http://www.strategypage.com/htmw/htintel/articles/20100925.aspxSeptember 25, 2010: The U.S. government shut down yet another company, and arrested the owners, for selling fake computer chips to firms that use them in American military electronics. In this case, nearly 60,000 micropchips were involved. The fake chips were manufactured in China, then mislabeled as coming from a reputable manufacturer. There are numerous cases a year of counterfeit items, mostly from China, being sold to American military suppliers.
China refuses to crack down on this sort of thing, and one reason they tolerate the widespread manufacture of counterfeit products is because some of them have some military benefit for China's Cyber War effort. This came to light two years ago when the FBI arrested two Americans for running a computer parts company that was selling counterfeit Cisco router components, manufactured in China. The phony parts had counterfeit labels, and were delivered in counterfeit boxes. The two brothers had a contract to sell these parts to the Department of Defense and other government agencies.
And to further expound on this (pdf download)
http://www.dtic.mil/cgi-bin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA497905One particular example of counterfeit IT hardware, and the threat that it harbors, was summarized in a recent Federal Bureau of Investigation (FBI) report concerning counterfeit Cisco products. A variety of individuals and companies were involved in selling counterfeit routers, switches, gigabit interface converters, and wide area network (WAN) interface cards to military agencies, military contractors, and electric power companies in the U.S.
China now crooning about being a "backdoor man"