Counterfeit Chips are Getting Better, Despite Arrests

| September 15, 2015

While government and industry officials continue to debate the best strategy for deterring counterfeit parts, there’s no question that electronics counterfeiting remains a large and growing threat to U.S. military security. The U.S. Defense Advanced Research Projects Agency (DARPA) calls counterfeit electronic components “a major problem,” that has resulted in more than 1 million suspected counterfeit parts entering the defense supply chain in recent years.

“The problem’s getting infinitely worse, and more dangerous,” says Tom Sharpe, vice president of SMT Corp., an aerospace and defense distributor specializing in testing chips against counterfeiting. He’s concerned that most of the product screening currently required is for an older generation of counterfeiting, in which illicit suppliers harvest old parts from used electronic products and alter or re-mark them as new, often higher-performance parts. But now, he says, counterfeiters are actually fabricating brand new chips that can be nearly impossible to distinguish from genuine parts.

“The clone devices that we see today exactly match the size and shape of original manufacturers’ parts,” he says, “and they function, at least initially, within the manufacturer’s performance range.” Sharpe contends that the makers of these advanced counterfeit parts are “flooding the market” with their wares and reaping billions of dollars in in illegal profits.

On the positive side, however, law enforcement agencies have begun making progress in identifying and bringing to justice companies and individuals profiting from the counterfeit parts trade.

In July for instance, Jeffrey Krantz, the former CEO and owner of New York-based Harry Krantz, LLC, a leading military components distributor, pleaded guilty to wire fraud for selling re-marked aircraft parts to a Rhode Island-based parts broker who sold the Chinese-made parts to a Conn.-based aerospace manufacturer, which used them in Bell helicopters.

And in 
Connecticut’s federal District Court, military-components distributor Peter Picone is still awaiting sentencing, more than a year after pleading guilty to selling U.S. defense contractors counterfeit Chinese-made chips, some of which may have ended up in nuclear submarines based in Groton, Conn.

 

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About the Author ()

EPS contributor Russ Arensman is an award-winning freelance writer and editor whose work has appeared in numerous U.S and international business and technology publications over the past three decades. He covered the semiconductor industry for nearly a decade as both a staff and freelance contributor to Electronic Business magazine. During most of the 1990s he worked as a journalist in Hong Kong, where he helped to launch Electronic Business Asia magazine and later the monthly business magazine Asia Inc. Previously, he worked as a reporter and editor for several newspapers in Colorado. His professional honors and awards include a National Silver Award in the American Society of Business Press Editors’ annual Editorial Excellence Competition for an October 1998 Electronic Business article profiling Idaho-based Micron Technology and its CEO Steve Appleton. Russ earned a bachelor’s degree in technical journalism from Colorado State University in 1981 and lives in Glenwood Springs, Colo. He is available for freelance writing and editing assignments, as well as corporate editorial projects, including articles, press releases, white papers, case studies, speeches, blog posts and market research. He can be reached at: arensman@rof.net