January 21, 2013 Huaqiang Square Hotel Shenzhen, China Mark A. Rinehart, Managing Director

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1 January 21, 2013 Huaqiang Square Hotel Shenzhen, China Mark A. Rinehart, Managing Director 2:00-2:15 Welcome 2:15-3:30 Presentation 3:30-4:00 Open Discussion 1

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3 Established in Employees in 3 South China Facilities ISO 9001:2008 Certified ANSI/ESD S Certified Member of IDEA-STD-1010 Revision Committee Specialist in Counterfeit Detection Providing testing, Inspection, Packaging, and Logistics services 3

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6 Reporting requirements mean a higher percentage of incidents are being reported so it looks like counterfeiting is on the rise Source of data for chart - IHS 1,336 reported incidences of counterfeit parts from September 2011 to August set a record for number of reported incidents and was marginally higher than 2011 Sources of data are IHS, GIDEP, and ERAI there still is not one definitive and complete source for this data Reported Incidents Reported Incidents

7 Counterfeit - A suspect part that is a copy or substitute without legal right or authority to do so or one whose material, performance, or characteristics are knowingly misrepresented by a supplier in the supply chain. Examples of counterfeit parts include, but are not limited to: Parts which do not contain the proper internal construction (die, manufacturer, wire bonding, etc.) consistent with the ordered part. Parts which have been used, refurbished or reclaimed, but represented as new product. Parts which have not successfully completed the Original Component Manufacturer s (OCM) full production and test flow, but are represented as completed product. Parts sold as upscreened parts, which have not successfully completed upscreening. Parts sold with modified labeling or markings intended to misrepresent the part s form, fit, function, or grade. Source AS5553 Counterfeit components can be defined as items produced or distributed in violation of international property right, copyrights, or trademark laws, or otherwise misrepresented in violation of intellectual property or other property laws, and electronic components whose materials, performance, or characteristics are knowingly misrepresented by the vendor, supplier, distributor, or manufacturer. Source CCAP-101 Counterfeit electronic components are electronic parts that are misrepresented as to their origins or quality. Source Wikipedia A fraudulent part that has been confirm to be a copy, imitation, or substitute that has been represented, identified, or marked as genuine, and/or altered by a source without legal right with intent to mislead, deceive, or defraud. Source AS6081 7

8 Refinished - Using postmanufacturing plating methods (such as solder dipping) to alter the plating composition on part s leads (or to complete the manufacturing process of connecting external bond wires). Refurbished - Parts that have been brightened, polished or renovated in an effort to restore them to a like new condition. Refurbished parts may have had their leads realigned and re-tinned. 8

9 Unused (New Surplus) - Electronic parts that have not been previously used (i.e. attached to a board or powered up since leaving the supply chain). A shipment of unused material can contain mixed date codes, lot codes, or countries of origin, and should be received in unused factory or third-party packaging. The material may have minor scratches or other physical defects as a result of handling, but the leads should be in good condition and should not be refurbished. The material should be guaranteed to meet the manufacturer s full specifications. Unused programmable parts should have no programming loaded. 9

10 Used (Refurbished or Pulled) - Product that has been electrically charged and subsequently pulled or removed from a socket or other electronic application. Used product may be received in non-standard packaging (i.e., bulk), and may contain mixed lots, date codes, be from different facilities, etc. Parts may have physical defects such as scratches, slightly bent leads, test dots, faded markings, chemical residue or other signs of use, but the leads should be intact. Used product may be sold with a limited warranty, and programmable parts may still contain partial or complete programming which could impact the part s functionality. Used parts marked as refurbished should be declared as such. NOTE BULK is a term for goods packed together loosely in a bag, it is a not a condition. BULK NEW means the parts are new but packaged together loosely in a bag. 10

11 Suspect Part - A part in which there is an indication by visual inspection, testing, or other information that it may have been misrepresented by the supplier or manufacturer. Fraudulent Part - Any suspect part misrepresented to the customer as meeting the customer s requirements. The device on the right has goldcolored leads but are actually only copper. These are medical connectors that require goldplated leads. This device was from the requested OCM but made counterfeit when remarked as the medical-grade device requested. 11

12 ISO 9001:2008 Quality Management Systems - Requirements ANSI/ESD S Electrostatic Discharge Control Program Standard AS9100 Quality Management Systems Requirements for Aviation, Space, and Defense Organizations AS9120 Quality Management Systems Requirements for Aviation, Space, and Defense Distributors IDEA-QMS

13 AS5553: Counterfeit Electronic Parts ; Avoidance, Detection, Mitigation, and Disposition (SAE) AS6081 Fraudulent/Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition Distributors (SAE) CCAP-101 Counterfeit Components Avoidance Program (CTI) IDEA-STD-1010B - Acceptability of Electronic Components Distributed in the Open Market (IDEA) 13

14 JEDEC (numerous) and Covers Manufacturing Criteria such as Marking Permanency, Packaging, and Solderability Military standards define test methods for different types of devices but do not specify which combination of parameters should be tested. There are different groups and subgroups for different reliability test methods. MIL-STD Electronic and Electrical Component Parts MIL-STD Test Methods for Semiconductor Devices MIL-STD Test Method Standard Microcircuits 14

15 Published by SAE in April, 2009 Require traceability to the OCM for every purchase Parts without traceability are required to be tested (compliance verification) Level of testing determined by risk assessment including application, product, and supplier risk Recommended test methods Use of approved suppliers, including testing providers, only with a strict supplier evaluation program including audits Counterfeit, and even suspect, parts are to be reported within 60 days of detection to agencies including government Seller advised what tests and approved testing facilities are to be conducted and approved by buyer Liability and insurance required, USD1,000,000 per occurrence is standard Suspected counterfeit product should be kept in quarantined and destroyed when proven to be counterfeit 15

16 Published by SAE in November, 2012 Recommends ARP6178 for Risk Assessment Introduces the term Fraudulent, although the handling is the same as counterfeit Required test and inspection methods Disclose source at the time of quotation Required product warranty of 1 year Introduces recommended use of golden samples Three levels of resurfacing testing Required to report incidents to GIDEP or other agencies within 60 days of occurrence Suspect and confirmed Counterfeit/Fraudulent place in quarantine for 5 years Definitions largely consistent with the AS5553 Evidence of resurfacing or remarking should require total lot rejection although not defined as counterfeit Testing facility (including in-house) is to be mutually approved between buyer and seller Traceability to the manufacturer preferred 16

17 Released by CTI in 2008 and updated in 2012 CTI is a private commercial company and, therefore, the standard is not accepted as an industry standard Some OEM/EMS require suppliers to be CCAP Certified First commercial attempt at a counterfeit parts detection standard Supplier must be ISO 9001 certified Detected counterfeit parts will be quarantined but not scrapped Required ESD compliance Packaging, storage, and shipment requirements Equipment calibration Test facilities must be disclosed to CTI but no mention of facility approval Not available outside of the United States Cannot source from China, India, or Africa for military and space applications Report counterfeit occurrences to CTI within 3 days of detection Specifies recommended testing levels 17

18 Published by IDEA in 2006 Specific to External Visual Inspection Discusses other methods for familiarity Requires certification of inspectors to IDEA-ICE-3000 Has gained widespread recognition at the OEM/CM/EMS level including NASA Only members and OEM/EMS/CM can achieve inspector certification but the standard is available for purchase Buyers may require IDEA membership or training certificate Objective is to identify evidence of fraudulent or counterfeit for disposition by management 18

19 Requirement AS5553 AS6081 CCAP-101 Standard Certification QMS Certification Supplier Approval Detection Methods No Optional Yes No No Yes Yes Yes Yes Yes Yes Yes Traceability Yes Yes No Supplier Disclosure No Yes No Reporting Yes Yes Yes 19

20 Method AS5553 AS6081 CCAP-101 External Visual Inspection Decapsulation Analysis Radiography Analysis Lead-finish Analysis Scanning Acoustic Microscopy Scanning Electron Microscopy Electrical Testing Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes No No Optional No No Optional No Optional Optional Level B Hermeticity Optional Optional No Thermal Cycle No Optional No Burn-in No Optional No 20

21 Signed into law in December 2011 Confiscation of Suspect and Counterfeit Parts All instances are required to be reported to the government and goods will be confiscated Increased jail terms for traffickers Buyers who do not complete due diligence are also liable Investigation of all reported incidents Requirements to incorporate a detection program but not yet defines what is suitable or how to detect 21

22 Do not ship counterfeit parts to the United States even if shipping for evaluation Document a Counterfeit Part Mitigation Policy, including definitions and disposition for suspect, fraudulent, and counterfeit parts Determine a detection program scalable by risk What standard is right for you based upon customer requirements and company strategic plan Incorporate those elements in your risk mitihation plan Designate a supplier evaluation and ranking plan Update your Quality Management System accordingly 22