Apple's weak link on secrets: Contract equipment manufacturing?

Summary:Reading about how a Flextronics employee was yapping about Apple's sales forecasts, product plans and internal code names makes you wonder why insider information doesn't leak out more.

Reading about how a Flextronics employee was yapping about Apple's sales forecasts, product plans and internal code names left me with two distinct reactions. First, I'm surprised that this insider information doesn't leak out more. And then there's the realization that the U.S. tech manufacturing base is hollowed out.

First, the good news. To the contract equipment manufacturing industry's credit, Walter Shimoon, the Flextronics employee spilling the beans on Apple's inner workings for a measly $22,000, appears to be a rarity. Non-disclosure agreements between tech vendors and their manufacturers are kept every day. Bad apples (pardon the pun) exist.

Nevertheless, when you depend on a manufacturer far away you have a trade secret weak link. Shimoon knew he was sitting on great information about the iPad. In a phone conversation detailed in the FBI complaint, he said:

"They [Apple] have a codename for something new...it's a new category altogether...It's a very secretive program, but I'm not involved. So, uh, you know, I don't really care...I believe it's called K48...that's the internal name...So at Apple you can get fired for saying K48 outside of a meeting that doesn't have K48 people in it. That's how crazy they are about it."

And the unedited version.

Shimoon didn't care because he didn't work for Apple either via his direct project and couldn't feel the wrath of CEO Steve Jobs. In a world where U.S. companies rarely make much of anything---oh sure we design the stuff---trade secrets can walk out the door with relative ease.

And that brings me to my second reaction. It's sad that the U.S. just doesn't make things anymore. Would an Apple manufacturing employee been so quick to hand over trade secrets? Maybe. Or maybe not. It should be noted that the other folks arrested in the U.S. government sting did work for Dell and AMD. We can't go indict the entire contract equipment manufacturing industry over a high-profile case.

But the manufacturing issue in the U.S. does spark a few conflicted feelings for this usually pro-globalization guy. Shimoon's yapping about Apple's trade secrets just surfaced them.

Topics: Apple

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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