Identifying and Eliminating Counterfeit Components in the Aerospace and Automotive Industries

The aerospace and automotive industries rely on technology to ensure performance, safety and longevity. With advanced systems such as avionics, braking systems, autonomous driving modules and engine control units (ECUs) forming the backbone of these sectors, counterfeit electronic components present a significant risk.

These industries face challenges from airplanes to electric vehicles (EVs), and costly repair or replacement is just the start. As incidents are reported, reputational damage reverberates across shareholders, customers and the entire supply chain. Trustworthiness and competence come into question. Litigation can run into the billions.

The Allure of the Grey Market

The speed of modern manufacturing and the demand for finished goods can make shortcuts tempting. Critical component backlogs push some to seek quantities on the grey market, the Wild Wild West of procurement. The same happens when a technology OEM announces that they will cease manufacturing parts intrinsic to goods still in production, on the road or in the skies.

Component obsolescence is an expensive problem for manufacturers of goods that cost millions and are designed to remain in use for decades. Inevitably, a component will fail, and when an OEM-authorized replacement part can’t be found, the choice to source an inexpensive part from the grey market vs. mothball the expensive plane or vehicle doesn’t seem like much of a choice.

The siren song of the grey market, with its promise of immediate availability, can tempt even the most stalwart. And even the most diligent can be fooled. A market flooded with counterfeit components is like a tenement flooded with rats—they come in from everywhere, and all the rats look alike. 

Counterfeiters are becoming more sophisticated in their methods, making some fake components almost indistinguishable from their legitimate brethren. As soon as the industry comes up with a new way to detect counterfeits, it’s a fair bet that the bad guys are finding a way to thwart it. Why all the effort? In a word, money.

Components are big business. The market for semiconductors is already U.S. $611 billion annually and it’s expected to grow exponentially, driven by demand for logic and memory integrated circuits. By 2025, semiconductor sales will reach $687 billion. The global semiconductor industry is expected to increase capacity by 6% in 2024 and 7% in 2025, reaching a monthly production capacity of 33.7 million wafers.

And of course, all the old chips, boards and electronic components that the new ones are replacing have to go somewhere. Despite strengthened environmental laws and growing corporate interest in the circular economy, electronic waste is still available for harvesting worldwide.  

That’s a lot of temptation for a bad actor intent upon capitalizing on a rollicking market. There are also many entry points in the component supply chain—nooks and crannies counterfeit parts can be squeezed into undetected. Some counterfeiters are quite brazen, producing illegitimate parts at legitimate fabs. Or making off with IP and manufacturing dies as companies engage in production far from home. The resulting components may seem identical to authorized versions, but they likely have not undergone the rigorous quality assurance testing required by an OEM. They may be misrepresented as meeting strict industry and performance standards when they don’t. They may be packaged indifferently, leading to damage in transit or storage.

High-profile Examples of Counterfeit Component Failures

Long story short, procuring parts on the grey market is a risk rarely worth the reward. Counterfeit components have caused significant harm in the aerospace and automotive sectors, leading to costly recalls and, in extreme cases, deadly accidents.

Military aircraft and systems. In 2011, a U.S. Senate investigation found counterfeit components were far from rare in the aerospace industry. In one case, fake microchips in the U.S. Navy’s P-8A Poseidon aircraft led to malfunctioning deicing systems. The investigation found more than 1,800 cases of counterfeit electronic parts installed in cargo and surveillance planes, collision avoidance systems, submarines, weapon systems and more—all in all, more than one million fakes. The report called out the defense industry’s reliance on unvetted independent distributors to supply electronic parts.

Consumer vehicles. In 2019, the U.S. National Highway Traffic Safety Administration (NHTSA) expanded a probe into 12.3 million potentially defective airbags in vehicles sold by Honda, Hyundai, Kia, Mitsubishi, Fiat Chrysler and Toyota. At issue: counterfeit electronic components in their airbag control units that were found to have caused injuries and at least eight deaths when the airbags didn’t deploy properly during accidents. Toyota alone recalled more than 3.4 million vehicles. 

Commercial airlines. Despite deadly incidents like the Boeing 737 Max aircraft crashes in 2018 and 2019 caused by faulty sensors, airlines still struggle with due diligence regarding component quality and authenticity. Aircraft engine parts backed by fraudulent airworthiness documentation have been identified in planes operated by at least six major airlines. 

This has led the Federal Aviation Administration (FAA) and the European Union Safety Agency to issue advisories requesting that aircraft operators and maintenance companies trace the provenance of parts supplied by the alleged perpetrator, AOG Technics, which had been supplying aircraft engine parts since 2015. In late 2023, the London High Court issued an order demanding that the company disclose every part it has sold—estimated to be in the thousands. 

Industry Standards Seek to Guarantee Authenticity

In response to the ever-present threat of counterfeit components, the FAA, NHTSA and other international regulatory bodies have implemented strict guidelines for post-market surveillance and adverse event reporting to track fake parts and identify risks. The FAA’s Suspected Unapproved Parts (SUP) Program seeks to identify counterfeit parts in aviation.

The automotive industry follows the International Automotive Task Force (IATF) 16949 quality management standard, among others, to ensure the safety and authenticity of electronic components. The end game, of course, is to ensure that only authorized components are used in aerospace and automotive applications.   

Taking Responsibility Beyond Regulatory Oversight

The most reliable defense against counterfeit parts is to source components exclusively from OEMs and their authorized distributors. These channels guarantee that parts meet strict quality standards and are equipped with the necessary documentation to ensure authenticity. For manufacturers in the aerospace and automotive sectors, partnering with authorized distributors can be a safeguard against the risks of counterfeit components. These distributors offer technical expertise, guaranteed authenticity and a transparent supply chain that withstands tampering and helps maintain component safety and performance standards.

In addition, distributor Flip Electronics offers obsolescence planning, extended manufacturing services and supply chain support to avert costly shutdowns. The firm also provides confidence by assuring customers that they are operating within legitimate channels and not dealing with the grey market. For more on the current state of counterfeiting and what you can do to ease its effects, download “Counteracting Counterfeiting: The Value of Authorized Distribution” by Gary Beckstedt, VP of Quality and Warehouse Operations, Flip Electronics. The e-book illuminates the scope of the problem, with insights into:

•  Which components are most vulnerable to counterfeiting today
• How a complex global supply chain impacts the tracking and authentication of parts
• The sophisticated (and not-so-sophisticated) tools and technologies counterfeiters are using now
• The temptations and pitfalls of sourcing from the grey market vs. OEM authorized distributors
•  Real-world consequences of building vulnerabilities into devices, boards, subassemblies and systems
• Prevalent trends in counterfeiting—and what to do about them
• How to address obsolescence effectively before and after component end-of-life

With due diligence and a commitment to sourcing solely from OEMs and their authorized distributors, aerospace and automotive manufacturers can make progress in eliminating the threat, risk and cost of incorporating counterfeit components in their designs.