Detecting and Removing Counterfeit Semiconductors in the U.S. Supply Chain
The semiconductor industry seeks to partner with the government toaddress the threat of counterfeits entering the government supply
chain. Recent media attention and government action has focused on
potential security threats, but counterfeits are an immediate threat.

Risks of Counterfeits
The risks of counterfeit semiconductors are often misinterpreted andunderestimated. Semiconductors are the “brains” inside criticallyimportant electronic systems, including medical equipment, power grids,
communications systems, automotive braking and airbag systems, andmilitary and aerospace systems. When these critical components of oureveryday lives contain counterfeits, they pose a unique risk to not only
the health, safety, and security of consumers, but also to the economic
prosperity of U.S. industry. However, much of the risk can be avoided.

KEY FACTS
 Industry data has shown that

<0.01% of legitimate
semiconductor products will
ever fail during operation inelectronics systems.
 Counterfeit components areoften “harvested” fromelectronics waste (e-waste)using crude processes then remarked to indicate they are newor are otherwise different from
how they were originally
manufactured.

Manufacturing and Reliability of Genuine Semiconductors vs. Counterfeits
The contrast between manufacturing of genuine semiconductors and counterfeit semiconductors could not be more
extreme. Semiconductor companies spend tens of billions of dollars per year developing, manufacturing, testing,and supporting products that will operate to the highest quality and reliability levels for many years. Counterfeits
are often “harvested” from electronic waste using crude and poorly-controlled processes that result in counterfeit
semiconductors having far higher failure rates than genuine semiconductors. Some counterfeit semiconductors will
fail immediately when electrically tested or first used, while others will fail after days, months, or years of field
application. Counterfeit semiconductors jeopardize lives since they are prone to fail at the worst possible moments,
such as when car airbags need to deploy, defibrillators are used to apply shocks, or when aircraft are landing.

Current Industry Initiatives to Combat Counterfeits

Driving counterfeit component awareness and actions.
Permitting Customs and Border Protection to work closely with manufacturers to keep counterfeit
components from crossing borders and entering the critical supply chain.
Partnering with law enforcement to help prosecute those involved in the manufacturing and/or traffickingof counterfeit semiconductor components.
Evaluating component security features and developing international standards relating to supply chain
assurance and anti-counterfeiting.
Partnering with government to mitigate security vulnerability risks and avoid purchase of counterfeits.

RequireGovernment Purchase from Authorized SourcesGovernment can significantly reduce the risks of counterfeit
semiconductors from entering the supply chain by requiring
purchase from authorized sources – original manufacturers and theirauthorized distributors.
Products purchased through authorized sources are more costeffective in the long term, since they have superior quality andreliability levels, and carry full factory warranties.
Any savings that DoD or their contract managers have realized bypurchasing semiconductor components from the open market would
be dwarfed by the costs of replacing previously-installed counterfeit
components in fielded military systems.
If semiconductors are not available from authorized sources,
government should partner with industry to create a system tomitigate risks and purchase from alternative suppliers.

“Experts have estimated that as
many as 15 percent of all spareand replacement semiconductors
purchased by the Pentagon arecounterfeit. Overall, we estimatethat counterfeiting costs USbased semiconductor companies
more than $7.5 billion per year,
which translates into nearly
11,000 lost American jobs.”
SIA President Brian Toohey
SASC Hearing
November, 2011