Security Tight at Apple’s China Manufacturing Facilities

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Inside the walled city — one of several compounds run by Foxconn International, a major supplier for Apple Inc — employees are provided with most of their daily needs. There are dormitories, canteens, recreation facilities, even banks, post offices and bakeries.

The rank-and-file within the compound have little reason to venture outside. That reduces the likelihood of leaks, which in turn lessens the risk of incurring the wrath of Apple and its chief executive, Steve Jobs, whose product launches have turned into long-running, tightly controlled media spectacles. (Reuters)

This feature story on security measures at Foxconn is illuminating. I was slightly surprised that the writers approached the topic of security as a PR/disclosure issue as opposed to a more “traditional” intellectual property concern over trademark or patent infringement, but then after I thought it through, it made sense.

Like most foreign tech firms, Apple has probably kept its best innovation shops in the U.S. (or EU, for European companies). The Foxconn facilities are for manufacturing only, so assembly and related quality is top concern.

If there is a worry about IP, it is specifically about something that these assembly-minded folks know a lot about: product design and tech specs. For Apple and Steve Jobs, product rollout is something of an art form (not to mention incredibly annoying) — the recent iPad show is a good example.

If your marketing strategy requires secrecy, engendering a lot of Net whispering from fanboys, you need to keep a lid on the people that are making your products.

Apple’s security measures, though, come across as unbelievably harsh in this Reuters piece. The Foxconn operation sounds like a cross between Santa’s Workshop (replete with elves) and a 19th century coal mining company town.

From an IP perspective, though, the measures sound quite good not only to stem the flood of design leaks, but for any other trade secret information. Other MNCs could learn a lot from this information, although one would caution against overly draconian IP protection strategies. I don’t think Apple wants Foxconn workers humming “Sixteen Tons” while assembling iStuff.

Many of the Cupertino, California-based company’s tactics read like something from a spy novel: information is assiduously guarded and handed out only on a need-to-know basis; employees suspected of leaks may be investigated by the contractor; and the company makes it clear that it will not hesitate to sue if secrets are spilled.

On occasion, Apple will give contract manufacturers different products, just to try them out. That way, the source of any leaks becomes immediately obvious, people familiar with the supply chain said.

And unlike other electronics makers, some of whom prefer the convenience of one-stop shopping, Apple doesn’t rely on a single firm to supply everything for a product. The industry sources say the company will often minutely divvy up projects.