Apple’s insistence on secrecy bites Hyundai

Hyundai confirmed in a brief statement last week that it was in early talks with Apple about cars. Almost immediately, the Korean car giant began to back down, releasing a subsequent statement that removed all mentions of Apple.

Hyundai’s withdrawal is almost certainly the latest consequence of Apple’s insistence on secrecy and discretion from suppliers or potential partners. Apple companies are subject to strict non-disclosure agreements, even if they are public companies and Apple is a major customer.

While non-disclosure agreements are common in high-tech technology, people who work with Apple say they take confidential information more seriously than competitors. Apple tells partners they can’t mention Apple in public or in the media, according to people familiar with the issue who didn’t want to be identified to avoid the risk of their relationship with Apple. One person who worked with Apple described his secrecy requirements as a lot of circles to jump through.

In at least one case, Apple has threatened to penalize suppliers with $ 50 million for each individual leak, under a contract that went public as part of a bankruptcy proceeding with GT Advanced Technologies.

Some companies may engage in limited discussions about their business with Apple, especially if Apple has spoken publicly about the relationship and approves. An example is Corning, which supplies glass for the iPhone. Apple has paid the company at least $ 450 million since 2017 and highlighted it in its own press releases as an example of the American manufacturing company it supports.

But its CEO said earlier this year that he was not comfortable talking about the relationship until Corning’s new more powerful glass was mentioned during the recent launch of the iPhone 12.

“I must tell you that it is not right to use the Apple name out loud. I still don’t think I’ve ever done that. Within the company, we have a code name for Apple, we never even say “Apple”. inside the company, “Corning CEO Wendell Weeks said in a winning call in October.” So if you could see me, I look a little pink and I have an anxiety attack, if I read their names with loud voice.”

Apple’s obsession with secrecy is one of its defining aspects – some in Silicon Valley jokingly call it the “Fruit Company”. In 2011, Apple even sold a shirt at its campus gift shop, which read, “I visited the Apple campus. But that’s all I’m allowed to say. “

Apple’s secret may be related to its founder, Steve Jobs, who insisted on it. Jobs was a master of marketing who perfected the launch of the product as a show, often relying on surprises to keep the show going when discussing new products.

Today, Apple is still relying on “surprise and delight” during product launches, which remain a key marketing strategy – Apple has organized three separate launch streams this fall to launch new Apple Watches, iPhone and Mac laptops. All three presentations attracted millions of viewers, who connected to YouTube to learn directly from Apple executives about its new products.

Apple considers the details of the unreleased products to be “one of its biggest assets”. In Apple’s October business conduct policy, it states that employees should be “highly selective” when disclosing Apple business information to vendors or suppliers, and should only do so after a non-disclosure agreement is reached. The manual also says that suppliers should respect Apple’s principles, such as privacy.

“When there is a business need to share confidential information with a supplier, supplier or other third party, do not voluntarily provide more than is necessary to address the business in question,” according to the policy. “Any confidential information shared outside of Apple should be covered by a non-disclosure / confidentiality agreement.”

Even with NDA layers and a limited ability to advertise a customer’s earnings, many vendors have the opportunity to sell to Apple.

Cirrus Logic, an audio chip maker, said in a SEC filing in March that Apple accounted for 81 percent of its total sales in fiscal year 2020, which was $ 1.28 billion.

However, Cirrus executives rarely say the Apple name and have avoided it altogether for years. In 2017, a presentation for investors included a slide with a variety of their customers’ logos. The Apple logo was nowhere to be found. Instead, the Cirrus slide included an image of a brown box with the words “CUSTOMER # 1”. Recent investor slide packages simply say that Cirrus Logic provides the top seven smartphone makers.

“Before beginning the questions and answers, I would also like to mention that, although we understand this intense interest in our largest customer, in accordance with our policy, we do not discuss details about our business relationship,” he said. said Cirrus Logic President John Forsyth. in a conference call with analysts in November, as the company says regularly before discussing its own earnings. A Cirrus spokesman provided the same statement in response to a question for this article.

Other public companies also use euphemisms when discussing the iPhone manufacturer’s business. In June last year, Broadcom CEO Hock Tan suggested that the iPhone 12 would be released later than usual when discussing its wireless revenue projections. However, he did not mention Apple – he spoke of “our great North American mobile phone customer”, even after a previous deal with Apple was large enough to deserve an SEC filing, albeit with rare details. .

In 2014, bankruptcy proceedings took a look at how Apple is secretly asking for its suppliers. In 2013, GT Advanced Technologies entered into an agreement with Apple to supply raw sapphire balls to make scratch-resistant iPhone screens. GT failed to manufacture the sapphire in Apple’s Arizona-owned unit and went bankrupt, leaving Apple as a major creditor.

During the bankruptcy proceedings, GT filed a confidentially labeled contract, which said GT would have to pay Apple $ 50 million on the leak. The contract mentioned three separate confidentiality agreements that the sapphire producer had agreed to. GT also said that the terms of its confidentiality agreements must be kept secret.

Another contract stated that any advertising involving Apple would require written approval.

Apple settled with GT shortly after the $ 50 million leak penalty was revealed. One condition of the settlement was that GT keep a “description of its relationship with Apple” private.

Apple declined to comment on the story.