Several industry associations, as well as franchised distributors, have expressed concerns over the Defense Logistics Agency's mandate to use DNA marking on components using a solution from Applied DNA Sciences. What follows are arguments for and against the mandate.
Janice Meraglia, vice president, government and military programs, Applied DNA Sciences
If the leadership of the SIA believes that the biggest hurdle for DNA marking is the participation of authorized distributors, we ask: Why has SIA not urged its own authorized distributors to engage? Isn't this the true obstacle? Wouldn't doing so solve the problem in a jiffy?
Indeed, we extend a hand of welcome to additional authorized distributors. The program already includes authorized suppliers, and we've made their transition smooth, effective and value adding.
Applied DNA Sciences agrees that key to winning the battle against counterfeit semiconductors is to buy from authorized distributors whenever possible. To underline this, we propose a new class of SigNature DNA mark that identifies a part as coming from an authorized source. This mark would identify, with forensically valid security, parts that originate from authorized distributors and therefore offer buyers the highest level of quality and confidence—second only to the manufacturers themselves. This optical scan would be visually different from the OCM version. A badge certifying the distributor would also signify that purchasers should always buy from authorized sources as a first choice.
At the same time, despite the assertion that buying from authorized suppliers or directly from the OCMs is the 'simple' answer, that option is not always available in today's supply chain. Purchasers cannot always find legacy or end-of-life components through authorized channels, especially given the long life cycles for military equipment.
Moreover, in some instances authorized suppliers do not wish to bid on orders of small, specialized or odd-lot-sized orders that often characterize maintenance and repair orders such as from DLA.
At a higher level, we believe the pushback to the DLA's DNA marking program stems from conflicting priorities. Private sector companies focus primarily on immediate revenue that they measure in months and quarters. DLA must take the long view. Of necessity, the military must ensure supply chain integrity 5, 10, 20 or more years into the future as military materiel ages and requires maintenance.
Continuing to take the long view, what if an authenticity initiative like SigNature DNA marking had emerged five or six years ago? We would now have a supply chain widely protected by authenticity marking on perhaps hundreds of millions of current components that allow authentication at any point in the supply chain. Instead, we still engage task forces and demand best practices—critically important steps to be sure, but without a shared technology and few new answers. In the absence of a proactive solution such as SigNature DNA offers, the authorized channel continues to risk accepting counterfeits into their own supply chains through returns.
We urge all stakeholders in government and industry to embrace the strategic view—for the health of our war fighters, the long-term safety of the supply chain and the business health of all companies involved.
Dustin Todd, director of governmental affairs for the Semiconductor Industry Association (SIA)
SIA and our member companies are deeply concerned about the dangers that counterfeit semiconductor products pose to our employees, the public, critical infrastructure, our military personnel and missions, and the U.S. economy. We are actively working to raise awareness of these threats and to reduce the supply of counterfeits. Working closely with distributors, customers and government agencies, SIA has developed straightforward, proven approaches for avoiding counterfeit semiconductor products. These approaches are outlined in an SIA's white paper, titled "Winning the Battle Against Counterfeit Semiconductors." The white paper's chief recommendation is that semiconductor products should be purchased from either Original Component Manufacturers (OCMs) or their authorized distributors or resellers, since these are the most trustworthy sources of chips.
Unfortunately, the Defense Logistics Agency (DLA) DNA marking mandate is ineffective and has undermined the effort to mitigate the risks of counterfeits. Here's why:
- Since the DNA marking policy went into effect at the beginning of 2013, DLA's purchases from authorized distributors have plummeted, while purchases from brokers have skyrocketed. Before the mandate went into effect, 90 percent of DLA's semiconductor product was procured through authorized sources; since the mandate, more than 90 percent of their semiconductor product has been procured through non-authorized sources. In any industry, to ensure the fewest counterfeit products, the last thing you want is to distance yourself from the product's manufacturer. Regrettably, the DNA mandate has done just that.
- The online posting system that DLA uses to purchase semiconductor product is flawed for the following reasons: 1) it does not choose authorized sources first; 2) it is price-driven; and 3) it adheres to supplier standards unique to DLA that establish mostly brokers as their so-called "trusted suppliers." As a result, many bad actors are allowed to bid to supply DLA with chips not purchased from legitimate sources. Instead of altering their purchasing structure to buy from authorized sources and prevent bad actors from supplying them with chips, DLA has worked with Applied DNA Sciences on a sole-source, no-bid, no industry-input technology to put plant DNA on highly complex semiconductors.
- Adding plant DNA to chips from brokers and other sources that have been all around the world before receiving the mark does little to nothing to inform DLA about whether they are purchasing an authentic and reliable semiconductor; it only tells them where they bought it from last.
- Most of the semiconductor product that DLA purchases is still available through fully authorized sources. There is no reason to drive up costs to taxpayers and utilize a problematic technology when there is authentic and reliable product already available.
- In addition to concerns about the effectiveness of this technology, many companies have concerns about the compatibility of this technology with their existing processes. DNA marking is a wet, ink-based process, whereas most companies have transitioned to a dry, laser-based marking of products.
As a result of the misguided DNA marking mandate, DLA is spending many more taxpayer dollars for semiconductors and simultaneously adding more risk to their semiconductor supply at the Department of Defense - endangering our military systems and operations. Simply put, this is the wrong solution to a growing problem. We are committed to continuing to work with government and other responsible parties in the supply chain to implement workable solutions to the very serious threat that counterfeit semiconductors pose.
The following is a rebutal to SIA comments submitted by Applied DNA Sciences.
First, we are delighted with SIA’s contributions to the conversation about SigNature DNA marking. Although we do not agree with some of the comments here, SIA’s participation in this discussion about the first specifically anti-counterfeiting technology adopted by a DoD agency is nothing short of essential. Welcome. We hope you will join us in taking steps to improve the DNA marking program where you perceive it necessary. We all agree with the end goal of stopping counterfeits, so from there, let us proceed.
Mr. Todd notes that SIA is "actively working to raise awareness of these threats and to reduce the supply of counterfeits." In 2006, the SIA established the Anti-Counterfeiting Task Force (ACTF), which would provide the basis for an aggressive campaign to prevent counterfeits. However, merely raising awareness, already on the agenda of every major electronics and defense company, falls short. The SIA ACTF recently published an excellent paper on the subject. However, after seven years, its chief recommendation to purchase from either OCMs or their authorized distributors or resellers is disappointing.
Let us never forget that despite all of our collective efforts, the counterfeit threat has spiked dangerously. The counterfeiters' ability to reproduce and even clone increasingly complex components has also escalated and has begun to merge with the threat of cyber-terrorism. I am not alone in wishing that SIA’s ACTF were more aggressive in the battle that is (a) stealing money from its own constituency and (b) wreaking havoc on end users, including users in high risk, critical applications.
With the first R&D programs in 2010, SigNature DNA marking emerged as a proven, practical action, available immediately. As part of its development, in tests, trials, and then in concrete full-production programs, SigNature DNA marking drew the participation of manufacturers Altera and SRI, as well as the full supply chain spectrum with distributors and defense contractors. For two years before that, Applied DNA Sciences sought participation, input and feedback from SIA and its members in dozens of venues and public forums. Although those entreaties proved less than successful, we welcome discussions, feedback, and constructive criticism from SIA.
The SIA’s chief recommendation states, “Semiconductor products should be purchased from either… OCMs or their authorized distributors or resellers… " We believe that the industry would benefit from some open and forthright discussion of this commonly accepted assertion.
In today's world, buying authorized parts, while always the best approach, is simply not always possible, especially in the defense industry where, as budget constraints force longer system deployment, manufacturers must procure parts well beyond their authorized channel life cycle.
Also, I will state the obvious: Purchasing by government entities is governed by FARS regulations – by law. As Mr. Todd points out, that law directs a price-first framework, which does not prioritize authorized channels. While advocating changes to the law may spark an interesting discussion, the effort does not directly affect SigNature DNA marking. In addition, authorized suppliers do not always bid on awards, forcing government agencies to reach out to independent distributors. As a result, buying authorized parts is simply not always possible.
Moreover, recent reports show that even buying authorized parts does not always eliminate risk. We have all seen recent revelations of counterfeits inadvertently supplied by authorized channels. We invite SIA to engage in an open, honest conversation with the industry on this point.
Also important to the discussion, the counterfeit problem knows no bounds – aerospace, defense, industrial, medical, automotive – they all suffer. Although I do not profess familiarity with their procurement practices, I recognize that they all have procedures in place to mitigate the risk of counterfeit infiltration. Despite their efforts, however, the threat persists. The fact that the counterfeit problem is not restricted to the industry bound by FARS procurement practices provides yet another reason why a ‘buy authorized’ mantra is not a valid answer from the association meant to provide thought leadership on such a global situation.
For anyone unfamiliar with the SigNature DNA platform, we need to revisit Mr. Todd's statement that the Provenance Mark, added to parts at the distribution level, "does little or nothing to inform DLA about whether they are purchasing an authentic and reliable semiconductor. It only tells them where they bought it from last."
This comment misses the point. The SigNature DNA Provenance Mark is not intended to be an Authenticity Mark. (An Authenticity Mark can only be applied by the original component manufacturer and is thereby a mark of originality.) However, to apply a Provenance Mark, the distributor must either have full traceability documentation or follow a testing protocol that adheres to the industry SAE standard AS 6081. The Provenance Mark provides an extremely valuable form of traceability and accountability.
Mr. Todd's statement that "90% of product is procured through non-authorized sources" is a comment for DLA, not Applied DNA. However, as we understand the situation, DLA procures 100% of its parts through its trusted supply chain.
SigNature DNA marking offers a comprehensive, actionable, proven step that the industry can adopt immediately to mitigate the counterfeiting risk. This mandate extends far beyond the realm of raising public awareness.
In addition, the counterfeiting crisis extends far beyond the electronics industry. It has raised broad global concerns about health, safety, and economics. What's more, it reaches into the sphere of national security; the "nexus" between counterfeits and cyber-terrorism has become increasingly clear.
SigNature DNA offers a common technology, versatile across an astonishing variety of products. We challenge the industry to take the discussion out of committee and take action, such as that offered by our technology. The urgency of such action is rooted in the risk of system failures and lives lost. This is something that should be keeping us all up at night.
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