Counterfeit Avoidance Through Purchasing Processes
 Henry Livingston, BAE Systems Electronic Solutions




© 2009 BAE Syst...
Agenda

 •    Observations from counterfeit detection experiences

 •    Approaches to reduce the potential of acquiring c...
Observations from counterfeit detection experiences
 Henry Livingston, BAE Systems Electronic Solutions




© 2009 BAE Sys...
Introduction

 •    BAE Systems issued eighteen (18) GIDEP Alerts from
      December 2006 to July 2007 reporting suspect ...
Counterfeit Case Summaries
       GIDEP Alert    Findings …
       J5-A-07-01     Parts marked as Philips QML product with...
Supply Chain Analysis
   J5-A-07-01      USA1    USA2      China1    China2   ???


   J5-A-07-02      USA1    USA2      U...
Observations from Counterfeit Detection Efforts (summary)

 •    Industry and Government inspection and test methods are d...
Observations from Counterfeit Detection Efforts

 •    Industry and Government inspection and test methods are designed to...
Observations from Counterfeit Detection Efforts

 •    Industry and Government inspection and test methods … (cont.)

    ...
Observations from Counterfeit Detection Efforts

 •    Industry and Government inspection and test methods … (cont.)
     ...
Observations from Counterfeit Detection Efforts

 •    Marking quality, legibility, conditions vary significantly
       •...
Observations from Counterfeit Detection Efforts

 •    Production records may not be available for older parts
       • Th...
Observations from Counterfeit Detection Efforts

 •    Documentation may not be authentic
       • In one specific case, a...
Observations from Counterfeit Detection Efforts

 •    Some parts show evidence of multiple exposures to tests
       • BA...
Authentic perhaps, but where have they been? …

 •    Many parts acquired from Independent Distributors may be authentic,
...
Conclusions

 •    Inspections and tests can reduce the risk of receiving counterfeit parts from
      Independent Distrib...
Approaches to reduce the potential of acquiring
 counterfeit electronic components
 Henry Livingston, BAE Systems Electron...
Franchised and Authorized Distributors

 •    The most effective approach to avoiding counterfeits is to purchase product ...
Independent Distributors

 •    Independent Distributors purchase new excess inventories from end users with
      the int...
Risk Mitigation Methods to Avoid Counterfeit Electronic
 Components

 •    The following mitigation methods can be applied...
Counterfeit Detection

 •    GIDEP documents reporting suspect counterfeit cases provide further
      insight into detect...
Strategic and Proactive Approaches


 •    Independent Distributor Selection

 •    Outsourcing Electronic Component Procu...
Independent Distributor Selection
 •    Source selection should include an assessment of the independent distributor’s
   ...
Outsourcing Electronic Component Procurement

 •    Some users outsource procurement to another entity
       • Electronic...
Aftermarket Supply Monitoring

 •    Some aftermarket sources produce finished products from a die bank
       • Residual ...
Diminishing Manufacturing Sources and
 Material Shortages (DMSMS) Management

 •    A significant driver for the use of In...
Summary

 •    In today’s supply chain environment, Original Equipment Manufacturers and Government
      users must be vi...
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Counterfeit Avoidance Through Purchasing Processes and Supplier Control - Livingston

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Presented at October 1, 2009 Counterfeit Workshop

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Counterfeit Avoidance Through Purchasing Processes and Supplier Control - Livingston

  1. 1. Counterfeit Avoidance Through Purchasing Processes Henry Livingston, BAE Systems Electronic Solutions © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 1 October 2009 1 All Rights Reserved
  2. 2. Agenda • Observations from counterfeit detection experiences • Approaches to reduce the potential of acquiring counterfeit electronic components © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 2 All Rights Reserved
  3. 3. Observations from counterfeit detection experiences Henry Livingston, BAE Systems Electronic Solutions © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 1 October 2009 3 All Rights Reserved
  4. 4. Introduction • 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 © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 4 All Rights Reserved
  5. 5. Counterfeit Case Summaries GIDEP Alert Findings … J5-A-07-01 Parts marked as Philips QML product with 2003 date code, but contained Intel die manufactured in 1980 J5-A-07-02 Parts marked as Analog Devices QML product, but markings were not consistent with standard Analog Devices markings for the device and device contained die of a different function J5-A-07-03 Parts marked as Cypress commercial product, but parts were salvaged from scrapped assemblies J5-A-07-04 Received parts Jan-06 thru May-06 marked as On Semiconductor commercial product, but On Semiconductor did not manufacture these parts J5-A-07-05 & Received parts marked as Seeq commercial product, but parts were salvaged from scrapped assemblies and J5-A-07-07 remarked to appear as legitimate/unused product J5-A-07-06 Parts marked as Philips QML product with 9852 date code, but Philips discontinued manufacture 31 December 1997 J5-A-07-08 Parts marked as National QML product, but major discrepancies in marking format and content, including date code and manufacturing location; Die contained in these parts were not manufactured by National Semiconductor J5-A-07-09 2001 date code, but Intersil discontinued this product in 2000; marking missing country of origin; parts had wrong lead finish J5-A-07-10 2004 date code, but Linear Tech discontinued this product in 2001 J5-A-07-11A Parts marked as Analog Devices QML product, but incomplete or absent marking; incorrect lead finish vs part number; reclaimed or refurbished; invalid test report J5-A-07-12 Part number and date code do not match the lot number identified in Cypress production records J5-A-07-13 Suspect marking; evidence of remarking; part number and date code do not match Cypress lot number J5-A-07-14 Parts marked as Analog Devices “883” product, but incomplete or absent marking; incorrect lead finish vs part number; reclaimed or refurbished; invalid test report; evidence of prior marking J5-A-07-15 Parts marked as Cypress commercial product; leads have been re-soldered; evidence of a resurfacing on device package J5-A-07-16 Parts marked as Xicor/Intersil QML product, but marking is not compliant to Xicor/Intersil brand layout; die not associated with QML product J5-A-07-17 discrepancies in device marking, lead finish and lead quality J5-A-07-18 parts appear to be reclaimed; the surface roughness the devices markings were stripped and remarked. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 5 All Rights Reserved
  6. 6. Supply Chain Analysis J5-A-07-01 USA1 USA2 China1 China2 ??? J5-A-07-02 USA1 USA2 USA12 China3 ??? All involve Independent Distributors J5-A-07-03 USA1 USA2 USA13 ??? J5-A-07-04 USA1 USA2 China4 China5 ??? Seventeen (17) unique part types. Broad variety of device functions. J5-A-07-05 * USA3 USA6 ??? Same unique part Ten (10) manufacturers represented. USA7 ??? USA8 ??? type obtained through several Twenty (20) USA based suppliers USA9 ??? USA10 ??? suppliers. One (1) UK based supplier J5-A-07-07 * USA1 USA2 USA14 USA15 ??? J5-A-07-06 USA1 USA2 China6 China7 ??? Eleven (11) China based suppliers J5-A-07-08 USA1 USA2 China8 ??? J5-A-07-09 USA1 USA2 China9 ??? Origin unknown for all cases J5-A-07-10 USA4 China10 ??? J5-A-07-11A ** USA5 USA11 USA16 ??? Similar bogus Eight (8) out of our eighteen (18) cases J5-A-07-14 ** USA17 USA19 ??? test reports trace back to sources in China… J5-A-07-12 USA6 ??? … Perhaps more. J5-A-07-13 USA17 USA18 ??? Parts exchange hands several times J5-A-07-15 USA1 USA20 ??? before reaching the end user. J5-A-07-16 USA1 USA2 China11 ??? J5-A-07-17 USA1 USA2 USA5 ??? Full details available to GIDEP Participants. UK1 ??? Others may apply for membership at the GIDEP Help Desk (951-898-3207) J5-A-07-18 USA1 USA2 USA14 ??? © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 6 All Rights Reserved
  7. 7. 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 • Visual inspection of marking for correct and accurate content can provide conclusive evidence of suspect counterfeits • Production records may not be available for older parts • Documentation may not be authentic • Some parts show evidence of multiple exposures to tests • Many parts show evidence of poor storage and handling conditions or termination refurbishing or reclamation © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 7 All Rights Reserved
  8. 8. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 8 All Rights Reserved
  9. 9. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 9 All Rights Reserved
  10. 10. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 10 All Rights Reserved
  11. 11. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 11 All Rights Reserved
  12. 12. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 12 All Rights Reserved
  13. 13. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 13 All Rights Reserved
  14. 14. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 14 All Rights Reserved
  15. 15. 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 15 All Rights Reserved
  16. 16. Conclusions • Inspections and tests can reduce the risk of receiving counterfeit parts from Independent Distributors, but there is no fail safe method … • Individual methods may not … • Definitively distinguish authentic parts • Detect damage induced by inadequate handling and storage, termination refurbishing, or reclamation • A suite of inspections and tests are necessary to … • Detect counterfeits and eliminate defects associated with handling and storage, and with termination refurbishing or reclamation. • Establish high level of confidence of failure free performance and to support an assembly/system level reliability assessment. • 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. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 16 All Rights Reserved
  17. 17. Approaches to reduce the potential of acquiring counterfeit electronic components Henry Livingston, BAE Systems Electronic Solutions © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 1 October 2009 17 All Rights Reserved
  18. 18. Franchised and Authorized Distributors • The most effective approach to avoiding counterfeits 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 • Franchise agreements between the original manufacturer and the distributor typically include … • Original manufacturer warranty • Product integrity via proper handling, storage and shipping procedures • Failure analysis and corrective action support • Traceability via certificates of conformance and acquisition traceability • Franchised distributors include large and small businesses, including Small Disadvantaged Businesses (SDB) • A substantial number of products, however, are no longer available through these channels. • Independent Distributors will continue fill this gap. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 18 All Rights Reserved
  19. 19. Independent Distributors • Independent Distributors purchase new excess inventories from end users with the intention to sell and redistribute back into the market. • Independent Distributors subsequently sell (re-distribute) the new parts from these excess inventories to fulfill inventory shortages with hard-to-find, obsolete, and competitively priced parts. • End users are typically original equipment manufacturers (OEMs) and contract manufacturers (CMs) at locations all over the world. • Independent Distributors do not typically have limiting contractual agreements or obligations to the components manufacturers. From … IDEA-STD-1010-A, Acceptability of Electronic Components Distributed in the Open Market. Copyright © Independent Distributors of Electronics Association (IDEA) 2006 (http://www.idofea.org/) © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 19 All Rights Reserved
  20. 20. Risk Mitigation Methods to Avoid Counterfeit Electronic Components • The following mitigation methods can be applied to reduce the risk of receiving counterfeit parts when purchasing from an Independent Distributor … • Traceability Documentation • Without certificates of conformance and acquisition traceability, the purchaser takes on unknown risks. • The Independent Distributor’s own acquisition certification should be in addition to the certificates of conformance and acquisition traceability provided by the manufacturer and previous distributors. • Handling and Storage Verification • Compliance Verification (authenticity analysis) • Visual Inspection • Testing • Physical Analysis © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 20 All Rights Reserved
  21. 21. Counterfeit Detection • GIDEP documents reporting suspect counterfeit cases provide further insight into detection techniques • The SAE G-19 developed a new aerospace standard … • AS5553, Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition (http://www.sae.org/ ) • The Independent Distributors of Electronics Association (IDEA) published a standard which includes inspection techniques for counterfeit detection … • IDEA-STD-1010-A, Acceptability of Electronic Components Distributed in the Open Market. © Independent Distributors of Electronics Association (IDEA) 2006 (http://www.idofea.org/) © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 21 All Rights Reserved
  22. 22. Strategic and Proactive Approaches • Independent Distributor Selection • Outsourcing Electronic Component Procurement • Aftermarket Supply Monitoring • Diminishing Manufacturing Sources and Material Shortages (DMSMS) Management © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 22 All Rights Reserved
  23. 23. Independent Distributor Selection • Source selection should include an assessment of the independent distributor’s ability to verify the authenticity of the products they offer. • Certificates of conformance and acquisition traceability • Compliance verification via visual inspection, testing and physical analysis • Purchasing and acceptance practices • Examples of industry standards that can be used for evaluating the suitability of an independent distributor • AS5553, Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition (http://www.sae.org/) • JESD31, General Requirements for Distributors of Commercial and Military Semiconductor Devices. (http://www.jedec.org/download/) • IDEA-STD-1010-A, Acceptability of Electronic Components Distributed in the Open Market. Copyright © Independent Distributors of Electronics Association (IDEA) 2006 (http://www.idofea.org/) • Vet the independent distributor in advance of procurement activity to ensure … • Suspect counterfeiting incidents have not occurred previously with this distributor • The independent distributor has the financial means to support any contractual guarantees expected © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 23 All Rights Reserved
  24. 24. Outsourcing Electronic Component Procurement • Some users outsource procurement to another entity • Electronics Manufacturing Service (EMS) provider • Contract Manufacturer • The selection of an EMS provider or Contract Manufacturer should include audits of their methods and purchasing records to ensure their procurement practices mitigate the risk of acquiring counterfeit parts. • Refer to “Independent Distributor Selection” © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 24 All Rights Reserved
  25. 25. Aftermarket Supply Monitoring • Some aftermarket sources produce finished products from a die bank • Residual inventory of die no longer in production • These aftermarket sources do not always issue End-of-Life notices or notify their industry and Government customers when die inventory is exhausted • In one case, DSCC (not the aftermarket manufacturer) issued a notice when notified that die inventory had been exhausted • A review of the GIDEP database showed no DMS notices issued by this manufacturer • End-of-Life notices were not published on the manufacturer’s website • Users are encouraged to periodically contact aftermarket sources concerning their continued ability to supply products © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 25 All Rights Reserved
  26. 26. Diminishing Manufacturing Sources and Material Shortages (DMSMS) Management • A significant driver for the use of Independent Distributors is the continued need for parts that are no longer produced by the original manufacturer. • In order to reduce the likelihood of having to purchase parts through an independent distributor, Original Equipment Manufacturers should … • Proactively manage the life cycle of their products versus the life cycles of the parts used within them. • Engage customers on the necessity to support and fund DMSMS management approaches that eliminate the use of obsolete parts. • Government and Industry documents … • SD-22: Department of Defense (DOD) Diminishing Manufacturing Sources and Material Shortages (DMSMS) Guidebook • GEIA GEB1: Diminishing Manufacturing Sources and Material Shortages (DMSMS) Management Practices, Government Electronics and Information Technology Association • EIA-4899: Standard for Preparing an Electronic Components Management Plan • IEC TS 62239: Process Management for Avionics – Preparation of an Electronic Components Management Plan © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 26 All Rights Reserved
  27. 27. Summary • In today’s supply chain environment, Original 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 component 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. • Original Equipment Manufacturers and Government users need to understand the independent distributor’s operations and business processes. • When considering purchases through Independent Distributors, Original Equipment Manufacturers and Government users should use mitigation methods and strategic approaches to reduce the potential for acquiring counterfeit parts. © 2009 BAE Systems No U.S. Government export controlled content. No U.S.G. export restrictions apply. 27 All Rights Reserved
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