In 2020, an ejection seat for an F-16 malfunctioned, causing the death of its pilot.
A subsequent investigation of one of the seat's essential components - the
sequencer - discovered that several microchips inside were counterfeit, or fake.
It remains unclear what role those chips played in this specific
incident. The sequencer in question for instance was in need of maintenance.
However, it is indicative of the significant risk fake chips present in critical situations.
In this video we look at the semiconductor industry’s counterfeit chip problem.
## What is Counterfeit?
A counterfeit semiconductor has a broad range of definitions. A memo from the
Department of Defense probably has the simplest two definitions:
One, a previously used electronic part that is sold as new;
And two, unauthorized copies of an authentic electronic product;
I think that is pretty good and covers a majority of incidents.
But there are always edge cases so the industry has a much more
comprehensive taxonomy. A counterfeit semiconductor is counterfeit because ...
One, it is an unauthorized copy;
Two, it does not conform to the original manufacturer's design,
model, or performance standard;
Three, it is not produced by the original manufacturer or its authorized contractors;
Four, it is off-specification, already used, defective, or misleadingly labeled as "new";
And five, it is incorrectly marked or with wrong documentation.
## A Big Business
We know that counterfeit semiconductors are a big business. But how big? Illegal doings
are always hard to track. So most data you come across are rarely up to date.
Most organizations talk about it as part of a larger piracy and counterfeit trend. In 2019,
the OECD estimated that the global volume of counterfeit
and pirated products amounted for up to 3.3% of total global trade, or over $500 billion.
While there is a government counterfeit parts
database called Government-Industry Data Exchange Program or GIDEP,
it is not anonymous so counterfeit victims tend to shy away from reporting there.
An alternate data source is the Electronic Resellers Association International,
a corporation that monitors incidents and issues reports.
Their database tracks incidents reported to them by buyers.
For instance in 2022 they noted 504 reported semiconductor counterfeit
cases in 2021, a sharp drop from 963 in 2019.
Another data point, though an older one. In November 2011,
a US congressional committee presented its investigation
findings on counterfeit electronics parts in the military supply chain.
They quoted an estimate from the Semiconductor Industry Association
saying that counterfeiting costs the American semiconductor manufacturing
industry over $7.5 billion a year in lost revenue and 11,000 jobs.
In 2010, the Bureau of Industry Security under the Department of Commerce published a report.
In it they identified 7,114 detected counterfeited microcircuit incidents
across 387 companies within the defense industry in 2008. Just
three years earlier in 2005, there were 3,040 reported incidents.
The types of counterfeited semiconductors span the board from microprocessors to
analog chips to memory to radio frequency chips. The chips’ resale value ranged from
as low as 11 cents to as high as $500 but most were in the 11 cents to $10 range.
## The Poseidon FPGA Incident
During that 2011 Hearing, the Senate panel ran through several incidents of
counterfeit semiconductors that got into the military's supply chains.
One such incident involved the P-8A Poseidon,
which is a plane. It flies and whatever. Inside the plane is something called an
ice-detection module, which warns pilots about ice forming on the aircraft.
The component controlling the module identified itself as a Xilinx FPGA
unit. But this was a lie. What was inside was a counterfeit.
Boeing only found out after the plane took off,
the part literally fell out of its socket and started rattling around inside the module.
BAE, the module's manufacturer, had bought 300 such FPGAs from a company
in California. That company tested 50 but neglected to test the rest.
From there, investigators traced the counterfeit chip back to an affiliate of an electronics
manufacturer in Shenzhen. Such incidents are not uncommon and the panel shared a few others too.
## The Contractor's Dilemma
The Defense Department's contractors - as well as commercial system integrators in
similar situations - find themselves in a particularly difficult spot.
They often have to use old parts for repair and maintenance. The
F-15 plane was first introduced into service over 45 years ago. No way the
supplier is going to be making those same parts for that long.
As I read someone else put it, it is like asking someone to build a
NeXT Cube motherboard using modern circuit boards.
It is often that the original manufacturer hasn't been making those chips for years,
leaving people with no choice but to go an oft-shady second-hand supplier. So
their situation is understandable. Nevertheless,
the US Government puts the onus of detecting and filtering out these counterfeit chips on them.
In January 2013, Obama signed into law the National Defense Authorization Act,
which threatens contractors with civil and criminal penalties for this.
One notable case concerned a company called VisionTech in Florida,
which knowingly sold fake chips as trademarked "military-grade" goods.
Per the indictment, VisionTech employees were instructed to tell customers that their
chips came from Europe despite knowing that they really came from China and Hong Kong.
And they also knowingly sent legitimate chips to customers when asked for samples,
but sent fake chips for the purchased shipment.
The company made nearly $16 million in sales from these
goods. The company's owner died before sentencing,
but the company's Administrative Manager went to prison for 38 months for her role in the scheme.
## Counterfeit Types: Recycled
Recycling is one of the most common ways how counterfeit chips enter the supply chain.
Here is the typical process. It starts with workers receiving scrap
electronics. They crack open the casing and remove the printed circuit boards.
The circuit boards are then heated over an open
flame to melt their solder and loosen the components' connections. The boards
are then bashed against a hard surface to make them fall out.
The components then have their markings removed
using various methods. After that they are sorted and re-processed. New coats
and markings are applied to the chip to make them appear like as if new.
For the buyers, there is a lot that can go wrong. These e-waste components are old and
worn-out as is. And then the process to harvest them subjects them to immense damage and stress.
Not surprisingly, many of these straight up won't work when you try to use them.
## Counterfeit Types: Relabeled
Relabeled - or re-marked - chips are chips that are not what they say they are.
Markings contain information about the chip's model, origin, certifications,
and so on. Changing the markings misleads the users about their chip's capability and quality.
It is the semiconductor equivalent of making and selling a fake Louis Vuitton
bag. A bad actor acquires a set of chips from some source, wipes away their markings,
and then adds new markings to make them seem more premium or expensive.
This has real consequences where components cost more due to enhanced specifications. For example,
military components where chips need to be hardened against radiation or temperature damage.
Suppliers missing the hardened, enhanced part might be tempted to swap in commercial parts
that are cheaper and have similar functions, but do not meet the hardening requirements.
## Counterfeit Types: Over-Production
Together, recycling and re-marking counterfeit make up about 80% of
total counterfeit incidents. But there are other categories to consider as well.
Today, most semiconductor companies do not own their own fabs. They instead contract
foundries to produce their chips. Most of these contract foundries
are overseas and operate without third party oversight which can be taken advantage of.
Sometimes a bad foundry produces more of that chip that it was contracted
to. This might be for yield reasons - having more good chips on hand so the
foundry can claim to have a higher yield than what they actually have.
But they can also do this to resell their production as counterfeits. The foundry
benefits from selling a valuable design - one that the design customer invested
a great deal of R&D into - without needing to spend the R&D themselves.
The modern semiconductor manufacturing industry is
one built on mutual trust. It is hard to believe that a reputable foundry
would risk a multi-billion dollar reputation doing this sort of thing.
Even so, there are things that fabless manufacturers can do like split
manufacturing for better assurance that their products are not being sold out the backdoor.
## Counterfeit Types: Cloned
Another type of counterfeit chip are unauthorized clones. This is
kind of like the foundry over-production situation, but start with a third party.
Such third parties clone chips so to save on the expensive R&D to develop
their own designs. I am reminded of East Germany - and the larger
Soviet Union in general - cloning chips and computers from the West.
The design IP for these clones can be obtained either through
reverse engineering - like using an electron microscope to learn all the
chip's various layers. This is harder if the chip is exceptionally complicated.
Or by illegally acquiring the chip's design IP.
This can happen at all stages of the chip design and manufacturing process.
For instance, someone might copy RTL code at the design house so that they can then take
home to turn into a foundry-ready GDSII file using their own tools.
Cloned counterfeits are harder to detect because they tend to be functionally similar to the real
thing. But they aren't always as good. In practice, many cloned or reverse engineered
chips deviate from the original in technology and process - which can lead to erratic behavior.
## Detection
Oftentimes Fake chips get into products because the contractor did not have documented evidence
of the chip's supply chain history and did not give the product a thorough inspection.
Like with the case of the Poseidon FPGA counterfeit incident,
where the California-based semiconductor supplier
should have more closely inspected the FPGAs they purchased from their Chinese supplier.
There are two types of methods of inspecting
potentially counterfeit chips - physical and electric methods.
Physical methods are methods that look for defects directly related
to the chip's physical properties. These include defects with the chip's exterior
shipping or packaging, connections, IC packaging, bonding wires, or die.
For this we might use External Visual Inspection - called EVI - or more invasive
methods like X-ray or even de-lidding the whole chip and exposing its innards.
Since some of these methods are destructive, we can't always do all of them.
Electrical methods test for changes in the chip's component parameters - a parametric
test. They might also test for whether or not the chip is functioning properly - a functional
test. These tests tend to be quite effective, but are also time-consuming and expensive.
In the end, detecting counterfeits is a challenge of nuances. For instance,
how do we distinguish normal physical defects on a chip's
packaging from sanding procedures to blast away previous markings?
At the same time, we have to balance detection against financial and time
concerns. So best practices dictate designing a set of tests that give us confidence that
we have achieved a high enough test coverage rather than total assurance.
## Avoidance
With die recycling such a significant problem and package re-marking getting harder to detect,
fabless designers can add new features into their chip designs to help.
These are called design-for-counterfeit measures.
A simple one is to give the chip a unique ID that can be easily read throughout its
lifetime. This would be programmed into a non-programmable memory.
Another interesting anti-counterfeiting design is
to create a unique fingerprint for the chip - called the physical uncloneable feature or PUF.
One example of this uses random variables within the semiconductor
fabrication process to produce a circuit called an arbiter PUF. You
send a signal through the arbiter circuit - your "challenge" - and it produces an output.
That output can be a string of numbers or whatever. The output just needs to
be random but repeatable, like your Google Authenticator app for a 2-step authentication.
As with everything, counterfeiters can still tamper with these methods. Or
these methods might be prohibitively difficult to implement for cost or
technical reasons - for example, due to lack of space on a chip.
Side note. I want to note that I have seen some blockchain proposals using
such PUFs. They take advantage of the blockchain's traceability
and immutability to track a chip's supply chain history.
I am not going to comment on those other than these schemes need to work in
concert with existing measures and require broad acceptance of the scheme by a concert of players.
## E-Waste Incentive and Opportunity
Anyway. While these fancy methods can be effective,
in the end most of these counterfeit chips - especially the recycled
ones - enter the supply chain because the opportunity and incentive are there.
Worldwide in 2019, just 17.4% of the world's electronic waste was documented to be collected
and recycled. These are often harvested to produce fake semiconductor components.
Harvesting and desoldering old chips from e-waste can cost as little as 10 cents
per chip. And as I mentioned, certain types of chips can sell anywhere from $1 to $10 per chip.
So a fake, recycled chip can go for as much as 100
times the cost of harvesting them! This is a significant amount for any laborer.
Combine that with massive imports of improperly managed e-waste from developed areas like the
United States and Europe, and that is how you get a counterfeit chip problem.
## Conclusion
Our modern world relies on our unheralded semiconductors to work properly.
Whether it be a soldier and his equipment, or a component in a plane, or a brake in a car,
a chip that is not what it says it is can cause serious harm.
Throughout the 2010s, most fake recycled and relabeled chips came
out of China because that was where most of the e-waste went.
Then in 2017, China banned the import of 24 types of solid waste including
plastic and e-waste. Some e-waste is still being smuggled into China,
but significant imports are redirecting to new countries.
For instance, Thailand saw a 5.7 times increase in the volume of
e-waste imports in 2017 after the China bans were implemented - from 9,312 to 53,291 tons.
Other countries in Southeast Asia have seen similar effects and this will have
big impacts on the counterfeit chip trade in the coming years.
The proper definition, management and disposal of such e-waste is not only vital to human health
and the environment. But it also serves to help stem the fake chip scourge. It is worth pursuing.