U.S. e-waste drives counterfeit components problem

ERAI Executive Conference points to proliferation of electronic waste, complex government regulations, and harder-to-detect fakes as ongoing issues in the fight against counterfeit electronics

Counterfeit electronic components continue to inundate the U.S. market, and leaders from the electronics industry gathered recently in Las Vegas to report on the state of the issue at the 2012 ERAI Executive Conference. Experts identified three key issues that continue to plague the electronics supply chain: e-waste generated by U.S. consumers and businesses, the complexity of new government regulations over counterfeit parts and those that supply them, and increasing sophistication of the counterfeiters themselves.

More than 300 industry professionals attended the conference, hosted by electronics industry information services company ERAI and sponsored by industry analyst firm IHS. The event took place May 18th and featured presentations from standards organizations, defense contractors, distributors and others.

One of the key problems driving the proliferation of counterfeit parts is electronic waste (e-waste) generated by consumers and businesses in the United States. Much of this waste is shipped to developing countries, where counterfeiters sift through and remove key parts such as semiconductors, which then find their way back to the United States as counterfeits.

“People don’t hold onto their old electronic devices,” Bob Braasch, senior director, supply chain for IHS, told conference attendees. “A three-year-old cellphone is ancient, so people are constantly upgrading to the latest device. As the world economy improves and as technology continues to develop, people increasingly will be looking for the latest technology. All of this electronics consumerism translates into e-waste.”

Braasch said 58% of the e-waste generated in the United States is shipped to developing countries, where it is then remade into counterfeit parts and shipped back to the United States and elsewhere.

The number of counterfeit parts in the supply chain has quadrupledin recent years according to IHS research. The U.S. government took new action on the issue this year, passing the U.S. National Defense Authorization Act (NDAA), which imposes strict regulations and severe criminal penalties on counterfeits supplied for government military and aerospace programs.

Despite the new regulations, many independent distributors and end users still face problems in implementing anti-counterfeit efforts due to the vague language and difficult-to-comply with requirements contained in the NDAA, Kirsten Koepsel, director of legal affairs and tax at the Aerospace Industries Association, told conference attendees. Some aspects of the legislation are still forthcoming—such as establishing official processes to analyze, assess and act on reports of counterfeit parts—and definitions of key terminology, such as “suspect counterfeit part” and “trusted supplier” remain unclear, Koepsel said.

The other ongoing issue in the counterfeit fight is that the counterfeiters continue to get better at their trade. Sophisticated counterfeit organizations are working harder to overcome even the most diligent methods to test for bogus parts, experts explain.

“Counterfeiters are escalating—they know what we are looking for and move on to the next step,” Tom Sharpe, vice president of SMT Corp., an independent distributor of electronic components to the defense and aerospace industry, told attendees in Las Vegas.

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