issued this article: Scanners Could ID E-Fakes Before They Risk Weapons|by Philip Ewing
A California diagnostics company says it has an answer to the problem of counterfeit electronics components, which Senate lawmakers have warned could amount to ticking time bombs inside the military’s latest high-tech weapons.

Pasadena-based ChromoLogic builds an optical sensor that scans electronics for signs they have been resurfaced and remanufactured, with the hope of catching them before American defense contractors add them to parts eventually bound for servicemembers’ hands.

Project manager Leonard Nelson told that the scanner technology started with a development contract from the Army Research Office from 2008 and has grown into a “subscription service” that ChromoLogic offers to Boeing and other large defense firms.

As documented by Senate Armed Services Committee investigators and others, the problem is this: Scammers, mostly in China, take old electronics parts, dress them up, then sell them as newly built to suppliers for Western companies. Those suppliers, believing the parts are legitimate, sell them to defense contractors, which incorporate the components into their circuit boards, computers and other devices.

A Senate report last year said the process appears to be criminal fraud, as opposed to deliberate sabotage by the Chinese or another government.

But no matter why the counterfeit parts are ending up in the U.S. arsenal, they’re there, and Armed Services Committee chairman Sen. Carl Levin warned that they could at least shorten the service lives of weapons and aircraft, and at worst, fail at critical moments and risk the lives of American personnel.

Levin backed legislation that made contractors responsible for the cost of repairs or re-work caused by counterfeit components, to make them responsible for ensuring the integrity of their supply chains. To that end, they turned to companies like Nelson’s. Problem is, the forgeries are very good.

“What happens is when those surfaces are altered, the counterfeiters do it in a way that is very difficult for human observer to detect,” he said. “Believe it or not, the fake ones look better than the real ones – real ones are beat up, scratched; the markings aren’t perfect. The fake ones look very good.”

Nelson said the fake electronics business is very profitable: “You can make 90 percent-plus margins on a $100,000 order in the course of a day or so, so it’s very compelling economically,” he said. “It’s much easier than trying to make a new electronic component from scratch.”

Nelson’s company tries to keep abreast of fraudsters’ latest tactics so it can catch telltale cracks, marks or other techniques, then look for them with its scanners. ChromoLogic charges a big vendor such as Boeing a subscription of about $25,000 per year to scan its incoming components, which covers the inspections and the constant process of gathering intelligence on the latest fakes.

The problem isn’t going away, however.

“It’s not a silver bullet,” Nelson admitted. “What we do is one piece of the puzzle.”

With so many thousands of counterfeit parts entering the U.S., and a strong incentive for fraudsters to improve their handiwork, the amount of data that contractors need to maintain could start to pile up, Nelson warned.

“The challenge you’ll see as this unfolds, as you begin to try to respond, you say — ‘OK, what can I do to test, protect myself’ – that begins to create a large amount of information. That info has to be managed, and that will be the next challenge for the defense industrial base, as DoD pushes down requirements … all of a sudden you have large amounts of test info, especially for obsolete components.”

That may just be the new cost of doing business, however: Levin complained last fall that Chinese officials would not agree to crack down on the e-waste recycling, or even let Senate investigators visit the “boiler rooms” where counterfeits are made.