TTI’s VP total quality, Kevin Sink, recaps 2024’s Symposium on Counterfeit Parts and Materials: effects of the CHIPS Act and the need of the US to secure technology for economic viability.
Each summer the Center for Applied Life Cycle Engineering (CALCE) and the Surface Mount Technology Association (SMTA) hold the gold standard symposium, The Symposium on Counterfeit Parts and Materials, to discuss the latest in counterfeit electronic components and how to avoid them. Held at the University of Maryland, it brings together experts from the mil/aero supply chain, test labs, university researchers, industry standards bodies and policy makers.
Richard Smith of the Electronic Resellers Association International (ERAI), detailed the number and types of counterfeits reported over the last year. In 2023, 786 counterfeit events were reported through ERAI, 30 percent lower than the peak in the early 2010s.
After the MLCC allocation of 2018- 2019, passives have fallen back down to their traditional low levels (0.5 percent). Once again, ICs lead the pack, with analog ICs and microprocessors the most counterfeited, but with memory on the upswing. Obsolescence drives the counterfeit market with 46 percent of reports being for obsolete products. The next largest category of parts counterfeited were in current production (33 percent) but with long lead times.
A throughline in many of the presentations was the 2022 CHIPS Act. While no one believes it will return the US to semiconductor manufacturing dominance, there is recognition it is a step in the right direction for national security. Several presentations laid out the evolution of the US government’s strategy and expected impact of the CHIPS Act.
I was honored to moderate the session on policy, both from the US government’s approach and that of litigation over counterfeiting. In this session, the keynote presentation for day two was by Dr Michael Fritze, of the Potomac Institute of Policy Studies: Microelectronics Acquisition Policy of the US Government.
As Dr Fritze explained, the challenge for the Department of Defense is the need to access ‘state-of-the-art’ technology, but this is largely produced in foundries outside the US. Today’s smallest IC architecture is available only from Samsung or TSMC. This is a remarkable geographic concentration in a risky part of the world. Add to this that China consumes 50 percent of the world’s semiconductor production while the US only consumes 25 percent and we have a situation where global companies want access to the huge market in China, but we also need to protect their IP for national security.
Security is all the more important as counterfeits are evolving beyond the harvesting of old devices to the cloning of chips in brand new packages, making them hard to detect. Of course, with this cloning can also come the insertion of malicious code. Dr Fritze concluded with the need for policy to move beyond lowest cost that meets capability to also include secure process for critical infrastructure needs.
The second part of this session was a presentation by Patricia Campbell, JD, from the University of Maryland Carey School of Law entitled: Debugging the Trademark Laws: Civil and Criminal Liability for Trafficking in Counterfeit Materials. This was the presentation I looked forward to most. For all the risk of counterfeits in electronic components, legal action has been nominal. In fact, Campbell revealed that no civil action has been filed by trademark owners of electronic components in the last 15 years and few criminal cases have been brought. Why?
Campbell explained that among the many reasons are: the lack of jurisdiction over counterfeiters in other countries; limited economic recovery that outweighs the cost; concerns about the negative impact on stock value; and misperceptions about the applicability of the ‘material alteration theory’.
Campbell explained the material alteration theory whereby resale of a trademarked item that is materially different from the product sold by the trademark owner may constitute infringement or counterfeiting. This would then include used parts sold as new, remarked parts, fake parts in genuine packaging or rejected goods. Unfortunately, because two district courts have held that it does apply in criminal cases, but the DC district court said otherwise, the resulting uncertainty had a chilling on prosecutions for counterfeiting.
To see more prosecution for electronics counterfeiting, Campbell concluded that we need more involvement by the manufacturers, a renewed priority by the Department of Justice, consistent application of the material alteration theory and perhaps specialized legislation such as we have with fasteners (Fastener Quality Act 15 USC § 5401) and the fraud involving aircraft or space vehicle parts (18 USC § 38).