Interview: Dale Lillard, President of Lansdale Semiconductor

NF: I understand that counterfeits have become a major topic at the military-sponsored Diminishing Manufacturing Sources and Material Shortages (DMSMS) and Standardization Conference (most recently held in Hollywood, FL from August 29th through September 1st).
DL: Yes, but counterfeit parts are not just a DMS problem. While counterfeits are often found in the supply chain when a part has been categorized as DMS, they are also common when a part is still available in the market. According to Barry BirdsongQuality, Safety, and Mission Assurance Directorate Parts and Materials Program Manager for the Missile Defense Agencyonly four of the eight counterfeit components found since 2004 were considered DMS. The other four were still available from manufacturers. This is a result of a faulty procurement process that historically purchased product of unknown origin from the lowest bidderwith no regard for the system risk and possibility of failure that could be caused by counterfeits.

NF: Do you think counterfeit warnings can encourage people to be more cautious about how they procure products?
DL: The reality is if a legitimate component is not on the shelf at an authorized distributor when it is neededand for the same or a better price than it has been procured for in the pastthen the component is often sourced outside authorized sales channels to meet the required delivery schedules and costs. This standard purchasing process increases the possibility of receiving counterfeits. The solution is to plan far enough ahead to give your procurement department enough lead time and pricing flexibility to purchase through authorized sales channels and from legitimate aftermarket manufacturers. Lead times for DMS products often are lengthy. But given time, good product can be sourced. The major distributors, such as Avnet and Arrow, recognize the problem and have aligned with aftermarket manufacturers to ensure that legitimate product can be provided.

NF: Do you think counterfeiting is getting worse in the semiconductor space?
DL: There has been a substantial increase in the last three years of counterfeit integrated circuits (ICs). There are many more parts being counterfeited, and they are harder to identify.

NF: What is being done to deal with this problem from both an industry and government perspective?
DL: Industry and government have recognized the risks and are taking action to mitigate the procurement of counterfeits. Defense contractors are making more of an effort to purchase from authorized sales channels when possible. Distributors have been forced to be both police and investigators to ensure that their customers receive legitimate product. So they are implementing processes to evaluate product that is suspect.

An entire industry now exists just to provide investigation tools and services to identify bad product. The Defense Supply Center Columbus (DSCC) has instituted a qualification process for distributors and brokers, supplying products to them that help to prevent counterfeits. The government has also stepped up its efforts to stop counterfeiting, recognizing its negative impact on defense and commerce and that it is a danger to public health, public safety, and fair competition.

NF: Do these steps echo what is being done to combat counterfeit products in general?
DL: John Morton, Director of US Immigration and Customs Enforcement, confirmed that the government is stepping up its enforcement efforts against counterfeit products in general. All industriesincluding software, pharmaceuticals, medical supplies, and semiconductorsare affected. Recently, there have been 20,000 seizures, 2000 cases of counterfeits, and 365 arrests. Morton estimates that 40% of the supply chain is affected by counterfeit parts. He urged the reporting of any counterfeits to the National Intellectual Property Rights Coordination Center by calling (866) IPR- 2060 or (703) 603-3800, or by sending a fax to (703) 603-3872.

For more information on how and what to report, go to www.iprcenter.gov. The IPR Center coordinates investigations with federal, state, local, and international law-enforcement agencies. The IPR Center encourages members of the general public, rights holders, trade associations, law enforcement, and government agencies to report instances of intellectual-property (IP) theft to them for prompt action.

NF: Aside from the parts themselves being faulty and all of the repercussions of their failure to perform, what problems have been caused by counterfeit ICs in particular?
DL: The growth of the counterfeit industry has also increased the problem of maintaining a reliable source of components for long-life systems. More caution by the users is mandatory when products are not procured from the original manufacturer, authorized sales channel, or authorized aftermarket manufacturer. Otherwise, the increased likelihood of a counterfeit part getting into the system increases the possibility of a system failure.

NF: How do you think the increase and spread of counterfeit products can be curbed?
DL: The quantity of counterfeit product will continue to grow as long as there are willing buyers. Although the least costly and quickest solution in the past was to use Internet brokers and distributors, counterfeits have changed the picture so drastically that this is a risky solution. With counterfeits, the possibility of product failure has increased to the point that the users must protect themselves by testing incoming product before using it, thus increasing both the cost and the risk.

NF: Can such risks be avoided?
DL: Yes. The simplest option is for the user to purchase product from the original manufacturer, the manufacturer's authorized sales channels, or a franchised aftermarket manufacturereven though, at first blush, this might appear to be a more costly and time-consuming solution. Ultimately, the cost is much lower because the product purchased is genuine and usually has already been tested by a reliable supplier.

NF: Any last words of wisdom?
DL: Counterfeiters are getting better and bolder. They will continue to thrive if there is a market for them to serve. It is getting more difficult to identify counterfeit products, which increases the risk when product is purchased outside of authorized sales channels. When counterfeits are found, they should not be returned to the source, but held and reported to the National Property Rights Center.