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Clive.Hendricks
The solution is easy. Don't buy from parts brpkers. The government and its ...
hkdale
best way to prevent this is to create a secure supply chain by marking chips ...
Chip counterfeiting case exposes defense supply chain flaw
Bruce Rayner
10/24/2011 9:13 AM EDT
When you type www.visiontechcomponents.com into your browser, up pops a cheerful page that tells you, “Sorry! This site is not currently available.”
That’s because last September, the feds shut the component broker down, arrested owner Shannon Wren and administrative manager Stephanie McCloskey, and charged the pair with conspiracy, trafficking in counterfeit goods and mail fraud for knowingly importing more than 3,200 shipments of suspected or confirmed counterfeit semiconductors into the United States, marketing some of the products as “military grade” and selling them to customers that included the U.S. Navy and defense contractors.
McCloskey pleaded guilty to the conspiracy charge last November in U.S. District Court for the District of Columbia and cooperated with the government. Wren died of an apparent drug overdose in May.
Last month, details of the case against McCloskey were revealed in the 78-page “memorandum in aid of sentencing” that the government filed with the district court. The memorandum offers a rare glimpse into how a rogue broker operating out of a house on a quiet residential street in Clearwater, Fla., was able to dupe the system, put countless innocents at risk and compromise national security for nearly five years.
'Poison in the veins'
“Due to the type of counterfeit goods sold, the industries to which sales were made, and the multitude of military, commercial and industrial applications into which these devices may be placed, defendant McCloskey did her part to set a ticking time bomb of incalculable damage and harm to the U.S. military, U.S. servicemen and -women, the government, all of the industries to which VisionTech sold goods, and consumers. She has effectively helped to release a poison into the veins of interstate and international commerce,” U.S. Attorney Ronald Machen wrote in the memorandum.
The memorandum recommended McCloskey serve a four-and-a-half-year prison sentence and pay restitution to the trademark owners for damages estimated at close to $600,000. The trademark owners named in the memorandum are a veritable who’s who of the semiconductor industry.
Of the estimated 3,263 shipments of semiconductors imported by VisionTech between December 2006 and September 2010, only 35 were confirmed as containing counterfeits and seized at the border by U.S. Customs agents. Those 35 shipments contained a total of nearly 60,000 counterfeit ICs, according to the government’s memorandum.
The 3,228 shipments that were not seized made their way into the U.S. electronics supply chain through sales VisionTech made to more than 1,100 buyers in virtually every industry sector. Many of VisionTech’s customers were other brokers, who resold the parts. While some of the counterfeits were caught during manufacturer testing, hundreds of thousands, if not millions, of counterfeit parts are potentially still floating around in the supply chain or, worse yet, inside equipment that’s being used today.
One of the counterfeit shipments contained fake parts sold to BAE Systems, which makes identification friend-or-foe (IFF) systems for the Naval Air Warfare Center’s Aircraft Division. BAE purchased 75 devices from a broker who had bought the parts from VisionTech. The contractor had the chips tested at a third-party testing facility, which identified them as counterfeits. If those chips had found their way into an IFF system on board a Navy vessel and the system had failed, the ship’s defenses would have been seriously compromised.
Another case involved the sale of 1,500 counterfeit Intel flash memory devices to Raytheon Missile Systems for incorporation in the Harm Targeting System (HTS), which is installed on F-16 fighter planes to identify and track enemy radar systems. Raytheon installed the flash chips on 28 circuit boards destined for HTS modules. The boards immediately failed. After testing nine of the flash devices, Raytheon concluded the parts were all counterfeit.
 Click on image to enlarge. |
Next: Flaw in the system
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DAH2136
10/24/2011 12:52 PM EDT
Now imagine that State was helping create the counterfeits. Pretty cool way of
infiltrating a system.
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pdudley
10/24/2011 4:59 PM EDT
The solution is simple:
Bring the manufacturing back HOME.
Stop supporting slave labor, uncontrolled pollution and counterfeiting.
The additional plus is it would also create jobs!
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fdunn
10/24/2011 5:24 PM EDT
You actually think that the military and their contractors are going to learn from this?
NOT!
But I am in complete agreement with you as if/when we were to have political issues with these countries then no more parts for our military!
I think the military are fools to purchase any component that is mission critical that is not designed and manufactured in the continental U.S.
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C VanDorne
10/25/2011 8:38 AM EDT
Great! I'm game. But then nobody better complain about the $400 toilett seat, or the $6,500 VME computer board.
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sierra tango
10/26/2011 5:08 PM EDT
I too agree, the whole $400 toilet seat and $500 wrench is pure drivel, in military work, (of late this has improved) a good portion of the cost comes from the reams of product and origin specifications that must be met. COTS helps, but the fed runs on paperwork....
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Code Monkey
10/24/2011 5:31 PM EDT
A chip company (or several) should sue CBP for their losses caused by pointless redaction. They'll change their interpretation of the Trade Secrets Act real fast. Counterfeit parts are a shameful cost for both consumers and OEMs. OTOH, this may spur the market for test equipment and microscopes.
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batavier
10/24/2011 5:34 PM EDT
There are two types of sources for parts: (authorized) distributors and brokers.
Almost all military contractors I know, and work for or have worked for, only buy from factory authorized distributors.
Buying from a broker, even ethical ones that have anti-counterfeit policies in force, poses an incalculable risk, for high-rel circuits,
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rtegg
10/24/2011 5:42 PM EDT
We have a solution to this problem that I am trying to get traction to.
We use a small scaled 2-D array that is placed on ALL semi parts at the trusted facility.
Data on this is a key which can be matched with an IT cloud. This creates a huge barrier for counterfeiters making a profit on product. It also is extremely cost effective at fractions of a cent per part. Each device can be quickly read and validated for authenticity. I would love the opportunity to showcase this more on EEtimes.
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nicolas.mokhoff
10/25/2011 11:28 AM EDT
rtegg: care to send us an abstract for a possible technical article we would use in EE Times?
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J_Lewis
10/25/2011 12:21 PM EDT
Nic, I would like to discuss a solution with you if you can contact me by email.
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rtegg
10/26/2011 11:58 AM EDT
Nic, Let me know where I can send you the abstract.
Ross T.
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rtegg
10/26/2011 3:33 PM EDT
Nic, You can send any information to sales@triunesystems.com
Best, Ross
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DrQuine
10/24/2011 7:35 PM EDT
Obsolete components pose a serious challenge. If everything must be repaired using new components that can be directly traced back to the manufacturer then the failure of a single obsolete component can doom an entire system to the dustbin. Remaindering, resale, reuse, or recycling of components may be a legitimate process - the challenge is to ensure the integrity of the components. Could a system be developed which replicates the manufacturer's manufacturing line acceptance tests to validate components outside the supply chain and allow them to legitimately rejoin the pathway as needed?
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gil@pcxco.com
10/28/2011 6:17 PM EDT
Dr. Quine,
I couldn't agree more with your view of the supply chain cycle and the legitimate (and economically needed niche) recycling of components fills. Please contact me at your convenience to discuss some ideas that we have had concerning this very concept you describe (Gil@pcxco.com)
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John.https://www.cmpevents.com/
10/24/2011 8:44 PM EDT
Hmmm ... we have "Fast and Furious" ... and we have this fiasco ... Citizens of the USA: There is only one way to fix these kind of problems ... caused by the over-bloated beauracracy in Washington ... We need to make that beauracracy smaller ... _much_ smaller! ...
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Simon7382
10/27/2011 3:47 AM EDT
What a BS! John, you should stop listening to Limbaugh, Fox and their right wing idiotic ilk.
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abraxalito
10/24/2011 11:52 PM EDT
McCloskey a lone 'bad apple'? I think not. Experience suggests this is just the tip of the iceberg, rather akin to Bernie Madoff.
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Silicon_Smith
10/27/2011 2:06 PM EDT
I agree. And considering the magnitude of this one discovery, I am scared to know how much more it could be.
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gil@pcxco.com
10/28/2011 6:19 PM EDT
You are 100% correct. The problem is massive and on a monumental scale. Frankly if a certain area of Shenzhen could be glassified without loss of life, I would vote yes on that one.
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hkdale
10/25/2011 6:24 AM EDT
Already a government trial is underway marking chips using botanical DNA.
See Applied DNA for more details
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Haldor
11/2/2011 9:45 AM EDT
What is the point of that since the implementation of this would end up being in China anyway.
Biggest risk to doing business in China is that the typical turnover in engineering is less than 2 years. Within a year the counterfitters will have all the information they will need to defeat this measure.
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jaybus
10/25/2011 8:17 AM EDT
There is an easy solution. The first time counterfeit goods are detected, wait for the next scheduled shipment. Get a search warrant and board that next ship. If counterfeit goods are found on the ship, then sieze the ship and its cargo. Arrest and promptly release the captain and crew. After the trial is over, the shipping company can negotiate for the return of their ship and its cargo after they pay a large impound fee.
Many will scream bloody murder, but the more public the case, the better. The end result will be that no shipping company will ever again do business with the counterfeiters. The shipping company will have a tainted reputation, as neither the importers of the siezed cargo nor the exporters will happy.
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nicolas.mokhoff
10/25/2011 11:31 AM EDT
Clever solution, jaybus. Now all one has to worry about is catching payoffs to the shipping company to let things stay as they are.
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jaybus
10/28/2011 3:03 PM EDT
The ship could be impounded for a year or more for this sort of case. It would have to be a very large payoff indeed for a shipping company to risk losing a ship for that long.
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agk
10/25/2011 8:30 AM EDT
At every manufacturing plant QC is working and they passs the consignment into the stores. So the QC got to be strong. This will save lot of issues. Also The purchase to be made only from authorised suppliers.Proper planning is required because of delivery times by the manufacturers are not consistent.
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docdivakar
10/28/2011 12:51 PM EDT
@agk: the burden is really the customer companies who when buying from an "approved vendor" depend on that vendor to sell them genuine parts. Many defense companies (I worked for one!) will require you DESC certification of your components, enforced by a component engineer (& frequently verified by that person).
Well, that role is now a days lot like the Dodo bird, extinct!
Scary, the way this is has unfolded (including one for my former employer, Peregrine Semi).
MP Divakar
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john bougs
10/25/2011 9:05 AM EDT
"The memorandum recommended McCloskey serve a four-and-a-half-year prison sentence and pay restitution to the trademark owners for damages estimated at close to $600,000. The trademark owners named in the memorandum are a veritable who’s who of the semiconductor industry."
The other problem is who is considered to have been wronged here. The damage done to the the trademark owners is minor compared to the damage done to the companies purchasing these parts.
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john bougs
10/25/2011 1:02 PM EDT
Did not make my point very well. The restitution to the trademark owners but nothing is made to the companies that purchased the parts.
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Bruce Rayner
10/25/2011 9:37 AM EDT
Yes you are right about that and the US Attorney acknowledged that in the memorandum.
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DavidPK
10/25/2011 12:16 PM EDT
Authorized Distributors! Authorized Distributors! Authorized Distributors! Authorized Distributors! Authorized Distributors! Authorized Distributors!
No one else!
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jlredford
10/25/2011 1:39 PM EDT
They're asking for a tough sentence for McCloskey, given that she was just the assistant on this scam, and that she pled guilty. How is some office manager going to pay $600,000? The principal here was Shannon Wren, but since he died in May, he's beyond their reach. The prosecutors sound frustrated and vindictive.
The original charge also said that VisionTech had only imported 60,000 chips, for which it paid $400,000 and re-sold for $16M. That sounds a lot more minor than "imported 3,263 shipments". That's only 18 parts per shipment, about a FedEx envelope's worth.
I also wonder if the real driver behind this is less national security than it is chip company's annoyance at counterfeiters. IP theft drives people crazy, E.g. RIAA suing little old ladies, and maybe they're making an example of VisionTech. The investigation was done by a special unit of the DoJ devoted to IP, not to security.
BTW, does anyone know if Wren's death was a suicide? "A drug overdose" could be accidental or deliberate. He was certainly looking at a serious sentence, and they had seized a lot of his assets. He was apparently quite well known in drag-racing circles, and had a lot of cars.
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Simon7382
10/27/2011 3:44 AM EDT
Paid $400k and sold for 16M?? If this is correct than just from this huge profit margin there is no doubt that most if not all the chips were fake.
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Frank Eory
10/25/2011 6:34 PM EDT
This is crazy. Prior to the new CBP redaction policy in 2008, chip companies say they were able to resolve 85% of CBP requests for identification.
But now that all markings are blacked out in the photos CBP sends to the chip companies, that percentage must be nearly zero.
Why do they even send out redacted photos? CBP could just as well send a written description, like "black molded plastic on top of a small circuit board with X number of solder balls in a grid on the underside" -- and then somehow expect a manufacturer to answer whether that part is legit or not!
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wilber_xbox
10/26/2011 7:24 AM EDT
This is just in USA. What happens in other countries is beyond thinking. There are nuclear warhead in many companies and i am sure those nations do not have very rigorous testing facilities to separate counterfeit parts.
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Khaled75
10/26/2011 8:17 PM EDT
Good point. The solution in my opinion is to accept the added cost of unique identification and secure authentication of IC chips. This is in the interest of every country.
PS. The cost need not be prohibitive. It's a matter of political will...
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KB3001
10/26/2011 8:20 PM EDT
It's matter of time before secure VLSI unique identification and authentication technologies are adopted. I just hope it's not going to take a major disaster for politicians to legislate for this.
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Simon7382
10/27/2011 3:40 AM EDT
Hm...I believe there is a simple and quick solution: fire Bersin. His "interpretation" of the law simply does not make any sense.
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Silicon_Smith
10/27/2011 2:09 PM EDT
$600 K in 35 shipments. Am I correct in understanding that this single broker could have dented the semiconductor industry by around $50 M in a few years? Considering the total number of shipments it has made @ ~3200
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idontgetitdude
10/27/2011 8:22 PM EDT
um, how do you counterfeit an IC ?
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RTewell
10/28/2011 12:03 AM EDT
We could tell you but then...
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Haldor
11/2/2011 9:50 AM EDT
One common way is to recycle used parts, repackage them and remark them as higher spec (military grade)parts. Sell as new.
There is an entire industry in China that does nothing but remove and repackage ICs from PCBs sent to China for recycling.
Perhaps it would make sense for us to stop sending PCBs to china for recycling?
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Navelpluis
10/28/2011 3:09 PM EDT
Nice story about the military, but how about small commercial companies like the one we have? We have had a couple of really annoying counterfeit problems in a few of our products... And I can assure you that Authorized Distributors do not always guarantee original silicon (and passive, yes passive parts can be counterfeit too)
A couple of 1000 large capacitors had 2pF capacity in stead of 220nF/400Vac. A little investigation with X-ray showed us that they are completely empty and that the wires were 1mm apart from each other to give- at least - a few pF of capacity. And how about this: A well known brand Instrumentation Amplifier with offset going through the roofs... They were the dropouts from a test facility in Taiwan and found their way -via China- repacked stamped with markings and date codes etc. and shipped to us to be used in our boards. Huge damage we had from this. Finding is 1 but solving it is 2: the boars -of course, Murphy tells us, were stuffed with the parts already.
The way we solve these issues now is to use well known good available parts only and no obsolete or near obsolete parts. These will assure you to get into trouble. (Some military stuff is soooo damned old that I wonder how they get those parts needed for it anyway ;-)
Not to tell you about letting stuff produced in China where they use everything they can get their hands on, except when you really supervise it well, hence, lots of extra costs...The heck with it. Now we stay in The Netherlands with our productions and we deliver ALL parts to the assembly company. In our design phase we start ordering and by the time the software is ready and hardware is okay we produce boards. Lead time is less critical this way. And I see lots of other companies here do exactly the same.
Just my 5 cents, but hopefully some people will read this and learn a bit from it.
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webpa
10/29/2011 7:53 PM EDT
Counterfeit parts are nothing new. In 1973, I joined a DoD weapons laboratory (all right! The USAF Armament Laboratory) in Florida. Among other things, I designed and fabricated instrumentation for subsonic wind tunnel and aeroballistic range (sub- to hypersonic) testing. We were warned almost daily by the Air Force Logistics Command (AFLC) about counterfeit electronic parts...sometimes by telephone. I recall a desperate phone call from Warner-Robbins (I think) about fake 2N2222 transistors; We used them as in large quantities as buffers on paper projectile penetration screens. Other problems were MS38510-certified TTL ICs. At the lab, we could sometimes pick out the fakes by the sloppy, smeared silver printing and/or the uneven leg widths. Sometimes we were required to simply discard whole lots of ICs (the "Dumpster Solution". Not just electronics either: Counterfeit nuts, bolts, and other hardware has been a major recognized problem (in the USAF, anyway) since at least the early 1970s.
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hkdale
11/2/2011 9:34 PM EDT
best way to prevent this is to create a secure supply chain by marking chips with a unique marker that cannot be duplicated. Such a program is already underway as a trial with an undisclosed vendor and I suspect it will become prevasive. See www.adnas.com
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Clive.Hendricks
11/14/2011 12:00 PM EST
The solution is easy. Don't buy from parts brpkers. The government and its contractors should only buy frDirectly from the OEM or from a Licenced Distibuter that buys directly from the OEM. Buying from Brokers is the equivalent of buying parts at swap meet.
I realize that there will be issues with obsolete parts, but there are options, i.e. one time builds with the OEM with engineering fee or aquiring the licence of licencing the IP
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