Apple’s insistence on secrecy bites Hyundai

Hyundai confirmed in a brief statement last week that it was at the start of discussions with Apple over cars. Almost immediately, the Korean auto giant began to backtrack, issuing a subsequent statement that removed all mention of Apple.

Hyundai’s retirement is almost certainly the latest fallout from Apple’s insistence on secrecy and discretion from its potential suppliers or partners. Companies that do business with Apple are required to adhere to strict nondisclosure agreements, even if they are public companies and Apple is a major customer.

While non-disclosure agreements are common in high tech, people who work with Apple say it takes confidential information more seriously than its competitors. Apple tells its partners they can’t mention Apple in public or in the media, according to people familiar with the matter who did not want to be identified to avoid risking their relationship with Apple. One person who has worked with Apple described their privacy requirements as many hurdles to overcome.

In at least one case, Apple has threatened to penalize suppliers $ 50 million for each individual leak, according to a contract made public in bankruptcy proceedings against supplier GT Advanced Technologies.

Some companies may engage in limited discussions about their business with Apple, particularly if Apple has publicly spoken about the relationship and endorses it. One 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 an American-made company it supports.

But its CEO said earlier this year that he wasn’t comfortable talking about the relationship until Corning’s new tougher glass was mentioned during the iPhone 12’s recent live launch. .

“I have to tell you, it’s not quite correct to use Apple’s name out loud. I still don’t think I did that. Within the company, we have a code name for Apple, we never even say ‘Apple’ inside the company, ”Corning CEO Wendell Weeks said on an October earnings call.“ So if you could see me, j seem to be getting a little pink and I’m having a panic attack if I read their name aloud. “

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

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

Today, Apple still relies on “surprise and fun” with product launches, which remains a key marketing strategy – Apple hosted three separate launch livestreams this fall to launch new Apple Watches, iPhones and Mac laptops . All three presentations drew millions of viewers, who tune in to YouTube to hear Apple executives directly talk about its new products.

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

“When a business needs to share confidential information with a supplier, vendor, or other third party, never volunteer more than is necessary to deal with the business in question,” according to the policy. “Any confidential information shared outside of Apple must be covered by a nondisclosure / confidentiality agreement.”

Even with layers of NDAs and limited ability to publicize a customer’s victory, many vendors jump at the chance to sell to Apple.

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

Yet Cirrus executives rarely say Apple’s name, and for years they’ve avoided it altogether. In 2017, a presentation to investors included a slide with a variety of logos from their clients. Apple’s logo was nowhere to be found. Instead, the Cirrus slide included an image of a brown box with the words “CUSTOMER # 1”. Slides from recent investors simply indicate that Cirrus Logic supplies the top seven smartphone makers.

“Before we start the questions and answers, I would also like to note that while we understand this intense interest in our biggest customer, as per our policy, we do not discuss the details of our business relationship,” said John Forsyth, president of Cirrus Logic. on a conference call with analysts in November, as the company regularly puts it before discussing its own results. A spokesperson for Cirrus made the same statement in response to a question for this article.

Other state-owned companies also use euphemisms when discussing the business of the iPhone maker. Back in June, Broadcom CEO Hock Tan indicated that the iPhone 12 will be released later than usual when reviewing its wireless revenue projections. However, he didn’t mention Apple – he referred to “our big mobile phone customer in North America,” even after a previous deal with Apple was big enough to warrant filing with the SEC, but with few details.

In 2014, bankruptcy proceedings gave insight 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 manufacture the sapphire at its Apple-owned plant in Arizona and declared bankruptcy, leaving Apple as a major creditor.

During the bankruptcy proceedings, GT presented a contract labeled confidential that GT should pay Apple $ 50 million per leak. The contract mentioned three separate confidentiality contracts to which the sapphire manufacturer had subscribed. GT also said the terms of its confidentiality agreements should be kept secret.

According to another contract, any advertising involving Apple would require written approval.

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

Apple declined to comment for this story.