Electronics Anti-Counterfeiting Law to Hit Europe -- IHS iSupply study

Ever since December, 2011, we have been telling readers of this blog that there is a locomotive coming at the electronics industry. 

 

In that month, a new Federal anti-counterfeiting law was proposed as an amendment to the U.S. National Defense Authorization Act for Fiscal Year 2012.  We said at that time that the law, which targeted counterfeit electronics in the military supply chain, would in fact shake up the entire industry, both private and public sectors, and world wide, not simply in the U.S.  

Now that law is on the books as Section 818 of the Act, and reality is making this crystal clear.

 

IHS iSupply, a well-regarded research and data provider, has released a study describing how Section 818 "may have broad international implications, impacting hundreds of overseas companies that have supplied billions of dollars’ worth of items to the American government."  According to IHS, the new electronics anti-counterfeiting requirements will create "wrenching changes" for companies throughout the world, citing Europe as the source of most of the international Defense Department purchases.

 

The law will be articulated in policy by the Defense Department at the end of June, 2012, and then at the end of September will be written into the main military procurement document, known as DFARS.  At that point the law will have teeth and defense contractors will need to comply.

 

The IHS study identifies Europe as the largest supplier of electronics to the U.S government, placing the region squarely in the sights of the new law.  From 2007 through 2011, 283 European countries accounted for almost $1 billion in sales, or 51 percent of all foreign electronics sales to the U.S. military. 

 

Most of the rest of the military electronics spend, 47%, was sourced from 32 companies in the Middle East.  Only 2% of official sales are from Asia.

 

An IHS senior manager, Greg Jaknunas, was concerned to correct the "perception that U.S. regulations such as 2012 NDAA, Section. 818. Detection and Avoidance of Counterfeit Electronic Parts, is only an issue for American companies, and that they don’t impact firms in Europe, the Mideast and elsewhere."  In fact, he said, "the impact is beginning to be felt worldwide...”

 

We would add that the impact of NDAA Section 818 will not only be global, it will cross from public to private sector.  Many of the same facilities which supply the U.S. military also produce electronic components for commercial applications.   Far more microchips are produced for industrial and consumer buyers than for the U.S. military, which buys only about 2% of the world's supply annually.

 

The study by iSupply also stresses that "the world must have tools that allow them [defense suppliers -- Applied DNA] to identify components at risk of counterfeits."  iSupply points to its IHS Haystack database which offers key logistics information to the government and contractors. 

 

We would add that new technological tools will also be necessary.  And none is more capable and ready to begin than Applied DNA Science's SigNature DNA authentication system for microchips, now undergoing testing by the U.S. military.