Wednesday, February 17, 2010, 01:50 pm

Overseas contractors feel pressure from Apple's rules of secrecy

By Katie Marsal

A new report from Reuters has offered a rare inside look at Apple's legendary veil of secrecy, and how the company's desire to prevent information leaks has influenced its relationships with overseas suppliers and manufacturers.

Citing numerous anonymous sources, the report issued Wednesday afternoon revealed that Apple often decides on a supplier only weeks before a product is rumored to launch. Deals with Apple come with a confidentiality clause, and breaches are reportedly met with stiff penalties. Factories have metal detectors, suppliers are issued fake products, and parts are divided among a number of companies so that those who work on the production line often have no idea what the final product will look like.

Sources said it is not common for suppliers to be fined for breaching a confidentiality agreement, though they had heard of companies that were "verbally warned that they were in danger of losing their contract" if leaks continued.

One South Korean supplier allegedly expressed frustration that the Cupertino, Calif., company makes "unreasonable requests," such as custom designs and unique sizes and specifications.

"That means we won't be able to use a common platform or rework those components to serve other clients," the source told Reuters. "And if there's any inventory left, it cannot be used any other way."

The report made mention of an incident in which a reporter, who stood on a public road and took photos of a Foxconn factory, was restrained and kicked by the facility's security guards, who attempted to pull the reporter into the factory, and then into a security vehicle. The reporter contacted the police, and a local police officer reportedly said that Foxconn has "special status" there.

In January, a Foxconn worker in the same town of Guanlan suspiciously died. The Taiwanese manufacturer has been working with local authorities in the ongoing investigation.

Apple's desire to keep projects secret, and the pressure it places on its partners, came under scrutiny last July, when a 25-year-old man reportedly committed suicide after an iPhone prototype he was responsible for went missing. One report said the man was subjected to "unbearable interrogation techniques" in the ensuing investigation by his employer, Foxconn.

The company later said that the man had a suspicious history of losing products. Apple officially commented on the matter, stating that the company requires its suppliers to "treat all workers with dignity and respect."

Reuters also noted that the company sued two Chinese reporters in 2006, asking for $4.4 million for exposing alleged substandard employment practices. That same year, Apple voluntarily conducted its first audit of Foxconn, and found that most of the manufacturer's facilities were in compliance with the law.

Apple has continued its audits of overseas partners in years since. In 2009, Apple's responsibility progress report found more than half of Apple's partners' factories in China were not properly paying their workers. In addition, 23 of 83 surveyed factories were not even paying some of their employers China's minimum wage.