Gray market electronics components
have been a problem for a long time. An extensive article appeared recently in
EE Times reporting on a case based on a small
operation in south Florida that was importing and re-selling counterfeit parts to
military, aerospace, medical, and other product manufacturers. The Feds charged
them "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." The good
news might be that this particular scam operation was caught and stopped, but the
bad news is, according to the story, that many more are never prosecuted - largely
because of typical bureaucratic SNAFUs in government procedures.
A couple years ago I wrote a short piece on the
gray market problem,
and surely it has only gotten worse. Much of the blame can be placed squarely on
the shoulders of our own production equipment vendors, manufacturers (almost a misnomer
anymore) and the technology export laws. The U.S. has been shipping know-how and
machinery overseas for decades, but in the 1990s, the pace accelerated significantly.
Now, in 2020, there are almost no significant restrictions on what kind of intellectual
property (IP) or hardware can be sold or given away to other countries. The first
time I remember really being alerted to the gravity of the problem was when reading
in Aviation Week & Space Technology about Boeing and McDonnell Douglas setting
up wing and empennage assembly operations in China. That was the early 1990s. Not
long thereafter, a story appeared telling about composite material layup machinery
being used to now manufacture the parts before the final assembly. Here in Erie,
Pennsylvania, the GE locomotive plant until recently used to design, build, and ship locomotives
from the local plant. A few years ago they began shipping "kits" to China, where
they would be assembled. With such an ample supply of components that can be easily
reverse engineered, China soon will not need GE's help at all to build trains. The
same scenario has played out with the semiconductor industry. A decade ago we could
not sell overseas the equipment for growing high purity GaAs boules, and could not
sell a lot of the newest IC processing equipment. Now, it seems anything is fair
game for the right price.
Millions of dollars worth of fees have been paid out to lobbyists on Capitol
Hill to "persuade" legislators to change laws that have precipitated the problem.
As with so many other things, America is committing national suicide by selling
off or even giving away all of our proprietary technology. It's one thing selling
it to long-time allies like England and Germany, but the government of China is
hard Communist, with no qualms about its goal of becoming the world's largest superpower
- both economically and militarily. A few years ago I wrote about all of
the technology we have given and are still giving to Iraq and
- places still largely dominated by radical Muslim terrorists who publically threaten
to slit our throats and regularly kill our soldiers. A member of the royal Saudi
family just offered a huge
bounty for the capture of an Israeli soldier (Israel is our only
real ally in the Middle East). These are among the countries we sell out our sovereignty
to, and then act surprised when we discover that counterfeit components are being
manufactured and sold illegally here. Electronics is not alone in the mess; pharmaceuticals,
aircraft parts, clothing, and just about everything else is being sold on the gray
Many defense and security analysts have voiced concern over the ability of foreign
IC suppliers, both legal and illegal, having the opportunity to design faults or
a means of selectively usurping control into processors and programmable gate devices.
Inferior packaging can make parts more prone to premature failure due to fatigue,
contamination, ESD vulnerability, etc. Phony aircraft grade bolts that are significantly
weaker than specifications have been discovered in military and commercial aircraft
after production. Scientific American magazine has published multiple articles on
the counterfeit drug problem. With all of these issues, the root causes can be traced
back to the U.S. (and other first-world countries) selling off both new and surplus
equipment to the highest bidder. I still remember back in the 1990s reading in disbelief
Loral selling rocket stabilization technology to China - ostensibly
for a commercial launch platform, but in reality for ICBMs. Maybe the practice has
been good for investors and CEO bonuses individually, but for the country, the practice
has been an unmitigated disaster.
See the full-size custom image
The truly sad thing is that no matter how bad things get, they are guaranteed
to worsen because there's too much money and power involved to do anything about
it. Consumers will continue to demand dirt cheap products while complaining about
manufacturing and innovation disappearing in America, and about how politicians,
in concert with industry leaders, will continue to see to it that they are provided.
Ultimately, the cost of this convenience is being paid for in a loss of personal
freedom and security. Pavlov rings his bell, and the dogs start drooling.
Read full EE Times article, "Chip counterfeiting case exposes defense supply chain flaw". Also,
from Source Today, "Avoiding
the gray market for electronic components," "U.S.
Government Launches a Counterfeit Crackdown," "Combating
counterfeit components: what buyers need to know," and "Is
That a Counterfeit Component in Your Supply Chain?"
Posted May 27, 2020
(updated from original post on 11/3/2011)