Component references are references used to place a component in an assembly. These references are created when components are placed relative to one another in an assembly. When you add a part to an assembly, the system creates a component feature in the assembly. This feature represents the part included in the subassembly, the part entities, and assembly entities used to place the part.

External placement dependencies occur when some geometry that does not belong to the subassembly or its components is used in placing a component of a subassembly. When you investigate a component reference, you may find an external reference exists because the component belongs to one subassembly but has been assembled to a component that does not belong to the same subassembly. If such an external reference is used for placement, the design intent of the subassembly is unclear outside the context of the higher level assembly in which the reference was created. Also, the subassembly will always have an external dependency to this parent assembly, making it difficult to reuse in other designs.

Local placement dependencies occur when placement uses geometry of components of the same subassembly (or their subcomponents).

When you set a subassembly as current, the system first considers it as a component and checks whether its own placement in a higher level subassembly is using some external geometry (in the context of the higher level subassembly). Then, it checks components of the current subassembly (only its own components) to see if it is using some of them for placement geometry out of the current subassembly.