New Study: Reports of counterfeit parts quadruple in two years

Reports of counterfeit parts have soared in the last two years amid heightened awareness of the counterfeiting problem and recent government action to clamp down on the flow of fake parts into the military supply chain, in particular.

A report released this week by industry analyst firm IHS said there were 1,363 separate verified counterfeit-part incidents worldwide in 2011, a fourfold increase over the 324 reported in 2009. This marked the first time the reported number of incidents in a single year exceeded 1,000, a total that could encompass millions of purchased parts, IHS said. The figures are based on IHS data, which includes information from the industry’s two recognized reporting entities—ERAI Inc., a privately held global information services organization and an IHS partner, and the Government-Industry Data Exchange Program (GIDEP).

The bulk of counterfeit incidents are reported by U.S.-based military and aerospace electronics firms, but IHS and others note that the parts themselves could find their way into any company using the same electronics in their products.

“The counterfeit issue is serious, it’s growing and it’s a major problem for electronics makers—especially military and aerospace companies,” said Rory King, director, supply chain product marketing at IHS. “The problem has grown increasingly hard to ignore, as reports of counterfeits have risen exponentially and most companies lack the awareness and capability to effectively detect and mitigate the growing problem. The reporting done by the industry can help other organizations pinpoint risky parts or suppliers. And now that United States legislation will hold defense suppliers accountable for counterfeit issues, access to these incident data becomes a critical decision-support capability for business systems.”

On Dec. 31st, President Obama signed the 2012 National Defense Authorization Act, which includes a bi-partisan amendment requiring the Department of Defense, the Department of Homeland Security and government contractors and their suppliers to detect and avoid counterfeit parts in the military supply chain.

The amendment includes enhanced inspection and reporting requirements for companies supplying electronic parts or systems that contain electronic parts, and also calls for closer scrutiny by the Homeland Security Department over countries considered to be significant sources of counterfeit parts in the DoD supply chain.  Both DoD and Homeland Security are charged with developing new or enhanced policies and procedures surrounding anti-counterfeit detection and avoidance this year—within six to nine months of the enacted legislation.

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