Mitigating the Risk OCTOBER 2014 COUNTERFEIT COMPONENTS Rory King Director Thought Leadership IHS, Inc. [email protected]
Aug 20, 2015
Mitigating the Risk
OCTOBER 2014
COUNTERFEIT COMPONENTS
Rory King
DirectorThought Leadership
IHS, Inc.
© 2014 IHS
WHAT WE DO
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Organizations around the world depend onour insights to help them make decisionsabout everything from day-to-dayoperations to long-term investments.
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ABOUTIHS
ANALYTICS
EXPERTISE
INFORMATION
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5.50%
16.90%
21.30%
25.90%
5.60%
24.80%
Automotive Electronics
Consumer Electronics
Data Processing
Industrial Electronics
Wired Communications
Wireless Communications
Welcome
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Source: IHS Technology, Electronics Equipment and Semiconductor Market Forecast Tool, 2014
Worldwide OEM Factory Revenue will be $2.045 Trillion in 2014CAGR of 3.7% from 2013 - 2018
Worldwide Electronic Equipment Revenue by Market
You are here
© 2014 IHS
Counterfeit components
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Top Impacts of Counterfeits
Experiences of Engineering, Procurement, and Supply Chain ProfessionalsIn 2009, a study was conducted among electronics supply chain professionals, asking what the impacts
of counterfeits were. These are written testimonials of those participating professionals.
Source: IHS Technology, 2009
© 2014 IHS
Counterfeit Incidents by Component, 2003 - 2013
Analog IC , 19.0%
Memory IC , 14.6%
Microprocessor IC , 13.7%
Programmable logic IC,10.2%
Other, components, 42.4%
Increased counterfeiting
Source: IHS Technology, Parts 2014
© 2014 IHS
Automotive$8.5 billion (15.7%)
Analog IC – the most counterfeited
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Wireless Market$18.9 billion (34.8%)
Data Processing$6.0 billion (11%)
Consumer Electronics$9.0 billion (16.6%)
Industrial Electronics$8.9 billion (16.5%)
Wired Communications$2.9 billion (5.4%)
2014 Analog IC Market (Total Shipment Revenue US$M*)
Source: IHS Technology, Parts 2014* rounded to 1 decimal place
© 2014 IHS
Top four counterfeited could impact$281.5B worth of semi markets
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ApplicationMarket
MemoryIC
MicroprocessorIC
ProgrammableLogic IC
AnalogIC
Data Processing 40.30% 60.10% 23.60% 10.80%
Wired Communications 2.40% 4.00% 10.50% 6.30%
Wireless Communications 43.80% 5.60% 42.50% 34.40%
Consumer Electronics 8.70% 9.60% 15.50% 16.90%
Automotive Electronics 1.70% 11.00% 2.90% 17.40%
Industrial Electronics 2.90% 9.70% 5.00% 14.30%
MCP 0.10% - - -
Total (Percentage) 100.00% 100.00% 100.00% 100.00%
Total (US$M) 59,704 69,133 98,555 54,161
The Top Counterfeited ComponentsOver three quarters of all incidents are for integrated circuits. More than half of reported counterfeit
incidents are for analog integrated circuits, memory devices, microprocessors, and programmable logic.
Component Application Market by Percentage and Total Shipment Revenue (US$M), 2014
© 2014 IHS
Focus on defense supply chain
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Timeline of EventsNovember 29, 2011, the US Senate unanimously approved an amendment to the National Defense
Authorization Act for Fiscal Year 2012 and President Obama signed the NDAA on December 31, 2011.
Excerpts from US SASC Hearing, November 8, 2011
© 2014 IHS
Notable HighlightsOver three quarters of all incidents were IC’s. While the majority of incidents are for discontinuedcomponents, nearly one third were for active devices. Over eight in ten were commercial parts.
Discrete,16.6%
Electro-mechanical,
0.4%
Integratedcircuits,76.8%
Passive,2.9%
Other, 3.3%
Counterfeit Incident Statistics, 2003-2013
Not just obsolete defense parts
Source: IHS Technology, Parts Management 2014
52.8%
32.2%
14.6%
0.4%
Discontinued
Active
Transferred
EOL/Lifebuy
81.5%
18.5%
CommercialPart
Military Part
© 2014 IHS
Military & Civil Aerospace vs. Total Semiconductor Market (Revenue Shipment US$M)
Military/aero is only 1% of market
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0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Military & Civil Aerospace
Rest of Market
Military & Civil Aerospace is 1% of Worldwide Semiconductor Market
Source: IHS Technology, Application Market Forecast Tool, 2014
© 2014 IHS
Regulations are perceived to bespecific but have a global impact
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▲Cost ▲EOL ▼ Supply ▼ Competition
• EU ROHS (2003)
• EU REACH (2007)
• US Conflict Minerals (Dodd-Frank 2010)
• US NDAA FY12 818 (2011)
© 2014 IHS
But what do these really call for?authenticity, traceability, reliability
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The average component manufacturerhas 50+ authorized sources of product
• EU ROHS (2003)
• EU REACH (2007)
• US Conflict Minerals (Dodd-Frank 2010)
• US NDAA FY12 818 (2011)
© 2014 IHS
Mitigate risk
• Counterfeit risk is real and growing
• It’s not exclusive to defense / obsolete parts
• Safety and reliability threaten all end markets
• Regulations are not localized global impact
• Authorized, “trusted” component sources
© 2014 IHS
About Rory King
Rory King is Director, Thought Leadership at IHS Inc. In this role, he has primaryoversight for the identification and cultivation of original expertise and insightsassociated with the most significant global megatrends, business drivers, marketdrivers, and strategic themes shaping four connected, capital-intensiveworldwide sectors with common supply chains: energy, chemicals, technology,and transportation. This includes coverage of the most critical and significantissues associated with advanced analytics, economics, operational excellence,risk management, innovation, product design, and supply managementunderpinning these convergent industries.
For over 15 years, Mr. King's collaboration and leadership have led to over 20awards for excellence in individual performance, process improvement andoriginal insight in areas of innovation, product lifecycle management, supplychain management, risk management, and sustainability. As an industry thoughtleader, his unique research, analyses, and evangelism on topics such as conflictminerals, semiconductor technology, environmental regulations, counterfeitelectronics, and supply chain risk, have been featured by global news andinformation services including CNN, The Wall Street Journal, BBC News, FoxNews, Compliance Week, The Federal Times, and IHS Quarterly, in addition tonumerous industry research, media, and trade publications.
Rory King, Director, Thought Leadership, IHS