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 withdraw and released another statement removing all mention of Apple.

Hyundai’s withdrawal is almost certainly the latest result of Apple’s insistence on secrecy and discretion from its suppliers or potential partners. Companies that do business with Apple are bound by strict nondisclosure agreements, even if they are public companies and Apple is a major customer.

While nondisclosure agreements are common in high tech, people who work with Apple say it takes confidential information more seriously than competitors. Apple tells partners that they cannot mention Apple publicly or in the media, according to people familiar with the matter who did not want to be identified to avoid jeopardizing their relationship with Apple. One person who has worked with Apple described the confidentiality requirements as a lot of hoops to jump through.

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

Some companies may enter into limited discussions about their business with Apple, especially if Apple has publicly discussed and approved the relationship. An example is Corning, which supplies glass for iPhones. Apple has paid the company at least $ 450 million since 2017 and has highlighted it in its own press releases as an example of a US manufacturing company supporting it.

But the CEO said earlier this year he was uncomfortable talking about the relationship until Corning’s new, stronger glass was mentioned during the recent iPhone 12 launch live stream.

“I have to tell you, it doesn’t feel quite right to use Apple’s 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’. within the company, “said Wendell Weeks, CEO of Corning, on an earnings call in October.” So if you could see me, it sounds like I’m turning a little pink and having an anxiety attack reading their names out loud. ‘

Apple’s obsession with secrecy is one of its defining aspects – some Silicon Valley insiders jokingly refer to it as the “Fruit Company.” In 2011, Apple even sold a shirt in the campus gift shop that said, “I visited Apple campus. But that’s all I can say.”

Apple’s secrecy may have to do with its founder, Steve Jobs, who insisted. Jobs was a master marketer who perfected the product launch as a spectacle, often relying on surprises to keep the show going when discussing new products.

Today, Apple still relies on “surprise and fun” during product launches, which remains a key marketing strategy – Apple held three separate launch live streams this fall to release new Apple Watches, iPhones and Mac laptops. All three presentations drew millions of viewers, who tuned in on YouTube to hear directly from Apple executives about the new products.

Apple considers details of unreleased products to be “one of its greatest assets.” Apple’s October Business Conduct Policy states that employees must be “highly selective” in disclosing Apple business information to vendors or suppliers, and that they should do so only after a nondisclosure agreement has been entered into. The handbook also says that suppliers must follow Apple principles such as confidentiality.

“When there is a business need to share confidential information with a supplier, vendor, or other third party, never offer more volunteers than is necessary to handle the particular business,” the policy said. “Any confidential information shared outside of Apple must be covered by a nondisclosure / confidentiality agreement.”

Even with tiered NDAs and limited ability to disclose a customer’s profit, many vendors are seizing the opportunity to sell to Apple.

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

Still, Cirrus executives rarely say Apple’s name, and for years they have avoided it completely. In 2017, an investor presentation included a slide with various logos of their clients. The Apple logo was nowhere to be found. Instead, the Cirrus slide featured an image of a brown box with the words “# 1 CUSTOMER.” Recent investor slide decks simply say that Cirrus Logic delivers the seven best smartphone makers.

“Before we begin the Q&A, I would also like to point out that while we understand this intense interest in connection with our largest customer, we do not discuss specific information about our business relationship in accordance with our policy,” said John Forsyth, President from Cirrus Logic. during a conference call with analysts in November, as the company regularly says before discussing its own earnings. A Cirrus spokesperson gave the same statement in response to a question for this article.

Other government companies also use euphemisms when discussing the iPhone maker’s business. Last June, Broadcom CEO Hock Tan hinted that the iPhone 12 would be released later than usual when discussing wireless revenue projections. He didn’t mention Apple, though – he talked about “our big North American cell phone customer,” even after an earlier deal with Apple was big enough to merit an SEC filing, albeit in scant detail.

In 2014, bankruptcies gave a glimpse into how Apple demands secrecy from its suppliers. In 2013, GT Advanced Technologies struck a deal with Apple to supply raw sapphire balls to make scratch-resistant iPhone screens. GT was unable to produce the sapphire at its Apple plant in Arizona, and declared it bankrupt, making Apple a major creditor.

During the bankruptcy proceedings, GT presented a contract labeled Confidential that said GT would have to pay Apple $ 50 million per leak. The contract stated three separate confidentiality contracts that the sapphire maker had agreed to. GT also said the terms of its confidentiality agreements should be secret.

Another contract said that any publicity involving Apple requires written approval.

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

Apple declined to comment on this story.