Wednesday, November 9, 2011

Defective Parts From China Poses Major Threat To National Security

Actual pictures of defective/fake parts for export
China has a reputation for dangerous products – from toxic toys, to poisoned toothpaste, the list of products that pose a major health risk is rising.
Now, China is engaging in something called "Sprinkling."   Basically, sprinkling is an illegal practice in which Chinese manufacturers sprinkle authentic parts with fake ones (counterfeit and unreliable).  Companies that engage in this process of course hope that by mixing in authentic parts with fake ones, the counterfeits will not be detected when companies test the components.
In fact, there is hard evidence that China is engaging in “sprinkling” on a massive scale and one of the most sensitive areas they are using this illegal practice is in electronic parts for weapons systems, such as missile systems and aircraft…some of which are used in weapons systems used by the United States military.
At a Senate Armed Services Committee hearing yesterday, China’s use of the illegal process of “sprinkling” was just one of the problems relating to China and national security – the conclusion is that the counterfeit electronic components coming in from China, which the Pentagon has found to be occurring on a massive scale, are a direct threat to the economy and in particular, to national security.
Senator Carl Levin, (D-MI) chairman of the committee said:  "The failure of a single electronic part can leave a soldier, sailor, airman or Marine vulnerable at the worst possible time.  A flood of counterfeit electronic parts has made it a lot harder to have confidence that won't happen."
Corporate executives, Defense Department officials, government investigators and a delegate from the semiconductor industry, all testified before the committee about what they say is a "ticking time bomb" of suspect counterfeit electronics ending up in weapons system. They also described counterfeiters operating openly and freely in Chinese provinces with Beijing unwilling to crack down on or stop the illegal practice.
Representatives from China’s Armed Services were officially invited to attend the hearings, but they declined to send anyone to participate and explain China’s actions.
During the hearing, the investigators testified that so far, they have found approximately 1,800 cases of suspect counterfeit electronics being sold to the Pentagon, with the total parts involved in the 1,800 cases totaling more than 1 million electronic parts.  According to the delegate from the semiconductor industry, they estimate that these illegal counterfeit parts cost $7.5 billion a year in lost revenue and about have cost 11,000 U.S. jobs.
Richard J. Hillman of the Government Accountability Office told the committee that his team created a fictitious company to investigate counterfeit parts.  They purchased the 13 parts through the Internet and after carefully examining 7 of the parts so far, found that not one single part was authentic.
Alarmingly, the committee investigators found that counterfeit electronic parts were installed or delivered to the U.S. military for several weapons systems, including the Army's Theatre High-Altitude Area Defense (THAAD) missile defense system, the Air Force's C-17 airplane and the Marine Corps' CH-46 helicopter.
Army Lt. Gen. Patrick J. O'Reilly, the director of the Missile Defense Agency, "We do not want to be in a position where the reliability of a $12 million THAAD interceptor is destroyed by a $2 part.”
"The Chinese government can stop it," said Sen. John McCain of Arizona, the top Republican on the panel.  As people testified at the hearing, photos of cardboard and plastic bins filled with electronic parts on the streets of Chinese cities flashed on video screens.
Thomas Sharpe, Vice President of SMT Corporation described visiting one of China’s electronic component marketplaces in July 2008 – he said that scrapped (discarded and defective) electronic parts were being washed in rivers or left out for the daily monsoon rains to be washed and the left to dry on riverbanks before being and collected in bins to be used in the counterfeit processing.
Sharpe added that in China, "Counterfeiting was not regarded as IP theft or improper in any way.  It was seen as a positive `green initiative' for the repurposing of discarded electronic component material."
Though they chose not to send anyone in person, in response to the ongoing committee investigation, China's Foreign Ministry said the government "attaches great importance to and has actively promoted cooperation in fighting fake and shoddy goods with competent authorities of other countries and such efforts are well known to all."
Clearly however, China’s Foreign Ministry is issuing hollow words, as “sprinkling,” poisoned products and intellectual property theft in China is dramatically increasing and not at all decreasing.