Dear ERAI Members and Colleagues,

It seems that 2016 has flown by in a flurry. The year was certainly tumultuous with a raucous election leaving many to wonder what 2017 has in store. Despite the political controversies, debates and protests that have polarized the nation, there is no better time for us to roll up our sleeves and work together. Just as false news and information taken out of context played a damaging role during this election cycle for all candidates, misinformation and lack of communication play a negative role in day-to-day business transactions.

These challenges call for a renewed spirit of cooperation. Now, more than ever, it is time to really get to know the organizations in your supply chain. Understanding a company's corporate culture can be as important as an organization's credit history. While technology, counterfeit detection and traceability/authenticity advancements are made and continue to progress, so do bad actors' methods. As in the case with many business e-mail compromise schemes, a simple phone call could have prevented a loss. Sometimes, a simple, human solution can be just as effective (or more) than a technological one.

With that said; however, we are excited to see how new advancements will continue to progress in the coming year, such as DARPA's SHIELD program and further applications of Applied DNA Sciences proprietary technologies. Along with further government efforts and the continuous development of standards by and for industry, 2017 promises to shape into an interesting year.

As the year ends, we would like once again to thank you for your continued support. The staff at ERAI wish you and your family a safe and Happy Holiday season and a Happy New Year!

Anne-Liese Heinichen

2016 Annual Report

By: Damir Akhoundov

Please note: The data contained in this report for 2016 includes parts reported to ERAI from January 1, 2016 through December 20, 2016.

In the beginning of 2016 it appeared that the semiconductor market was experiencing a slight slowdown with projected earnings being less than 2015; that changed in the second half of the year. "The global semiconductor market has rebounded in recent months, with October marking the largest year-to-year sales increase since March 2015," said John Neuffer, President and CEO, Semiconductor Industry Association. "Additionally, SIA endorsed the WSTS Autumn 2016 global semiconductor sales forecast, which projects the industry's worldwide sales will be $335.0 billion in 2016, a 0.1 percent decrease from the 2015 sales total."i

In the past, ERAI observed the numbers of parts reported to the ERAI High Risk and Suspect Counterfeit Parts Database followed very closely the overall state of the semiconductor market. The number of parts reported in 2016 was 1011 versus 1138 parts reported in 2015, showing a slight decrease. It remains to be seen if the rate of reporting will also increase following the recent uptick in semiconductor sales, although the historical data seems to indicate that this is usually the case.

We also looked at the categories of parts that were reported to ERAI in 2016 and compared it to last year's data as well as the last 10 years. The majority of parts listed in ERAI High Risk and Suspect Counterfeit Parts Database fit into 3 categories:

Nonconforming – A part that displays one or more nonconformance(s).

Suspect Counterfeit - A part that displays one or more nonconformance(s) and shows evidence of counterfeiting.

Nonconforming/Suspect Counterfeit - A part that displays one or more nonconformance(s) and shows evidence this it is a used part sold as new.

We observed that although the number of parts considered "Suspect Counterfeit" (SC) remains high (around 50% in 2016 and 2015 and slightly higher overall in the last 10 years), the ratio of Nonconforming and Nonconforming/Suspect Counterfeit parts has been changing over time with the Nonconforming/Suspect Counterfeit parts designation growing. One reason for this dynamic is likely the result of more stringent regulations and standards that make parts previously designated as nonconforming to be marked as NC/SC. It can be argued that the limited testing conducted to identify the nonconformances prevents many of the parts to be labeled SC due to an insufficiency of evidence. If, for example, the parts fail a basic visual inspection due to obvious signs of previous use, they can only be labeled NC or possibly NC/SC based on that evidence. However, if more detailed tests were conducted, additional evidence may have indicated that the part is, in fact, Suspect Counterfeit.

The types of components reported to ERAI were remarkably similar to last year with the same four part categories (Microprocessor IC; Analog IC; Memory IC; and Programmable Logic IC) comprising 68% of all parts with the other 26 categories trailing far behind (Note: In 2015 the four categories accounted for 64% of all parts reported).

When examining the manufacturer's brand marked on parts reported to ERAI, we once again see that Xilinx is the brand most frequently targeted by counterfeiters and totals 10.6% of the parts reported to ERAI in 2016. A total of 16 manufacturers' brands account for as many parts reported to ERAI in 2016 as the rest of the 160 other manufacturers' brands combined. The list of the manufacturers most frequently targeted by counterfeiters remains largely unchanged from previous years.

Analysis of parts previously reported by ERAI has revealed once again that the majority of the parts reported in 2016 (79.1%) were new occurrences that were not previously reported to ERAI. Of the remaining 20.9%, more than half were reported previously only once, and the rest were reported multiple times in the past. These numbers are remarkably similar to last year's observation (in 2015, 79.8% were newly reported while 20.2% were previously reported parts). This indicates that new suspect/counterfeit parts are constantly entering the electronic supply chain and the threat of encountering a nonconforming part that has not previously been detected remains very high, making reporting a crucial step in counterfeit control. Organizations are encouraged to report nonconforming parts to ERAI as part of their routine.

We then examined the types of organizations that are reporting parts to ERAI. We compared 2016 numbers to 2015 and the last 10 years' of ERAI data. The two types of entities that consistently provide the most reports to ERAI are Independent Distributors and Test Labs. Between the two, they accounted for 93% of reported parts over last 10 years; 95% in 2016 and 96% in 2015. Remarkably the number of parts reported by all other types of companies (such as OEMs, CMs, Franchised Distributors, etc.) has either remained unchanged or declined in the last two years, despite government mandates and regulations and industry standards requirements.

After examining the types of organizations that report nonconforming parts to ERAI, we analyzed the reporting companies' geographic location. The data indicated that although historically the vast majority of parts were reported to ERAI by US-based companies (67.8% of parts reported in the last 10 years), the number of parts reported by non-US companies has grown steadily in recent years. In 2016, US-based companies contributed 62.6% of reported parts but only 53.8% in 2015. The rest of the nonconforming part data was contributed by companies from China (close to 30% in both 2016 and 2015, compared to less than 20% in the last 10 years, indicating a higher participation in recent years), and Europe (UK, France and Germany contributing close to 10% combined yearly). Counterfeit parts are a world-wide threat to the electronic supply chain and can only be countered with a truly international effort.

The next data set examined was the geographic location of the suppliers of the parts reported to ERAI (in cases when the supplier information was available). We compared the geographic locations of the suppliers of the parts in 2016 vs. 2015 and further compared these numbers to those of the entire database over the last 10 years. Interestingly, we found that although historically the majority of suppliers of suspect/counterfeit parts were organizations located in China, the last two years indicate that companies located in the US now constitute the majority of suppliers of nonconforming parts reported to ERAI (49% in 2016 and 47% in 2015). China-based companies were a distant second source for non-conforming parts (20.6% in 2015 and 16.4% in 2015). These findings are quite alarming and certainly support the notion that simply not sourcing parts from China-based companies is not a sufficient strategy to avoid suspect/counterfeit parts.

We would like to thank those organizations who supply data to ERAI. We are constantly working on providing meaningful and useful data to our members. If you have any questions or would like to see any statistical data that has not been covered in this report, please contact Damir Akhoundov at damir@erai.com and we will do our best to provide the information to you.

i Rosso, D. (2016, December 5). Global Semiconductor Sales Increase 5 Percent Year-over-Year in October; Industry Forecast Revised Upward. Retrieved December 20, 2016, from http://www.semiconductors.org/ news/2016/12/05/global_sales_report_2015/ global_semiconductor_ sales_increase_5_percent_year_over_year_in_october_ industry_forecast_revised_upward/

Advancement in Counterfeit Avoidance to Watch in 2017

The dangers posed by counterfeit parts by now are well-known, especially in the defense and aerospace sectors. From e-waste that is resold as new to clones which can include hidden functions, counterfeit parts can adversely affect missions and endanger lives.

In 2014 the Defense Advanced Research Projects Agency (DARPA) announced the creation of the Supply Chain Hardware Integrity for Electronics Defense (SHIELD) program. The goal of SHIELD is the development of a miniscule component, or dielet, to authenticate the provenance of a component in an effort to eliminate counterfeit components from the defense and commercial chains of supply.

This dielet would be placed onto a component's packaging by the component manufacturer without requiring any changes to the component's design. The dielet, roughly the size of Abraham Lincoln's head on the back side of a pennyi, measures approximately 100 microns by 100 microns and can be placed on the surface of a component as it does not require an electrical connection between the component and the dielet. If removed, the dielet would become inoperable.

Three agencies were awarded contracts in the SHIELD program: $12.3 million to Northrop Grumman Systems, $6.8 million to SRI International and $4.1 million to the Charles Star Draper Laboratory in 2015.

In May of 2016, Northrop Grumman demonstrated the dielet at the DARPA Demo Day. With the help of RFID Global Solution, the dielet is enabled through proprietary Visi-Trac software to enable users to validate the authenticity of the parts. The entire system consists of the dielet containing an encrypted ID number with a built-in sensor, an RFID reader and Visi-Trac software.

To detect temperature exposure to see if a part was exposed to a manufacturing process, Sandia Labs is creating a thin-film temperature sensor. This sensor would undergo a change to its electrical resistance and could be read by the RFID reader. Once detected by the RFID reader, the user would be aware that the temperature had risen to at least 220 degrees C/392 degrees F and could indicate the part was previously used. The RFID reader is currently being developed by NoiseFigure Research while the Georgia Tech Packaging Research Center is developing a dicing and handling method for the dielets.ii

Development of the dielet has been parsed into three phases with full-scale production and deployment slated to begin in 2019:
  • Phase 1 through July 2016: Development of the technology on a basic level with a demonstration.
  • Phase 2 through January 2018: Fabrication of the dielet with full end-to-end authentication and manufacturing of 1,000 dielets for placement.
  • Phase 3 through January 2019: Insertion of the dielet, deployment and testing of the SHIELD system by manufacturers.
Northrop is currently performing work in Maryland, New Mexico, California, Virginia, Texas and Georgia through January 2018 through a potential $7.2 million contract modification for phase two development.iii

i http://www.rfidjournal.com/articles/view?14524

ii http://www.rfidjournal.com/articles/view?14524

iii http://blog.executivebiz.com/2016/07/northrop-gets-darpa-contract-modification-for-counterfeit-ic-detection-microchip/

Join ERAI, Counterfeit Part Avoidance, Detection, Disposition and Reporting Follow ERAI on Twitter(@ERAI_Inc) Like ERAI on Facebook Follow ERAI on Slideshare www.erai.com

Applied DNA Sciences Continues DLA Contract

By: Mary Dunham

Applied DNA Sciences has been awarded a one-year firm-fixed price Indefinite Delivery Purchase Order contract for FSC 5962 microcircuits by the US Defense Logistics Agency. According to the announcement made by the company on November 15, 2016, the contract ensures support and continuation for their current DNA program, which has been in place since December 2014 at DLA's Land and Maritime facility in Columbus, Ohio. The new contract calls for Applied DNA Sciences to provide supplies and services for DNA marking; create their SigNature® DNA marks; QC authentication testing; ink and supplies; and training. The new contract will run for one year and has an additional one-year option period.

The system uses plant DNA to forensically mark items so that the item's provenance can be traced. The DNA is suspended in a tiny dot of epoxy ink that is applied pneumatically and heat-cured, and has been proven to withstand demanding conditions. Once applied, the mark is scanned by the end-user. According to Applied DNA Sciences, the DNA provides a unique signature that counterfeiters cannot duplicate and there are additional levels of security and complexity built into the system to prevent reverse-engineering.i

The markers are custom manufactured to identify a class of individual products or items. Each individual marker is recorded and stored in a secure database. A single SigNature® DNA marker can be authenticated approximately 10 times in its lifetime so can be identified for years.

Since being established, the DLA's Land and Maritime Product Test Center's DNA-marking lab has marked more than 120,000 microcircuits that support numerous military applications. More than 700,000 microcircuits have been DNA marked and are in circulation.ii In addition to microchips, this marking technique is being used on electrical and electronic components, bearings, vehicle components, engine parts, pipes, tubing, hoses and fittings and hardware and abrasives. Applied DNA Sciences is looking to introduce the technique to a wider range of commodities so that traceability can be established and prevent counterfeit products from entering supply chains.

Applied DNA Sciences completed two additional contracts by the end of August 2016: one for the Missile Defense Agency Small Business Innovative Research (SBIR) and one for the office of the Secretary of Defense – Rapid Innovation Fund (RIF).

The SBIR allowed the company to continue their focus on microcircuits and scale-up of the business model to support volume at the point of manufacture.

The RIF expanded on the current DNA program for FSC 5962 microcircuits to establish a single authentication platform for: Electrical and Electronic Equipment Components; Bearings; Vehicular Equipment Components; Engine Accessories; Pipe, Tubing, Hose and Fittings; and Hardware and Abrasives.iii The RIF provides increased capacity and enables expanded marking and authentication options across a wider range of commodities. RIF also offers varied levels of customization for manufactures to incorporate DNA at differing points in their processes, effectively providing more capability over a wider number of products.iv

Applied DNA Sciences recently entered into an agreement with ActionPak, Inc. (a provider of packaging services for both commercial and military customers) to provide tamper-evident labels combining SigNature®DNA marks and Beacon, the company's "locked optical marker" for real-time inspections. Beacon provides covert screening that can be applied to packaging, labels and valuable assets through inks and varnishes, using a patent-pending "unique encrypted mechanism"v. ActionPak had previously worked with Applied DNA Sciences in a pilot project for forensic authentication and tracking solutions under the Department of Defense's RIF program. Initially, ActionPark will be using the system for their military suppliers but are looking to expand the technology to their entire customer base in the future.

James Hayward, Applied DNA President and CEO, stated:

"Together, these contracts have strengthened our core capabilities to offer supply-chain solutions across an expanded range of crucial commodities. These parts and assemblies are used in defense, industrial and consumer markets."vi

i "The Pentagon Uses Plant DNA to Catch Counterfeit Parts"; Kyle Mizokami; November 21, 2016

ii "DNA Marking Technology Improves Quality Through Fraud Prevention:, Michael L. Jones, DLA Land and Maritime Public Affairs; September 29, 2016; http://www.dla.mil/AboutDLA/News/NewsArticleView/Article/958928/dna-marking-technology-improves-quality-through-fraud-prevention/

iii "APDN Awarded Contract by the U.S. Defense Logistics Agency"; press release; November 15, 2016

iv "DNA Marking Technology Improves Quality Through Fraud Prevention:, Michael L. Jones, DLA Land and Maritime Public Affairs; September 29, 2016; http://www.dla.mil/AboutDLA/News/NewsArticleView/Article/958928/dna-marking-technology-improves-quality-through-fraud-prevention/

v "Following big deal, Applied DNA gets defensive", Gregory Zeller, November 18, 2016.

vi "Following big deal, Applied DNA gets defensive"; Gregory Zeller, November 18, 2016.

Learn More: How botanical based DNA is being used to forensically mark, validate and authenticate parts.

U.S. Government Looks to Maintain Semiconductor Manufacturing Lead

By: Anne-Liese Heinichen

On October 31, President Obama's Council of Advisors on Science and Technology (PCAST) announced the creation of a working group whose aim is to fortify the national semiconductor industry to strengthen the United States' economy and national security.

The semiconductor industry employs approximately 250,000 workers, is the third largest source of U.S. manufactured exportsi making it the leading provider of semiconductors to the world with a majority of global market share.ii

The goal of PCAST is to identify the core domestic and international challenges facing the industry, identify major opportunities for sustaining U.S. leadership and deliver a set of recommendations and actions to Government, industry and academia.iii

"SIA welcomes this timely announcement, given new challenges facing the U.S. semiconductor industry, including unprecedented government investment programs from some countries and the increasing technological complexity involved in achieving new innovation breakthroughs. These developments have implications not only for the economy and society, but also national security."

John Neuffer, President of the Semiconductor Industry Association (SIA)

Among these challenges is China's push towards self-reliance through multiple government-led initiatives such as "Made in China 2025", "Internet Plus", "National IC Fund" and the 13th Five-Year Plan to strengthen domestic production and intensify investment in joint ventures and international investments. While China's manufacturing capabilities are strong given the large scale of Chinese resources, its global market share of semiconductor production was estimated at only 4% in 2015.iv Accordingly, China was the top market for U.S. semiconductors during the same year representing $98 billion of nearly one-third of total global shipments.v

In its November 2016 Annual Report to Congress, the U.S.-China Economic and Security Review Commission cited examples of U.S. companies who formed partnerships with Chinese firms under pressure from the Chinese government. The report additionally named notable Chinese bids and acquisitions of U.S. firms by Chinese enterprises, including the failed attempt by the Tsinghua Unigroup to purchase Micron Technologies for $23 billion earlier this year. In August 2016, Tsinghua did, however, acquire majority holdings in XMC, a Chinese chip manufacturer, resulting in the creation of Yangtze River Storage Technology, China's largest chip maker estimated at $2.8 billionvi, bringing China one step closer towards their goal of economic independence.

While trying to maintain its leadership position, the U.S. Government also faces the challenges posed by counterfeit parts and cybersecurity concerns. Along with sabotage and supply chain disruptions, the Government has been forced to limit technology sales to China in the interest of national security, as was the case in 2015 with the Government blocking Intel from supplying Xeon microprocessors which could be used in the development of nuclear–related activities.vii

Although the Chinese market represents only half of U.S. semiconductor exports, U.S. manufacturers may face difficulties given China's renewed focus on independence and global competition. Further research and development, investment and revised policies will be needed to maintain innovation and economic advantage.

i Holdren, J. P. (2016, October 31). President's Council Launches Semiconductor Working Group. https://www.whitehouse.gov/ blog/2016/10/31/ presidents-council- launches- semiconductor- working-group

ii 2016 Top Markets Report – Semiconductors and Related Equipment, U.S. Department of Commerce, International Trade Administration, July 2016.

iiiHoldren, J. P. (2016, October 31). President's Council Launches Semiconductor Working Group. https://www.whitehouse.gov/ blog/2016/10/31/ presidents-council-launches- semiconductor-working-group

iv 2016 Top Markets Report – Semiconductors and Related Equipment, U.S. Department of Commerce, International Trade Administration, July 2016.

v Semiconductor Industry Blue Book December 2015 Administered by WSTS, Inc., Feb 1, 2016.

vi Kang, J. (2016, August 6). How China's New $2.8 Billion Chip Maker Will Affect The Global Semiconductor Industry. http://www.forbes.com/ sites/johnkang/2016/08/06/ how-chinas-new-2-8- billion-chip-maker-will- affect-the- global-semiconductor- industry /#1bb68a593ecd

vii Kan, M. (2015, April 10). US blocks Intel from selling Xeon chips to Chinese supercomputer projects. http://www.pcworld.com/ article/2908692/ us-blocks- intel-from- selling-xeon-chips-to- chinese-supercomputer-projects.html

DoD Issues Final Cyber Incident Reporting Rule

By: Mary Dunham

The Department of Defense ("DoD") published a final rule implementing mandatory cyber incident reporting requirements for DoD contractors and subcontractors on October 4, 2016. The rule became effective on November 3, 2016 and requires DoD contractors and subcontractors to report cyber incidents to the DoD within 72 hours of discovery.

It should be noted that these reporting requirements go beyond what contractors are required to report under all other applicable data breach notification laws and regulations or any other express contractual reporting or cyber incident response requirement. The final rule is in addition to these requirements and does not relieve the contractor or subcontractor of their obligations under those laws, regulations or contractual terms.

A cyber incident is defined as, "actions taken through the use of computer networks that result in a compromise or an actual or potentially adverse effect on an information system and/or the information therein."i

The final rule applies to, "all forms of agreements (e.g., contracts, grants, cooperative agreements, other transaction agreements, technology investment agreements, and any other type of legal instrument or agreement)."ii The requirement to report cyber incidents is to be included in all applicable contracts between the Government and the contractor.

In addition, the final rule requires that contractors flow down these same reporting requirements to applicable subcontractors who are required to report cyber incidents directly to the DoD and the contractor.

When a cyber incident is discovered, a review and investigation of covered defense information must take place to determine what has been compromised and rapidly report the incident to DoD at http://dibnet.DoD.mil. Costs associated with identifying, analyzing and reporting these incidents will be borne by the contractor or subcontractor.

In order to report cyber incidents, the contractor or subcontractor must obtain a DoD-approved Medium Assurance Certificate. These certificates typically cost $175.00 each. Please see http://iase.disa.mil/pki/eca/Pages/index.aspx for information on how to obtain the certificate.

What to report?

The final rule requires that contractors shall report as much of the following information as can be obtained to DoD within 72 hours of discovery of the incident:
  1. Company name
  2. Company point of contact information (address, position, telephone, email)
  3. Data Universal Numbering System (DUNS) Number
  4. Contract number(s) or other type of agreement affected or potentially affected
  5. Contracting Officer or other type of agreement point of contact (address, position, telephone, email)
  6. USG Program Manager point of contact (address, position, telephone, email)
  7. Contact or other type of agreement clearance level (Unclassified, Confidential, Secret, Top Secret, Not applicable)
  8. Facility CAGE code
  9. Facility Clearance Level (Unclassified, Confidential, Secret, Top Secret, Not applicable)
  10. Impact to Covered Defense Information
  11. Ability to provide operationally critical support
  12. Date incident discovered
  13. Location(s) of compromise
  14. Incident location CAGE code
  15. DoD programs, platforms or systems involved
  16. Type of compromise (unauthorized access, unauthorized release (includes inadvertent release), unknown, not applicable)
  17. Description of technique or method used in cyber incident
  18. Incident outcome (successful compromise, failed attempt, unknown)
  19. Incident/Compromise narrative
  20. Any additional informationiii
The final rule allows the contractor or subcontractor to update this information as more information becomes known.

Defense Industrial Base Cybersecurity Information Sharing Program

The final rule also made changes to the Defense Industrial Base Cybersecurity (DIB CS) information sharing program which is voluntary and open to eligible DOD Contractors. See 32 CFR §236.7 for participant eligibility requirements.

Under this program, the DoD is able to share both classified and unclassified information regarding cyber threat information and cyber security best practices to DIB participants. Its intent is "to provide participants with a better understanding of adversaries' actions and foster collaboration between the private sector and the Government."iv

i King and Spalding: Department of Defense Issues Final Cyber Incident Reporting Rule; October 20, 2016; Stephen Shin

ii 81 Fed. Reg. 68314

iii http://dibnet.DoD.mil/staticweb/ReportCyberIncident.html

iv Michael Scheimer, "Department of Defense Final Rule for the Defense Industrial Base Cybersecurity Program is Effective this Week", November 2, 2016

Update on Standards Development

As many of you may already know, ERAI staff members participate in various committees whose focus is the development of industry standards for distributors and integrators of electronics parts. Below is an update of the standards that are currently in development through SAE International.

SAE AS6171 issued by SAE G-19A Test Laboratory Standards Development Committee:
SAE International has just published AS6171 – Test Methods Standard; General Requirements, Suspect/Counterfeit, Electrical, Electronic and Electromechanical Parts. According to SAE, the standard was developed to, "provide uniform requirements, practices and methods for testing EEE parts to mitigate the risks of receiving or using SC [suspect/counterfeit] EEE parts."

SAE AS6171 was developed and released by SAE International's G-19A Test Laboratory Standards Development Committee, chartered in part to ensure consistency for test techniques and requirements throughout the global electronics supply chain. The standard consists of a master document and 11 accompanying slash sheets outlining test method requirements, each of which must be purchased separately. The slash sheets include:
  • AS6171 Test Methods Standard; General Requirements, Suspect/Counterfeit, Electrical, Electronic, and Electromechanical Parts
  • AS6171/1 Suspect/Counterfeit Test Evaluation Method
  • AS6171/2 Techniques for Suspect/Counterfeit EEE Parts Detection by External Visual Inspection, Remarking and Resurfacing, and Surface Texture Analysis Test Methods
  • AS6171/3 Techniques for Suspect/Counterfeit EEE Parts Detection by X-ray Fluorescence Test Methods
  • AS6171/4 Techniques for Suspect/Counterfeit EEE Parts Detection by Delid/Decapsulation Physical Analysis Test Methods
  • AS6171/5 Techniques for Suspect/Counterfeit EEE Parts Detection by Radiological Test Methods
  • AS6171/6 Techniques for Suspect/Counterfeit EEE Parts Detection by Acoustic Microscopy (AM) Test Methods
  • AS6171/7 Techniques for Suspect/Counterfeit EEE Parts Detection by Electrical Test Methods
  • AS6171/8 Techniques for Suspect/Counterfeit EEE Parts Detection by Raman Spectroscopy Test Methods
  • AS6171/9 Techniques for Suspect/Counterfeit EEE Parts Detection by Fourier Transform Infrared Spectroscopy (FTIR) Test Methods
  • AS6171/10 Techniques for Suspect/Counterfeit EEE Parts Detection by Thermogravimetric Analysis (TGA) Test Methods
  • AS6171/11 Techniques for Suspect/Counterfeit EEE Parts Detection by Design Recovery Test Methods
The standard is available for purchase from SAE at http://standards.sae.org/as6171/.

SAE AS5553 Revision C issued by SAE G-19CI Continuous Improvement Committee:
SAE AS5553 Revision B was published by SAE International on September 12, 2016. Intended for use by organizations that procure and/or integrate EEE parts and/or assemblies, the risk-based standard provides requirements for the mitigation of counterfeit EEE parts. Work on Revision C is anticipated in the beginning of 2017. A primary focus will be ensuring that the requirements of the standard are aligned with the specifications set forth in the U.S. Department of Defense, Defense Federal Acquisition Regulation Supplement: Detection and Avoidance of Counterfeit Electronic Parts – Further Implementation (DFARS Case 2014-D005), Part 252.246-7008 on August 2, 2016.

To purchase Revision B of AS5553, please visit: http://standards.sae.org/as5553b/.

SAE ARP6328 Revision A Guideline for Development of Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition Systems:
SAE ARP6328 was published along with SAE AS5553 Revision B on September 12, 2016. This aerospace recommended practices document was developed out of the appendices that were contained in Revision A of AS5553 and provide guidance for implementing a counterfeit mitigation plan for compliance to AS5553. The Committee is currently working on Revision A which will mirror the format of AS5553 and will address comments provided by various Committee members.

SAE AS6081 Revision A issued by SAE G-19D Distributor Committee:
AS6081 Revision A, for use by independent distributors, is currently under development. Work had been paused pending the publication of AS6171. The Committee is currently reviewing AS6171 and will begin finalizing work on AS6081 Revision A in anticipation of balloting.

SAE AIR6273 issued by the G19T Terms and Definitions Committee:
AIR6273 is currently in a 28-day ballot period through December 19, 2016. AIR6273 contains definitions relative to counterfeits from the standards developed by the G19 and G21 Committees. Since each individual standard currently contains definitions, the goal of AIR6273 is to provide a standardized set of terms and definitions to ensure consistency throughout SAE's anti-counterfeit standards.

Not a Member of ERAI?
To receive a glimpse of what you're missing, ERAI now offers a one-time free report. Learn more about a potential supplier or customer or receive a nonconformance part report from the ERAI High Risk and Suspect Counterfeit Parts Database.

Criminal Prosecution Updates

Xianfeng Zuo, one of three Chinese nationals operating as HK Potential Electronics in Shenzhen, China, was sentenced to 15 months imprisonment for conspiracy to traffic in counterfeit goods. Along with Jiang "Ben" Yang and Daofu Zhang, in 2015 the trio attempted to purchase Xilinx ICs which had military applications. Knowing that the ICs could not be exported outside of the United States with an export license, the 3 individuals unknowingly asked an undercover agent to steal the ICs from a U.S. Navy base and offered to provide counterfeit substitutes to conceal the theft.

Zuo is detained in New York and is scheduled to be released on January 10, 2017. Zhang is in detention in Pennsylvania and is also scheduled for release on January 10, 2017. Yang is currently awaiting sentencing scheduled on December 20, 2016.

Paul Skiscim, President of AeroSpec Fasteners, Inc. in Kings Park, NY, was arrested in February 2016 for continuing to sell defective and non-conforming airplane parts to the Government, despite being debarred in 2013. Skiscim allegedly made sales to the government totaling $2,800,000.00 through shell companies, including Sun Tech Air Parts, Aerocon Corp. and Specialty Components, Inc., registered in the name of relatives and fictitious people to hide his involvement. Skiscim pleaded guilty on September 7, 2016 to count one of an eight count indictment and is awaiting sentencing currently scheduled for February 23, 2017.

Major Criminal Complaints Filed by US Prosecutors Relevant to Electronics Industry

Name (Last, First) Company Name(s) Court Complaint Date (mm/dd/yy) Offense(s) Guilty Plea? Sentence Date (mm/dd/yy) Sentence
Wu, Zhen Zhou (Alex) Chitron Electronics MA 12/04/08 Munitions export violation
Commerce control export violation
Conspiracy to violate Munitions List & Commerce Control List
Conspiracy to file materially false shippers export declarations
No 01/26/11 84 months imprisonment
$15,000.00 fine
McCloskey, Stephanie VisionTech Components DC 09/14/10 Conspiracy and aiding and abetting Yes 10/28/11 38 months imprisonment
3 years supervised release
Restitution of $166,141.23 paid through forfeiture
Aljaff, Mustafa MVP Micro DC 08/21/09 Conspiracy to defraud United States
Trafficking in counterfeit goods
Yes 02/28/12 30 months imprisonment
Restitution $177,862.22 joint w/Felahy
Felahy, Neil MVP Micro DC 08/21/09 Conspiracy
Trafficking in counterfeit goods
Yes 3/16/12 20 months imprisonment
Restitution $184,612.57 joint w/Aljaff
Hashemi, Mohammad Excellent PetroAlloy South CA 08/14/12 Conspiracy to Export to Embargoed Country (Iran) Yes 12/16/13 27 months imprisonment
Yang, Hao MS Technologies Inc. MD 06/12/13 Conspiracy to traffic in counterfeit goods and counterfeit military goods No 04/23/14 21 months imprisonment, deportation
Forfeiture $59,000.00 cash and items valued at $280,720.00
Frediani, Steven InstoComp South FL 02/26/13 Conspiracy to commit aircraft parts fraud
Aircraft parts fraud
Yes 04/28/14 18 months imprisonment
12 months home detention with electronic monitoring
1400 hours community service
Restitution $229,494.24 joint w/Nichols
Nichols, Glenn InstoComp South FL 02/26/13 Conspiracy to commit aircraft parts fraud Yes 05/13/14 15 months imprisonment
Restitution $229,494.24 joint w/Frediani
Picone, Peter Epic International
CT 06/25/13 Conspiracy to traffic in counterfeit military goods Yes 10/08/15 37 months imprisonment
Restitution $325,088.00
Krantz, Jeffrey Harry Krantz CT 07/28/15 Wire Fraud Yes 12/10/15 3 years probation
$100,000.00 fine
$402,500 restitution joint w/Warga
Warga, Jeffrey Bay Components CT 12/10/14 Conspiracy to commit wire fraud Yes 01/22/16 3 years probation
$402,500 restitution joint w/Warga
Wren, Shannon VisionTech Components DC 09/14/10 Conspiracy
Trafficking in counterfeit goods
Mail fraud
Died May 2011
Flider, Pavel Semenovich Trident International
Flider Electronics
North CA 03/05/15 Smuggling goods
Conspiracy to commit money laundering
Money laundering
Yes Sched. 2/16/17
Brazhnikov Jr., Alexander ABN Universal
Telecom Multipliers
Electronics Consulting, Inc.
NJ 06/26/14 Conspiracy to commit money laundering
Conspiracy to smuggle goods out of US
Conspiracy to violate IEEPA
Yes 06/30/16 70 months imprisonment
3 years supervised release
Forfeiture seized assets
Mandatory drug/alcohol abuse treatment
Zhang, Daofu HK Potential Electronics CT 12/10/15 Conspiracy to traffic in counterfeit goods Yes 07/13/16 15 months imprisonment
Forfeiture of $63,000.00
Fishenko, Alexander Arc Electronics East NY 09/28/12 Acting as an agent without notifying Attorney General
Conspiring to export microelectronics to Russia
Illegally exporting microelectronics to Russia
Money laundering conspiracy
Obstruction of justice
Yes 07/21/16 120 months imprisonment
3 years supervised release
$1,900.00 fine
Forfeiture money and real estate assets
Mandatory drug/alcohol abuse treatment
Man, Wenxia (Wency) AFM Microelectronics South FL 08/21/14 Violation of Arms Export Control Act No 08/19/16 50 months imprisonment
2 years supervised release
Zuo, Xianfeng HK Potential Electronics CT 12/10/15 Conspiracy to traffic in counterfeit goods Yes 11/04/16 15 months imprisonment
Forfeiture of $63,000.00
Yan, Jiang (Ben) HK Potential Electronics CT 12/10/15 Conspiracy to traffic in counterfeit goods
Attempt to violate IEEPA
Yes Sched. 12/20/16
Skiscim, Paul AeroSpec Fasteners East NY 02/24/16 Fraud involving aircraft of space vehicles
Wire Fraud
False claims
Yes Sched. 02/23/17 Forfeiture of monies and real estate properties

White Paper Reviews

2016 Top Markets Report – Semiconductors and Related Equipment

Why you should read it: The U.S. Department of Commerce, International Trade Administration, Industry and Analysis staff released their 2016 report outlining US semiconductor manufacturing. While addressing the top five global markets, the report also names counterfeit semiconductors as a challenge faced by US exporters and states that, "many of these counterfeit semiconductors originate from China."

ERAI Insight: The United States is the global leading provider of semiconductors and the largest producer of semiconductor manufacturing equipment. The report provides an in-depth analysis of the top five markets that represent 70% of the semiconductor market and 90% of the semiconductor manufacturing market for U.S. exporters; of which, to no surprise, China is the largest and fastest growing market in both sectors. The report details market overviews and opportunities and addresses challenges and barriers for U.S. semiconductors in each individual market segment.

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Changes to Counterfeit Parts Regulations Merit Review, Revision to Industry Practices

Why you should read it: Robert Metzger's white paper addresses the August 2016 changes to DFARS including case 2016-D010 Costs Related to Counterfeit Electronic Parts and their "real world" consequences and costs to covered contractors.

ERAI Insight: It is clear that the government is listening to industry and is attempting to clarify and make regulations more practical for their suppliers. Organizations are forced to respond to changing requirements. Previously, contractors were liable for replacement of a counterfeit part and/or rework; new changes reduce the vulnerability of contractors provided that their counterfeit mitigation systems are reviewed and approved. Additionally, contractors now have the ability to establish long-term relationships with organizations once they become "contractor-approved suppliers".

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Articles You Can't Afford To Miss

Global Semiconductor Sales Increase 5 Percent Year-over-Year in October; Industry Forecast Revised Upward
http://www.semiconductors.org/ news/2016/12/05/ global_sales_report_2015/ global_semiconductor_sales_ increase_5_percent_year_ over_year_in_october_ industry_forecast_ revised_upward/

President's Council Launches Semiconductor Working Group

Chip trade group pledges to work with Donald Trump and fight for open markets

Department Of Defense Issues Final Cyber Incident Reporting Rule

Pentagon Pleads With Contractors to Step Up Fight Against Industrial Espionage

Worried about China, the US pushes for homegrown chip development

Citizen of China Sentenced to 15 Months in Prison for Trafficking in Counterfeit Computer Chips

Flaw in Intel chips makes users more susceptible to malware attacks

Following big deal, Applied DNA gets defensive