Gray Market Electronics - Reaping What We've Sown
market electronics components have been a problem for a long time. An extensive article appeared recently in
EE Times reporting on a case based on a small operation in south Florida
that was importing and re-selling counterfeit parts to military, aerospace, medical, and other product
manufacturers. The Feds charged them "with conspiracy, trafficking in counterfeit goods and mail fraud for
knowingly importing more than 3,200 shipments of suspected or confirmed counterfeit semiconductors into the United
States, marketing some of the products as “military grade” and selling them to customers that included the U.S.
Navy and defense contractors." The good news might be that this particular scam operation was caught and stopped,
but the bad news is, according to the story, that many more are never prosecuted - largely because of typical
bureaucratic SNAFUs in government procedures.
A couple years ago I wrote a short piece on the
gray market problem, and surely it has only
gotten worse. Much of the blame can be placed squarely on the shoulders of our own production equipment vendors,
manufacturers (almost a misnomer anymore) and the technology export laws. The U.S. has been shipping know-how and
machinery overseas for decades, but in the 1990s, the pace accelerated significantly. Now, in 2011, there are
almost no significant restrictions on what kind of intellectual property (IP) or hardware can be sold or given
away to other countries. The first time I remember really being alerted to the gravity of the problem was when
reading in Aviation Week & Space Technology about Boeing and McDonnell Douglas setting up wing and empennage
assembly operations in China. That was the early 1990s. Not long thereafter, a story appeared telling about
composite material layup machinery being used to now manufacture the parts before the final assembly. Here in
Erie, Penn., the GE locomotive plant until recently used to design, build, and ship locomotives from the local
plant. A couple years ago they began shipping "kits" to China, where they would be assembled. With such an ample
supply of components that can be easily reverse engineered, China soon will not need GE's help at all to build
trains. The same scenario has played out with the semiconductor industry. A decade ago we could not sell overseas
the equipment for growing high purity GaAs boules, and could not sell a lot of the newest IC processing equipment.
Now, it seems anything is fair game for the right price.
Millions of dollars worth of fees have been paid
out to lobbyists on Capitol Hill to "persuade" legislators to change laws that have precipitated the problem. As
with so many other things, America is committing national suicide by selling off or even giving away all of our
proprietary technology. It's one thing selling it to long-time allies like England and Germany, but the government
of China is hard Communist, with no qualms about its goal of becoming the world's largest superpower - both
economically and militarily. Just a couple weeks ago I wrote about all of the technology we have given and are
still giving to Iraq and
Afghanistan - places still largely dominated by radical Muslim terrorists who publically threaten to slit our
throats and regularly kill our soldiers. A member of the royal Saudi family just offered a huge
bounty for the capture of an Israeli soldier (Israel is our only real ally in the Middle East). These are
among the countries we sell out our sovereignty to, and then act surprised when we discover that counterfeit
components are being manufactured and sold illegally here. Electronics is not alone in the mess; pharmaceuticals,
aircraft parts, clothing, and just about everything else is being sold on the gray market.
Many defense and
security analysts have voiced concern over the ability of foreign IC suppliers, both legal and illegal, having the
opportunity to design faults or a means of selectively usurping control into processors and programmable gate
devices. Inferior packaging can make parts more prone to premature failure due to fatigue, contamination, ESD
vulnerability, etc. Phony aircraft grade bolts that are significantly weaker than specifications have been
discovered in military and commercial aircraft after production. Scientific American magazine has published
multiple articles on the counterfeit drug problem. With all of these issues, the root causes can be traced back to
the U.S. (and other first-world countries) selling off both new and surplus equipment to the highest bidder. I
still remember back in the 1990s reading in disbelief about
Loral selling rocket stabilization technology to China - ostensibly for a commercial launch platform, but in
reality for ICBMs. Maybe the practice has been good for investors and CEO bonuses individually, but for the
country, the practice has been an unmitigated disaster.
The truly sad thing is that no matter how bad
things get, they are guaranteed to worsen because there's too much money and power involved to do anything about
it. Consumers will continue to demand dirt cheap products while complaining about manufacturing and innovation
disappearing in America, and about how politicians, in concert with industry leaders, will continue to see to it
that they are provided. Ultimately, the cost of this convenience is being paid for in a loss of personal freedom
and security. Pavlov rings his bell, and the dogs start drooling.
EE Times article, "Chip
counterfeiting case exposes defense supply chain flaw".
Posted November 3, 2011
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