The U.S. miltary has known for quite some time that they have a quality control problem with the microchips they've been buying in China. A 2005 report from the Defense Science Board warned that in buying weapon circuitry overseas, "trojan horse" chips could find their way into American weapons, potentially prompting missiles to detonate early or computers to shut down in the event of an attack. Then, in 2008, an investigation by BusinessWeek revealed that this was, in fact, happening--fake Chinese microchips were crashing American military networks. In 2010, the military bought 59,000 chips that turned out to be counterfeits. Last week, the government finally announced that they wanted to figure out a way to spot "trojan horse" chips. What took them so long?

Well, for one, China's gotten really good at counterfeiting. The fake Louis Vuitton bags they sell on Canal Street in New York City is one thing, but brand-stamped microchips sold to the U.S. military in the thousands is different in a number of different ways. When BusinessWeek investigated this issue, they found that money and "affirmative-action goals" steered government equipment buyers away from the most trusted manufacturers:

The flood of counterfeit military microelectronics results largely from the Pentagon's need for parts for aging equipment and its long efforts to save money. In the mid-1990s, after the collapse of the Soviet Union, the Clinton Administration launched an initiative, continued during the Bush years, of buying all sorts of components off the shelf. In addition to the traditional pattern of purchasing equipment from original manufacturers and their large, authorized distributors, the Pentagon began doing business with smaller U.S. parts brokers that sprang up to offer low-cost items, including microchips. Federal affirmative-action goals have further encouraged the military to favor suppliers that qualify as "disadvantaged." The chips wholesale for as little as 10 cents and as much as $2,000 each, depending on their complexity and quality. The Pentagon spends about $3.5 billion a year on spare chips, many of them for planes and ships that are 10 or 20 years old.

Further, once equipment malfunctioned, government officials explained how even though they knew some parts were counterfeit, they couldn't identify them:

It's very difficult to determine whether tiny fake parts have contributed to particular plane crashes or missile mishaps, says Robert P. Ernst, who heads research into counterfeit parts for the Naval Air Systems Command's Aging Aircraft Program in Patuxent River, Md. Ernst estimates that as many as 15% of all the spare and replacement microchips the Pentagon buys are counterfeit. As a result, he says, "we are having field failures regularly within our weapon systems—and in almost every weapon system." He declines to provide details but says that, in his opinion, fake parts almost certainly have contributed to serious accidents. When a helicopter goes down in Iraq or Afghanistan, he explains, "we don't always do the root-cause investigation of every component failure."

The Trusted Integrated Chip (TIC) program hopes to fix all of this. The new program in development at the Intelligence Advanced Research Projects Agency, a research group that reports up to the Director of National Intelligence, will host a conference on July 27 to detail their need for a new chip-testing method. At some point thereafter, they may accept proposals from contractors to carry out the method. Wired reports that one idea would be to bring the trust question stateside. "One way Iarpa would like to make chips from foreign foundries safe is by splitting up the manufacturing process," says the magazine. "Under this scenario, the front-end-of-line (FEOL) stage of manufacturing would take place at offshore foundries, while the back-end-of-line processing would finish up at a more secure U.S. facility."

The spy community's plan to accept proposals for a plan to address the problem sounds like it might take a while before the military really figures out this counterfeiting problem. (So far, only six contractors have showed interest in the program.) In the meantime, now you know how chip counterfeiting works.