Fake chips threaten military

Sep 14, 2010 By Steve Johnson

A growing deluge of millions of counterfeit chips is posing peril to the military and the general public -- and perhaps nothing illustrates it better than a scheme federal prosecutors recently revealed that stretched from Southern California to Silicon Valley.

Mustafa Aljaff and Neil Felahy, a Newport Beach pair indicted in October, have admitted importing from China more than 13,000 bogus chips altered to resemble those from legitimate companies, including Intel, Atmel, Altera and National Semiconductor. Among those buying the chips was the U.S. Navy.

It wasn't the first time the military has been hoodwinked. Separate studies this year by the Commerce Department and the Government Accountability Office concluded that the armed forces -- which use chips in everything from communications and to warplanes and missiles -- is alarmingly vulnerable to fakes.

Commerce officials partly blamed the Iraq and Afghanistan wars for diminishing the supplies of chips the military normally uses for equipment repairs and forcing it to rely on questionable dealers for replacement parts. Moreover, both studies cited serious flaws in the Pentagon's procedures for spotting sham components.

Whether any of the fakes sold by Aljaff and Felahy went into vital defense systems isn't clear. The Navy declined to comment, saying the case remains under investigation. Nonetheless, recent reports have described several close calls the military has had with bogus chips.

• Because the microprocessors it needed for its F-15 warplanes' flight-control computer were no longer made by the chips' original manufacturer, the military obtained them from a broker, only to discover they were counterfeit, according to the GAO's study in March. Air Force technicians spotted the bad chips before they were installed on the planes' computers.

• That same month, Tobyhanna Army Depot in Pennsylvania discovered it had malfunctioning chips intended for use in military communications systems. "The counterfeit chips failed during testing" and weren't put on any equipment, said depot spokesman Anthony Ricchiazzi.

• In November of last year, a Florida business that makes a device to keep injured pilots from becoming entangled in their parachutes reported finding a counterfeit chip in one of the devices and other fakes in its supply chain. None of the devices were known to have failed, however.

But it's not just the military that's at risk. Chips perform key roles in countless commercial products, as well as phone links, banking networks, electronic grids and nuclear power plants. Given the flood of phony chips, said Diganta Das, a University of Maryland expert on the subject, "we can be assured that we have counterfeit parts in all kinds of systems."

Just ask Billoo Rataul, CEO of Paramit, a contract electronics manufacturing firm in Morgan Hill. Three years ago, his company went to a broker to buy hard-to-find chips and installed them in a Bay Area firm's medical devices. When the equipment began failing at hospitals, he discovered the chips were fakes.

Although the problem was caught before patients were affected, "scores of machines were impacted," said Rataul, who declined to identify the company and the medical device involved. As a result, Paramit has intensified its efforts to watch for counterfeits because "there is a lot of this stuff floating around."

That was seconded by Don Trenholm, a New Hampshire-based chip-failure analyst. A few months ago, he bought a liquid crystal display for a computer, only to see it suddenly stop working. When he dismantled it to learn why, he found it contained several fake chips.

"It scares me," Trenholm said. "The chance of a counterfeit component showing up on a commercial product is getting better and better."

From November 2007 through May 2010, U.S. Customs officials said they seized 5.6 million bogus chips. Yet many more are finding their way into the U.S. and even the military, which federal officials consider especially worrisome because it could affect national security.

To withstand the rigors of battle, the Defense Department requires the chips it uses to have special features, such as the ability to operate at below freezing temperatures in high-flying planes. And because it pays extra for such chips, experts say, it has become a prime target for counterfeiters.

The Commerce Department turned up 3,868 incidents in 2005 in which the military and its suppliers had encountered counterfeit electronics -- the vast majority of chips -- with each incident potentially involving thousands of phony circuits. By 2008, the most recent data sought, the number had soared to 9,356.

Counterfeiters -- many of them based in China -- often tear apart scrapped computers to obtain chips, which they then mislabel to appear suitable for jobs that exceed the parts' capabilities. That can result in the components suffering dangerous glitches.

Asked whether any military equipment had malfunctioned because of fake chips, Tonya Johnson, a spokeswoman for the Defense Logistics Agency, which buys most of the military's electronic components, said she knew of no such cases. Besides, she said, her agency "has a series of checks and balances in place to block the flow of nonconforming or counterfeit parts from entering the supply chain."

Nonetheless, the Commerce Department study found 14 military organizations, including three with the Defense Logistics Agency, that "reported encountering counterfeit parts in some form."

The recent convictions of Aljaff and Felahy drew praise from the Semiconductor Industry Association, which urged the government to continue cracking down on such offenses, "given the potential for catastrophic injury and damage from failure of a counterfeit microchip." But when it formally commented in March on a federal plan to combat such crimes, the group took issue with the government's enforcement methods.

Customs used to ask legitimate chipmakers to help it check out suspected parts. But it stopped that two years ago, fearing it could be prosecuted for revealing confidential information about the seller of the parts to another company. Since then, the association noted, there has been a "dramatic decrease" in fake-chip seizures. Customs officials told the San Jose Mercury News they are seeking a legal way to once again get help from firms.

Other serious roadblocks deter the detection of counterfeits within the military, according to the Commerce Department. It found the armed forces had no reliable method for tracking bogus chips and that numerous attempts to warn authorities about counterfeits "have fallen on deaf ears."

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User comments : 23

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jdbertron
1.9 / 5 (13) Sep 14, 2010
Wow. Let's lump together all the definitions of bogus, inferior, malicious and counterfeit. Because obviously our military should pay top dollar for anything it buys since it's rolling around in pools of money.
There's nothing wrong with generic drugs or generic chips. You make it sound like the manufacturers purposely makes fake chips out of bubble gum.
Finding out that the chips don't meet the requirements set by contract is the responsibility of the buyer.
nada
4.6 / 5 (10) Sep 14, 2010
Since when is "counterfeit" and "not meeting requirements" synonymous? Counterfeit is criminal deception. So your point is pointless.

The real point is that we are selling our enemies the rope to hang us with. Don't forget to vote for the bush tax cuts to reward those who have gotten rich by shipping our manufacturing, engineering and intellectual property over to a country that manipulates the currency market and requires business to buy 50% of their parts within the borders.
yyz
5 / 5 (7) Sep 14, 2010
"There's nothing wrong with generic drugs or generic chips. You make it sound like the manufacturers purposely makes fake chips out of bubble gum."

Did you miss this:

"Counterfeiters -- many of them based in China -- often tear apart scrapped computers to obtain chips, which they then mislabel to appear suitable for jobs that exceed the parts' capabilities."
TehDog
5 / 5 (7) Sep 14, 2010
"There's nothing wrong with generic drugs or generic chips. You make it sound like the manufacturers purposely makes fake chips out of bubble gum."

Did you miss this:

"Counterfeiters -- many of them based in China -- often tear apart scrapped computers to obtain chips, which they then mislabel to appear suitable for jobs that exceed the parts' capabilities."


And this?
"To withstand the rigors of battle, the Defense Department requires the chips it uses to have special features, such as the ability to operate at below freezing temperatures in high-flying planes. And because it pays extra for such chips, experts say, it has become a prime target for counterfeiters."
FredJose
4.7 / 5 (3) Sep 14, 2010
Finding out that the chips don't meet the requirements set by contract is the responsibility of the buyer.

Sure it IS the buyers responsibility. But that's only because in todays world nobody can be trusted. Even if under contract. There still remains the remedy of "failure to perform" that discourages people from being totally and truly dishonest.
Now who's to say that people should be honest in the first place?
Who makes the rule that people's word should be their bond? In other words who's there to tell people to not lie, steal, cheat, murder, rape and exploit to the uttermost?

Zed123
5 / 5 (5) Sep 14, 2010
There's nothing wrong with generic drugs or generic chips. You make it sound like the manufacturers purposely makes fake chips out of bubble gum.


I think the bigger issue here is the potential for malicious people to implant a type of hardware Trojan into these chips. If a chip like that was then installed in a military communciations syetem or other such sensistive system, it could be very bad indeed.
NickFun
5 / 5 (1) Sep 14, 2010
The military is always looking for the best "deal" and they have not learned the proverb, "if it sounds too good to be true, it probably is". As`long as they are looking for cheap and don't investigate their suppliers this problem will keep happening.
Eric_B
3.7 / 5 (3) Sep 14, 2010
they need the best deals to cover for the siphoning off of funds that they are doing all day long and still build killing machines.

the black budget is only 1.2 trillion per year on top of what is on the books.
rgharakh
5 / 5 (3) Sep 14, 2010
This is really disturbing. It shouldn't be the buyers responsibility to check every single product they purchase. You sign the contract agreeing to what will be provided. The US needs to really get on China's ass. There's too much blatant disregard for acceptable business practices coming from them especially since we're their biggest buyers.
Jonseer
3 / 5 (4) Sep 14, 2010
This whole scandal was reported in greater detail in Business Week a year or two ago.

It didn't make the mainstream press.

So here it is again, discovered as new by yet another reporter.

This whole problem stems from a Clinton era change in military procurement.

In order to cut costs, the military was encouraged to buy off the shelf components as much as possible rather than commission every single thing they need.

Needless to say the military procurement staff has not been up to the task, nor made any effort to use common sense distinguishing good stuff to buy off the shelf and other stuff that should be custom commissioned.
TheQuietMan
5 / 5 (2) Sep 14, 2010
You buy from reputable manufacturers (not dealers), and you get what you pay for. Mil spec has been around for a long time. I agree out sourcing is the root of the issue, core industries need to stay local, as in the United States or Canada. Anything else is bullcorn.
TehDog
not rated yet Sep 14, 2010
This whole scandal was reported in greater detail in Business Week a year or two ago.

It didn't make the mainstream press.

So here it is again, discovered as new by yet another reporter.

This whole problem stems from a Clinton era change in military procurement.

In order to cut costs, the military was encouraged to buy off the shelf components as much as possible rather than commission every single thing they need.

[snip]


So, The US military should have built their own chip fabrication plants, plus hired development teams to duplicate existant chip designs, hopefully avoiding any patent or copyright problems. Bit pricey that.

This story is about quality control, not conspiracy and certainly not politics.
FainAvis
5 / 5 (1) Sep 15, 2010
At the hardware store I asked for a wrecking bar.
The store owner said he had good ones and cheap ones.
I said, "I'll have the good one because I will only be wrecking good stuff."
Sancho
not rated yet Sep 15, 2010
Any nation that relies on silicon for its national security has built its defense establishment on a foundation of sand.
TheQuietMan
5 / 5 (1) Sep 15, 2010
Any nation that relies on silicon for its national security has built its defense establishment on a foundation of sand.


Cute, but not very true. Warfare has changed quite a bit. Boots on ground are critical, but if they can see what the enemy can't see, sense what the enemy doesn't want known, be invisible to the enemy, and deliver pin point strikes their effectiveness is enhanced off the charts.
kirkamr
5 / 5 (3) Sep 15, 2010
I said it when I worked for Mostek in the 70s, "using chips manufactured outside of the US in military systems was asking for trouble." Moving vital manufacturing capabilities offshore was the stupidest thing this country has ever done. Making money should never have taken priority over our security. Politics and greed, there you go; you got what you paid for. This began way before Clinton.
O2BOOM
not rated yet Sep 15, 2010
Finding out that the chips don't meet the requirements set by contract is the responsibility of the buyer.

Sure it IS the buyers responsibility. But that's only because in todays world nobody can be trusted. Even if under contract. There still remains the remedy of "failure to perform" that discourages people from being totally and truly dishonest.
Now who's to say that people should be honest in the first place?
Who makes the rule that people's word should be their bond? In other words who's there to tell people to not lie, steal, cheat, murder, rape and exploit to the uttermost?



Even if you could trust everyone, sometimes mistakes are made or a glitch happens in the manucture. If the military procurement is being overseen by people that are too stupid to properly buy stuff and then there are no checks made then maybe some people need to be replaced?
freethinking
1 / 5 (3) Sep 18, 2010
Will anything be done by the US regarding Chinese counterfits? Not likely.... which party has received the most money (legally and illegally) from China? Democrats!

Outsourcing to third world countries very seldom if ever really saves companies money. I've been involved/seen this several times by several companies. That and its well known that if you outsource to China, the Chinese Government will know more about your product and business than you will.
Au-Pu
1 / 5 (1) Sep 19, 2010
The answer is so simple.
Contractors who win defence contracts must as part of that contract continue to manufacture parts for a specified period beyond the actual contract.
AND the defence department buys its replacements ONLY from its original supplier.
Not difficult at all.
KBK
1 / 5 (2) Sep 19, 2010
The military needs to do as Arnie did in "Conan", when he was at the market buying some 'black lotus' (opium laced hashish).

"This better not be Hagga!" he says to the seller.

The seller looks at him and says, "Would I sell Hagga... to a slayer such as you?".

That is the point that the military needs to make.

Penalties.

Real ones.
vonrock
not rated yet Sep 19, 2010
We aren't making our own chips ??
TehDog
not rated yet Sep 21, 2010
If by "we" you mean the US, then in general, no. Most semiconducter production is based in taiwan or china.
This includes the FPGA's used in modern military systems.
http://en.wikiped...te_array
TehDog
not rated yet Sep 21, 2010
Ah crap, I actually follow some links and find the top two FPGA companies (according to wiki, open to edit), are based in the US...
http://en.wikiped...te_array
More research needed on my part.