supply chain activity. Determine if there has been a change in procurement practices by analyzing changes in the number of counterfeit/nonconforming part escapes against product obsolescence. Reveal at what level of inspection most nonconforming and suspect counterfeit parts are identified. © 2013 ERAI Inc.
    4. 4. BIS Study – June 2007 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. © 2013 ERAI Inc.
    5. 5. NAVAIR was correct - Industry leaders ring alarm bells 5 January 2002 - ERAI began collecting and publishing counterfeit and nonconforming part data. January 2004 - ERAI traveled to China to see first hand the recycling and refurbishing activities that were fueling the supply of counterfeit parts. Late 2004 - US Chamber of Commerce launched the CACP (Coalition Against Counterfeit and Piracy). June 2006 - SIA Launched the Anti-Counterfeiting Task Force October 2006 - IDEA-STD-1010-A Acceptability of Components Distributed in the Open Market) published. Electronic Industry leaders were assembling at conferences & symposiums looking for information and guidance. Discussions underway within SAE to create a standard to supplement ISO and AS9100/AS9120 that would specifically address counterfeit avoidance. © 2013 ERAI Inc.
    6. 6. Counterfeit Incidents Steadily Rise - As of June 1, 2007, ERAI had reported 1,554 incidents 6
    7. 7. BIS Data Source & Survey Period 7 Survey Period - 2005-2008 Data Source - 387 companies representing 5 segments of the supply chain 1. 2. 3. 4. 5. 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 © 2013 ERAI Inc.
    8. 8. What We Discover When Information Sharing Is Not Optional 39% encountered counterfeit electronics during the four year period. 8 50% of OCMs encountered counterfeit parts 26% of DOD agencies encountered counterfeit parts 26% of prime contractors and subcontractors encountered counterfeit parts 55% of distributors encountered counterfeit parts 34% of circuit board assemblers encountered counterfeit parts 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. © 2013 ERAI Inc.
    9. 9. 29,910 Counterfeit Encounters Reported - BIS Study 2005-2008 | 90% from OCMs 9 10000 OCM = 26,794 9000 613 Counterfeit Part Encounters 8000 750 938 Distributors = 2,755 CB Assemblers = 154 7000 Prime Contractors = 207 6000 DOD = ? 5000 8644 4000 7295 454 7486 2006 2007 3000 2000 3369 1000 0 2005 OCMs © 2013 ERAI Inc. Distributors (AD & ID) 26% (14 out of 53) of the DoD agencies surveyed encountered counterfeits. The incidents were not tracked. The number of incidents is unknown. 2008 Circuit Board Assemblers Prime Contractors DOD
    10. 10. 2,5555 Counterfeit Encounters - ERAI & GIDEP 2005-2008 10 1/28/2014
    11. 11. Data Source Reporting Comparison - 2005-2008 11 GIDEP BIS BIS Study Period BIS Study Period OCM = 3 Distributors = 3 CB Assemblers = 0 Primes & Subs = 10 (DoD) agencies = 1 OCM = 42 out of 83 Distributors = 54 out of 98 CB Assemblers = 11 out of 32 Primes & Subs = 31out of 121 (DoD) agencies = ? While it is likely organizations surveyed by BIS were also Members of GIDEP, unless required to reveal counterfeit encounters, the data was not willingly shared. © 2013 ERAI Inc.
    12. 12. Data Source Reporting Comparison - 2009-2013 12 GIDEP 2005-2008 GIDEP 2009-2013 BIS Study Period Post BIS Study Period OCM = 3 Distributors = 3 CB Assemblers = 0 Primes & Subs = 10 (DoD) agencies = 1 Other = 1 58 Counterfeit Encounters 18 Unique Reporting Sources OCM = 5 Distributors = 27 CB Assemblers = 11 Primes & Subs = 32 (DoD) agencies = 5 Other = 1 460 Counterfeit Encounters 81 Unique Reporting Sources © 2013 ERAI Inc.
    13. 13. Data Source Reporting Trend - 2009-2013 13
    14. 14. Data Source Reporting 10-year Trend - GIDEP 2003-2013 14
    15. 15. Reported Parts 10-year Linear Trend ERAI 2003-2013 15
    16. 16. Who is Most Likely to Share? 16
    17. 17. Why More Data can be Found Within ERAI 17     ERAI’s membership is open to all sectors of the supply chain, without geographic restrictions, and is not limited to defense and aerospace. ERAI’s reporting mechanism does not require the reporting entity to publicly identify its supplier. As awareness increases, suppliers deeper within the supply chain are catching counterfeit and nonconforming parts keeping them out of the hands of top tier Independents that sell directly to government contractors. Because of concerns over brand damage, legal repercussions, unwanted media attention, etc., DoD primes and sub-primes will likely attempt to flow the responsibility of reporting to their supplier which may result in fewer GIDEP alerts. Forthcoming US Government regulations will require DoD and its contractors to report “counterfeit electronic parts or suspect counterfeit electronic parts” via GIDEP. The impact these regulations will have on the amount of data captured cannot be predicted. © 2013 ERAI Inc.
    18. 18. Reporting Should not Damage a Company’s Reputation 18 The defense and aerospace industry has recognized the reporting of counterfeit part incidents as a key practice to addressing the counterfeiting threat. The stigma of being known as a source or receiver of counterfeit or substandard parts has been one of the reasons behind the failure to report such activities. © 2013 ERAI Inc.
    19. 19. 19 Trends cannot be accurately measured without industry-wide cooperation and participation. Data sharing is vital to the effectiveness of ERAI & GIDEP. 1/28/2014 © 2013 ERAI Inc.
    20. 20. Does Counterfeit Activity Fluctuate along with Market Demand? 20
    21. 21. Most Frequently Reported Part Types 21
    22. 22. Reported Part Types Trend Over Time 22
    23. 23. Obsolescence Trend 23
    24. 24. Obsolescence Trend 24
    25. 25. Obsolescence Incidence 25 1/28/2014
    26. 26. How are Most Counterfeits Identified? - Are Counterfeits Slipping through the Cracks? 26 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, CCAP101, IDEA-STD-1010-B, etc. Are more sophisticated counterfeit parts slipping through the cracks? © 2013 ERAI Inc.
    27. 27. 27 © 2013 ERAI Inc.
    28. 28. Counterfeit Detection Methods 28 Revisions to the ERAI Nonconforming Parts Database will 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 Check list. © 2013 ERAI Inc.
    29. 29. Data Trends Conclusions 29      Counterfeit incidents appear to have a correlation to market fluctuations. A decline in the number of active parts being reported suggests organizations are limiting procurements from the open market to allocation or 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. © 2013 ERAI Inc.
    30. 30. THANK YOU Send questions and requests for information to: mark@erai.com Join- ERAI: Counterfeit Part Avoidance, Detection, Disposition and Reporting Follow ERAI on Twitter (@ERAI_Inc) Like ERAI on Facebook Follow ERAI on Slideshare © 2013 ERAI Inc.
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