Counterfeit and fraudulent components in the supply chain pose a significant threat to the reliability, performance, and safety of electronics products and their end-users. This presentation shares counterfeit trends and insights, including potential similarities in supply chain impacts of counterfeit regulations with other regulatory issues RoHS, REACH, and Conflict Minerals.

1. OCTOBER 2014
COUNTERFEITCOMPONENTS
Mitigating the Risk
RoryKing
DirectorThought Leadership
IHS, Inc.
Rory.King@IHS.com

2. WHATWEDO
IHS (NYSE: IHS) is a global information
and analytics companywith world-class
experts in pivotal areas shaping today’s
business landscape.
Organizations around the world depend on
our insights to help themmake decisions
about everything fromday-to-day
operations to long-term investments.
We employ over 8,000 people inmore than
31 countries around the world.
INFORMATION
© 2014 IHS 02
© 2014 IHS
ABOUTIHS
ANALYTICS
EXPERTISE

3. © 2014 IHS
Worldwide Electronic Equipment Revenue by Market
5.50%
16.90%
21.30%
24.80%
25.90%
5.60%
Automotive Electronics
Consumer Electronics
Data Processing
Industrial Electronics
Wired Communications
Wireless Communications
Welcome
3
Source: IHS Technology, Electronics Equipment and Semiconductor Market Forecast Tool, 2014
Worldwide OEM Factory Revenue will be $2.045 Trillion in 2014
CAGR of 3.7% from 2013 - 2018
You are here

4. Counterfeit components
© 2014 IHS
4
Top Impacts of Counterfeits
Source: IHS Technology, 2009

5. Counterfeit components
© 2014 IHS
5
Top Impacts of Counterfeits
Source: IHS Technology, 2009
Experiences of Engineering, Procurement, and Supply Chain Professionals
In 2009, a study was conducted among electronics supply chain professionals, asking what the impacts
of counterfeits were. These are written testimonials of those participating professionals.

6. Increased counterfeiting
© 2014 IHS
Counterfeit Incidents by Component, 2003 - 2013
Analog IC , 19.0%
Memory IC , 14.6%
Microprocessor IC , 13.7%
Programmable logic IC,
10.2%
Other, components, 42.4%
Source: IHS Technology, Parts 2014

7. Analog IC – the most counterfeited
© 2014 IHS
2014 Analog IC Market (Total Shipment Revenue US$M*)
Automotive
$8.5 billion (15.7%)
7
Wireless Market
$18.9 billion (34.8%)
Data Processing
$6.0 billion (11%)
Consumer Electronics
$9.0 billion (16.6%)
Industrial Electronics
$8.9 billion (16.5%)
Wired Communications
$2.9 billion (5.4%)
Source: IHS * rounded to 1 decimal place Technology, Parts 2014

8. Top four counterfeited could impact
$281.5B worth of semi markets
Component Application Market by Percentage and Total Shipment Revenue (US$M), 2014
© 2014 IHS
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Application
Market
Memory
IC
Microprocessor
IC
Programmable
Logic IC
Analog
IC
Data Processing 40.30% 60.10% 23.60% 10.80%
Wired Communications 2.40% 4.00% 10.50% 6.30%
Wireless Communications 43.80% 5.60% 42.50% 34.40%
Consumer Electronics 8.70% 9.60% 15.50% 16.90%
Automotive Electronics 1.70% 11.00% 2.90% 17.40%
Industrial Electronics 2.90% 9.70% 5.00% 14.30%
MCP 0.10% - - -
Total (Percentage) 100.00% 100.00% 100.00% 100.00%
Total (US$M) 59,704 69,133 98,555 54,161
The Top Counterfeited Components
Over three quarters of all incidents are for integrated circuits. More than half of reported counterfeit
incidents are for analog integrated circuits, memory devices, microprocessors, and programmable logic.

9. Focus on defense supply chain
© 2014 IHS
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Excerpts from US SASC Hearing, November 8, 2011
Timeline of Events
November 29, 2011, the US Senate unanimously approved an amendment to the National Defense
Authorization Act for Fiscal Year 2012 and President Obama signed the NDAA on December 31, 2011.

10. Not just obsolete defense parts
Passive,
2.9% Other, 3.3%
Integrated
circuits,
76.8%
© 2014 IHS
Counterfeit Incident Statistics, 2003-2013
Electro-mechanical,
0.4%
EOL/Lifebuy
Transferred
Active
Discontinued
Military Part
Commercial
Part
Notable Highlights
Discrete,
16.6%
52.8%
32.2%
14.6%
81.5%
18.5%
Source: IHS Technology, Parts Management 2014
0.4%
Over three quarters of all incidents were IC’s. While the majority of incidents are for discontinued
components, nearly one third were for active devices. Over eight in ten were commercial parts.

11. Military/aero is only 1% of market
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
© 2014 IHS
Military & Civil Aerospace vs. Total Semiconductor Market (Revenue Shipment US$M)
Source: IHS Technology, Application Market Forecast Tool, 2014
11
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Military & Civil Aerospace
Rest of Market
Military & Civil Aerospace is 1% of Worldwide Semiconductor Market

12. Regulations are perceived to be
specific but have a global impact
• EU ROHS (2003)
• EU REACH (2007)
• US Conflict Minerals (Dodd-Frank 2010)
• US NDAA FY12 818 (2011)
© 2014 IHS
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▲Cost ▲EOL ▼ Supply ▼ Competition

13. But what do these really call for?
authenticity, traceability, reliability
• EU ROHS (2003)
• EU REACH (2007)
• US Conflict Minerals (Dodd-Frank 2010)
• US NDAA FY12 818 (2011)
© 2014 IHS
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The average component manufacturer
has 50+ authorized sources of product

14. Mitigate risk
• Counterfeit risk is real and growing
• It’s not exclusive to defense / obsolete parts
• Safety and reliability threaten all end markets
• Regulations are not localized  global impact
• Authorized, “trusted” component sources
© 2014 IHS

15. About Rory King
© 2014 IHS
Rory King, Director, Thought Leadership, IHS
Rory King is Director, Thought Leadership at IHS Inc. In this role, he has primary
oversight for the identification and cultivation of original expertise and insights
associated with the most significant global megatrends, business drivers, market
drivers, and strategic themes shaping four connected, capital-intensive
worldwide sectors with common supply chains: energy, chemicals, technology,
and transportation. This includes coverage of the most critical and significant
issues associated with advanced analytics, economics, operational excellence,
risk management, innovation, product design, and supply management
underpinning these convergent industries.
For over 15 years, Mr. King's collaboration and leadership have led to over 20
awards for excellence in individual performance, process improvement and
original insight in areas of innovation, product lifecycle management, supply
chain management, risk management, and sustainability. As an industry thought
leader, his unique research, analyses, and evangelism on topics such as conflict
minerals, semiconductor technology, environmental regulations, counterfeit
electronics, and supply chain risk, have been featured by global news and
information services including CNN, The Wall Street Journal, BBC News, Fox
News, Compliance Week, The Federal Times, and IHS Quarterly, in addition to
numerous industry research, media, and trade publications.