In December 2011, President Barack Obama signed the fiscal year 2012 US National Defense Authorization Act. The budget bill also encourages the implementation of procedures to mitigate the possibility of obtaining counterfeit components by making members of all tiers of the defense supply chain accountable. The meaning of the term counterfeit in this context includes fake, substandard, damaged, or mismarked components.
In the fall of 2011, for the first time in history, U.S. Federal Courts prosecuted an individual for trafficking in counterfeit integrated circuits, many of which were targeted for the U.S. military. Others were to be used in brake systems in high-speed trains and instruments used by firefighters to detect nuclear radiation. The administrator of the company that sold the components was sentenced to 38 months in prison and assessed fines of $166,141 for selling almost $16 million worth of semiconductors falsely marked as military, commercial or industrial grade.
As progressive as all of this news seems to be in the fight against counterfeit semiconductors making their way into the US supply chain, it is just the beginning. In fact, it is estimated that 2 percent of all the semiconductors sold last year were counterfeit. That doesn’t sound too threatening until we do the math: the estimated value of counterfeit parts that made their way into the U.S. supply chain in 2011 is over $5 billion.
Not only do counterfeit components threaten lives, they impose a vast negative financial impact to semiconductor manufacturers, distributors, electronics equipment manufacturers and end users. It is estimated that the actual cost of a failed semiconductor that makes its way into production – in any industry – can be more than 100 times the cost of the original component. That makes the bargain price – often 70 percent less than the “real thing” – look less and less attractive. No matter how hard the industry tries, it can’t get around that old adage: you get what you pay for.