Over 70% of these substandard parts came directly from China. These compromised components are found in a host of crucial military weaponry.
Failure of such parts can lead to system degradation and or failure. As a consequence, not only are the lives of military personnel being put at risk, but national security as well.
This news has served to increase awareness of the prevalence of Chinese counterfeiting and its impact on national security. What most people do not know, however, is that there have been other reports about Chinese counterfeits in the military supply chain as well.
Based on the results of the senate study, it would appear that little to nothing has been done about this problem.
This is a multi-part article which will expose the problem of counterfeit parts in the military. To achieve this end, results of the most recent studies will be analyzed and revealed.
The article will then will explain how suspect Chinese parts not only have the power to sabotage US security interests but to enable economic espionage as well.
Chinese Military Parts Flood the Market
The most recent senate report was the result of a two year study to identify the scope and cause of suspect parts in the military supply chain. Flaws in the supply chain enabled the purchase and use of suspect electronics.
It was concluded, that among other things, contractors were remiss in key quality control areas and information sharing. In addition, as opposed to aiding the study, the Chinese government impeded the study by denying Visas to US staffers.
The Chinese were also blamed for failing to curtail the global flow of Chinese counterfeits.
Up to eighty percent of all pirated goods in the world come from China. Thus, it should come as no surprise that some of them found their way into the military supply chain.
This report highlights two issues plaguing the US today: 1- suspect Chinese parts in the military supply chain, 2-potential increase in the threat of Chinese cyber-espionage.
Believe it or not, the US military is still dependent on technology from the previous century. Many of the airplanes, and avionics utilize chips and parts that are no longer produced.
The problem is that in the ever changing world of high technology, product life cycles have been reduced to 18-24 months. This means that components are technologically obsolete much quicker than they were in the past. As a consequence, older components are hard to find.
The problem of obsolete parts is not a new one. In 2004, it was reported that many integrated circuits on new Department of Defense production systems were approaching the end of their life-cycle. Consequently, these pieces would no longer be produced (2).
China, the electronic waster (e-waste) capital of the world, stepped in to fill the void. China is the dumping ground for old computers, printers, cell phones and the like, which is known as e-waste.
This e-waste has proven to be a windfall for predatory Chinese suppliers and unethical US sub-contractors.
Small companies in China are dedicated to disassembling and reselling e-waste. Quality with these suppliers is a concern, however, where, instead of using clean rooms, e-waste is “disassembled by hand, washed in dirty rivers and dried on city sidewalks” (3).
Aside from shoddy quality, a cottage industry of reworked or remarked circuitry has emerged. This means that component quality is compromised by poor product rework and outright fraud.
Substandard Parts Threaten National Security
The Chinese can be blamed for workmanship and pirating, but US suppliers are guilty as well.
According to the Senate report, thirty percent of the time, US sub-contractors chose to purchase from sketchy Chinese suppliers when quality OEM parts were available. This has lead certain groups, such as CALCE, to claim that unscrupulous US companies are also to blame for the invasion of substandard Chinese components entering the supply chain (4).
The potential risks from substandard parts cannot be understated. Such parts are not usually built to stringent military specifications.
Military specifications are the most robust, due to the rigors of the combat environment. The stresses put on military weaponry go well beyond anything found in normal situations. Due to this fact, purchases of military components were supposed to be held to higher quality standards.
Unfortunately, these standards were partially dismantled under the Clinton administration, which means that lower quality goods can now be purchased.
The effect of doing away with adherence to strict quality controls are seen in the results of the Senate report. In an MDA report for the senate, only 20% (5) of the parts tested were military grade, while 50% were industrial and 30% commercial or lower.
What this means is that the security of our nation is being compromised by many factors. Those to blame are sketchy Chinese suppliers, US contractors and sub-contractors.
The Senate Report
As mentioned at the outset, the Senate report is neither the first of its kind nor the most detailed. That honor goes to a study published by the U.S. Department of Commerce (DoC) in January of 2010.
That study exposed that:
“out of the total of 387 companies and organizations that participated in the 2005 – 2008 research, representing all segments of the supply chain, 39 percent encountered counterfeit electronics during the four-year period. Moreover, information collected highlighted an increasing number of counterfeit incidents being detected, rising from 3,868 incidents in 2005 to 9,356 incidents in 2008. These counterfeit incidents included multiple versions of DOD qualified parts and components. Thus, subsequent to the 2004 GAO findings the situation has apparently further deteriorated. (6)”
While the DoC study proposed measures to shore up the sanctity of components for military gear, these measures went unheeded.
In the study undertaken by the Senate, it was proven that Chinese parts and espionage present a danger to US security that cannot be ignored. The Senate report found that US contractors were guilty along many lines.
They were derelict in inspecting orders as well as managing the supply chain. The study also concluded that US contractors were unaware of the prevalence of suspect parts.
Federal acquisition regulations allow the use of reconditioned parts, but the their use needs to be authorized by the contractor. Due to the use of unvetted suppliers, however, counterfeit and irregular parts had been utilized without the knowledge of the contractor.
Another problem is that while systems are in place to report suspect suppliers and parts, they are not being fully utilized. This has enabled the bevvy of suspect Chinese components.
As an example, one company, Hong Dark Trade from Shenzhen, China had provided over 84,000 suspect or counterfeit parts alone.
Reporting and following up on companies like Hong Dark is poor. Only 4 of 37 repeat offender suppliers were investigated by the DLA.
More troublesome is the fact that only 36 of 93 contractors who supplied counterfeit parts were on a special list called the DCRL. This contains the names of suppliers of suspect parts and performance.
Its use is to stem the ability of companies like Hong Dark Trade from inundating the US with sub-par goods.
As far as the Chinese government was concerned, the problem of counterfeit goods was none of their affair. Visas for US staffers traveling to the Chinese mainland to investigate counterfeiters were denied.
An official from the Chinese Embassy warned that issues touched by the investigation were sensitive and if conclusions were not positive, it could damage US-China relations. Thus the Chinese would provide no help.
A potential reason for the Chinese reaction is over embarrassment at the prevalence of Chinese counterfeiting around the globe. According to the report, Chinese factories with thousands of workers are dedicated to producing counterfeit goods. This has lead to China being the country of choice for the manufacture of pirated goods.
As a matter of fact, 80% of all Intellectual Property based seizures in 2011 were from China. During the same time frame, the incidence of IP based border seizures has increased 400%.
Next week, in Part II, I will explore the problem of counterfeit Chinese military parts in more detail. Stay tuned.