India’s path to prosperity: Book talk with Raghuram Rajan on ‘Breaking the Mold’


India’s path to prosperity: Book talk with Raghuram Rajan on ‘Breaking the Mold’


Cost Cutting Breeds Counterfeits in U.S. Weapons

Editor’s Note: The U.S. Senate Armed Services Committee (SASC) recently released a report on counterfeit electronic parts found in the U.S. military system. The report held China primarily responsible for this problem, but also mentioned problems within the U.S. defense industry. But is China really to blame for the issue? What problems does the U.S. defense industry have? In an interview with the Global Times (GT), Peter W. Singer (Singer) and Song Xiaojun (Song), a Beijing-based military expert and media commentator, discuss these issues.

GT: The SASC’s report holds China responsible for the counterfeit parts found in US weapon system. What’s your opinion on this?

Singer: The issue is a complex one. Essentially, the report argued that the Defense Department and its contractors were not doing a good job of monitoring where their components were coming from and ensuring they were trustworthy, and that many of the most problematic were from companies based in China.

What is important is to distinguish between fears over counterfeit parts from fears over corrupted parts. That is, situations where you buy an inferior part posing as something else versus situations where you buy a part that has been deliberately manipulated with.

One is a fear of bad business, the other is a fear of espionage and sabotage. Most of the report was about the first, but much of the media made it seem like it was the second.

Song: I believe this report is a political stunt driven by the U.S. elections. It is obvious that the problem lies within the purchasing procedures of the U.S. defense industry. But U.S. politicians have to find an excuse to attack China to win votes.

China and the U.S. have not established any trade of military equipment. It is likely that those alleged counterfeit military electronic parts were actually commercial electronic parts purchased by subcontractors of U.S. defense contractors through commercial trade channels from any part of the world. So some parts don’t come from China, but are brought through a complicated process from elsewhere.

The subcontractors wanted them cheap and thus bought the electronic parts, while major defense contractors failed to examine these parts before installing them into their weapon system.

GT: Why would contractors choose untrustworthy distributors in the first place? Is it due to budget limit in a tight economy?

Singer: Yes. It is not only a matter of trying to save costs, but also how the industry of making and then buying computer chips has changed and grown far more complex.

The chips went from having all their key components being visible to the naked eye in the 1960s to now having literally millions of transistors packed into an area measured in square millimeters.

And, the companies designing them went from just a handful to now more than 1,500 different companies creating 2,500 new designs each year, spreading from the U.S. to Asia to the Middle East. Each of these designs now involves hundreds to thousands of people at multiple locations.

Each of those designs might then be manufactured in anything from the hundreds to the hundreds of millions of chips, going into everything from rice makers to missiles.

Song: The U.S. once had a very strict set of standards in purchasing electronic parts for military use. This was motivated by waves of problems that emerged during the Vietnam War. Those standards applied to almost every electronic part. Every part had to be checked before they could be put into weapon systems.

However, maintaining those standards was very expensive. After the Cold War ended in 1991, former U.S. president Bill Clinton began to cut some of the standards. From 1994 to 2004, around 5,000 standards were removed, which means these parts could then be purchased en masse through commercial channels.

This gives freedom to second and third-tier subcontractors. While they have a list of the recommended electronic parts, they can also purchase parts not specifically designed for military use if they are more advanced or cheaper but with a similar function.

GT: Is there any mechanism in place that will allow the Defense Department to inspect its contractors in case they use counterfeit parts to make weapons?

Singer: No. The oversight is limited to non-existent. But even then, the essential problem is that the chips have become so complex that no single engineer or even team of engineers can understand how all their parts actually work. The process of design is so distributed that no one can know all the people involved. And they are manufactured in such a great number that not even a tiny percentage can be tested.

GT: Some Americans argued that moving factories of electronic parts back to the US will solve this problem. Is it feasible?

Singer: It would help some, in that the manufacturing process might be easier to monitor, and you would have an easier time in distinguishing between trustworthy and counterfeit part makers. But it just isn’t feasible to do it for everything.

Remember these counterfeit parts go into everything from military systems to consumer products, everywhere from the U.S. to China to Brazil. A bad chip might go into an F-15 in Hawaii or it might go into a bus in Hunan Province. So the key is not just the U.S. military doing a better job of knowing where its chips come from. It is a concern for us all.

That is, the Chinese government would do well to police these less savory chip makers and traders, to ensure they follow the law and don’t sell parts that are counterfeit. Becoming known as a home for these sorts of firms that cut corners or sell counterfeits is not good for China’s image or standing in the world economy.

Song: Moving back those factories won’t help. The basic problem is that the poor U.S. economy has forced it to look for products that are cheaper and more affordable. Although cheap price means a reduction in quality, but with more limited budgets, the U.S. has to swallow this bitter reality.

Even if it outsource the manufacturing of electronic parts to South Korea or Japan, it is still hard to say whether companies from these two countries won’t purchase materials from China.