Jane Lanhee Lee

OAKLAND (Reuters) – When Silicon Valley chipmaker Marvell discovered that one its chips had been found inside a Russian surveillance aircraft in 2016, Marvell set out to find out how this happened.

This chip is less expensive than $2 and was delivered to an Asia distributor in 2009. The broker then sold it to another Asia-based broker, who eventually went out of business.

“We couldn’t trace it any further,” Marvell Technology Group Ltd Chris Koopmans was the Chief Operations Officer in a recent interview.

The drone was recovered in Lithuania several years later and the insect returned. Marvell’s experience is one of a myriad of examples of how chipmakers lack ability to track where many of their lower-end products end up, executives and experts said. It could also hinder U.S. efforts to block Russia’s export of U.S. tech.

High-end chips with supercomputer-building capabilities are often sold to corporations directly. But, low-cost commodities that may just have the ability to control power go through many resellers before ending up in a device.

The global chip industry is expected to ship 578 billion chips this year, 64% of them “commodity” chips, said TechInsights’ chip economist Dan Hutcheson.

Russia represented less than 0.1% in global chip purchase before sanctions. According to World Semiconductor Trade Statistics, however, Western sanctions have increased the danger of Russian espionage.

“All those drones we’ve seen were not armed,” said Damien Spleeters, deputy director of operations at the European Union- and Germany-funded Conflict Armament Research group, which found the chips in the drones.

“Some of these drones that we have documented, like the Forpost, are now used in their armed version in the current conflict” in Ukraine, he said.

The report that prompted Marvell’s tracking work published late last year by the Conflict Armament Research also found chips in Russian drones from Intel (NASDAQ:), NXP (NASDAQ:), Analog Devices (NASDAQ:), Samsung Electronics OTC:), Texas Instruments OTC:), STMicroelectronics

Texas Instruments and STMicroelectronics did not reply to Reuters for comment; NXP and Analog Devices said they comply with sanctions; Intel said it’s against its products being used for human rights violations; and Samsung (KS:) said it does not make chips for military purposes.

Experts believe that many military weapons, including drones, missiles, helicopters fighter jets, aircraft, and electronic warfare equipment, require chips. Many of these chips are older and have been well-tested. Even the most basic of chips can no longer be sent to Russian-prohibited entities under U.S. sanctions. 

For the most sensitive chips, controlled under the International Traffic in Arms Regulations, the U.S. company selling them can be held responsible if the chip ends up with an entity on the U.S. banned list, said Daniel Fisher-Owens, a specialist on chips and export control and at law firm Berliner Corcoran & Rowe.

    ‘LIKE THE DRUG BUSINESS’

    Figuring out where chips go is like tracking the flow of narcotics, experts say.

“It’s like the drug business,” said James Lewis, director of the technology policy program at Washington-based Center for Strategic and International Studies. “There’s cutouts. There’s middlemen. There’s money laundering … There’s a black market distribution network.”

The point of the Russian sanctions, Lewis said, isn’t to track every chip, but to disrupt their supply chain, which the intelligence community has been working on.

It could require creative and technical solutions to find a solution.

It is probably very beneficial to know where chips are located. You could for example, on every chip put in essentially a public private key pair, which authenticates it,” and allows it to work, Eric Schmidt, the former Google (NASDAQ:) chairman, told Reuters in a recent interview, discussing high-end processors.

Marvell claims it is developing a range of products that support fingerprinting and traceability. It works with customers and industry partners to further this goal. The Global Semiconductor Alliance has proposed its members work on building a “Trusted IoT Ecosystem Security” https://www.gsaglobal.org/iot/ties to tag and trace chips, said Tom Katsioulas, technology executive at the industry group.

This may prove difficult for $2 chips, but it is possible. This could depend on manufacturing process and regulation, or, maybe, both.

“Ironically, the technology to do this, all of the things that we’ve got in there, the blockchain, the IDs in the device, this has all been done before for other applications,” said Michael Ford an executive at Aegis Software who is working with the industry standards group IPC for better supply chain security. “All that is needed is that catalyst to make it happen.”

Russia’s invasion of Ukraine could be that catalyst, he said.