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Vigilance–Enforcement–Abatement

World Micro Training ProgramDiane Hummer , Mahendran Sanggaren 23rd, July, 2012

Ministry of Domestic Trade Cooperatives and Consumerism

Protecting Malaysia From The Economic Impact of

Suspected Counterfeit Electronic Components

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How did counterfeiting start?

E-waste is main driver

The U.S. and the UK struggled with finding places to dump

their e-waste

China and Pac-Rim countries agreed to take the

e-waste at no charge

Photo source: Science Blogs http://tinyurl.com/d8bsd7y

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E-waste is valuable China began extracting precious metals from electronic parts

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Profits in e-waste Remove and re-mark components

China also realized it could obtain more profit by removing

and remarking components and selling them

as new product

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Defense supply chain study followed

In January 2010, the Defense Industrial Base Assessment: Counterfeit Electronics

report was released by the U.S. Department of Commerce, the Bureau of

Industry and Security (BIS), and the Office of Technology Evaluation (OTE)

The purpose of the study was to provide statistics of the extent of the infiltration of

counterfeits into the U.S. defense and industrial supply chain, to provide

understanding of industry and government practices that contribute to the problem,

and to identify best practices and recommendations for handling of and

preventing counterfeit electronics

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From the report: Part 6 Impact

“What is the impact from not detecting and preventing

counterfeit electronics from entering and leaving

Malaysia?”

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Impact Aerospace applications

Without a formal counterfeit electronics detection program,

Malaysia is at risk of allowing defective materials in airplanes

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Impact Medical applications

Penang and the rest of Malaysia have several medical

manufacturing facilities

MRI scanning and human implantable devices are

examples of what can be affected

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Loss of brand identity Reduced brand value can hurt Malaysia

If counterfeit components are allowed to be received by Malaysian manufacturers,

there will be a loss of brand value to those companies, as

well as to Malaysia overall

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Automobile industry Reliability and quality impact

Reworked and counterfeit components can disrupt the

reliability of Malaysian automobile products, including

automobile running gear, and overall automobile quality

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Elevator operation Service disruption and safety concerns

Counterfeit components can find their way into Malaysian elevator systems around the

country. This could cause disruption of service and

unsafe operation

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Traffic control systems Traffic flow disruption and possible injuries

Having fake or reworked components used in the

Malaysian traffic control system could cause traffic flow

problems and even result in serious injuries

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ATM terminals Impact to the economy and citizens

ATM malfunctions caused by counterfeit parts could have a

serious impact on the Malaysian economy and the

country’s citizens

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Counterfeits defined … An electronic part that is not genuine because it:

…is an unauthorized part…does not conform to original OCM design, model and/or performance standards…is not produced by the OCM or is produced by unauthorized contractors…is an off-spec, defective, or used OCM product sold as ‘new’ or working, or……has incorrect or false markings, and/or documentation

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Countering the counterfeits Industry-wide efforts underway

StandardsAS5553 | IDEA-STD-1010 B | CCAP-101AS 6081 | ISO Family | QMS-IDEA-9090

AssociationsIDEA | ERAI |GIDEP | NEDA

DifferentiationAuthorized distributors

Independent distributorsBrokers

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Leaks in supply chain Allow material to escape into counterfeit market

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Independent distribution:Where did it come from and

why does the market need it?

Industry Pressure – Industry needed to find more ways to manage costs and drive profit. Independents are an ideal solution

Lack of Solutions - Companies did not have enough resources to effectively manage the 20 percent of the parts that cause 80 percent of their headaches. World Micro-like independents came to the rescue

Franchise, Brokers and Traders -Just Not Enough – Because of manufacturing diversity and volatility of markets, it is no longer economically feasible for franchise distribution channels to support all customer needs. Risk is high when purchasing material from companies calling themselves Independents without certifications. So, independents differentiated themselves. World Micro is a prime example.

Value Added Services Protect Customer Supply –Certified independents have expertise in identifying suspected counterfeit and sub-standard material.

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Independent distribution Minimum requirements

If it is recognized that there is a true need for an Independent Distributor in a company’s vendor base, how does one go about selecting the right supplier?

The first step is to develop a list of minimum requirements. Each company that seeks to be a “Preferred Independent” should be able to provide the following:

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Safe Supplier programs are being built..details

available soon World Micro is involved

World Micro has served as unofficial advisors to three US Senators on the Armed Services Committee

World Micro has a state-of-the art quality lab for testing/detection, industry certifications, on-going

testing/compliance programs

Earned spot on the QSLD

Working with DoD and have supplied govt. for years

Have process for GIDEP reporting

Aligned with associations like ERAI, IDEA etc…