Six years ago, a warehouse employee at one of Apple’s top suppliers, Jabil, stole thousands of iPhone 5C casings from a factory in China before the product was announced. The employee, with help from a security guard, falsified documents and avoided security cameras as he drove a truck filled with the candy-colored shells out of the gates, according to three people familiar with the matter.
The incident, which hasn’t been previously reported, was one of the most devastating leaks to come out of Apple’s supply chain, the people said. Images of the iPhone 5C soon appeared on the Internet, spoiling the reveal at the company’s carefully choreographed media event that September. Jabil didn’t respond to a request for comment.
• Apple’s product security team in China works to stop leaks of unreleased products
• Factory workers have hidden iPhone parts in clothing and have even dug tunnels
• Apple sends people undercover into black markets to buy and trace stolen parts
The audacious theft was a wake-up call for Apple. In the years following, Apple created the New Product Security team, known as NPS, in China to monitor security at its most sensitive suppliers. The team ultimately put a stop to most device leaks—and discovered some audacious attempts, such as some factory workers who tried to build a tunnel to transport components to the outside without security spotting them. Last year, Apple began to trim the team and is now moving some of the work to contractors, according to people familiar with the team. “We were in wartime before, but now we’re in peacetime,” said one former team member.
In recent years, a new security threat has emerged: electronic leaks. Most leaks of the next iPhone, for example, have been in the form of schematics, which have revealed it will have three rear-mounted cameras but little else in terms of design changes. Apple has shifted more resources to stopping these electronic leaks, two people familiar with the matter say. Those efforts are mostly handled by a separate group managed out of Apple’s headquarters in Cupertino, Calif.
How Apple stamped out physical leaks is a model that competitors such as Google, Samsung and LG are now trying to replicate. Apple’s security guidelines, which are also aimed at preventing corporate espionage, have taken on greater significance given revelations about efforts by Chinese smartphone giant Huawei to steal technology from competitors including Apple.
Apple’s NPS team was first described by the news website The Outline in 2017. The Information spoke to seven people familiar with Apple’s supplier security practices and also reviewed an internal Apple document detailing security responsibilities for suppliers.
Types of Leaks
Apple’s security efforts are mainly concerned with halting the physical or electronic leaks of parts such as the glass, metal and plastic casings that house the iPhone’s components. Known as “enclosures,” leaks of these parts can reveal the dimensions and features of a product.
Individuals who leak parts (or images of parts) do so for different reasons, people familiar with Apple’s security policies say. Some post photos of unreleased devices on social media to gain popularity. Others want to sell unreleased components to accessory makers, which are eager to get a head start on developing products like iPhone cases.
Some leakers sell unreleased parts to local businesses that want to either build counterfeit products or learn how to repair Apple devices. Employees can earn an amount equivalent to a year’s salary for stealing iPhone enclosures, depending on how early in the development process they are stolen, these people say.
Some factory workers have hidden sensitive parts in crawl spaces and later returned to retrieve them when security guards aren’t looking. Employees have hidden parts in used mop water, tissue boxes, shoes and under discarded metal shavings. A factory worker was once caught hiding parts inside his belt buckle, hoping security guards wouldn’t pat down that area.
A woman at Jabil once hid dozens of glass screens in her bra but was caught by security guards after they noticed her unusual style of walking. Apple once caught factory workers digging a small tunnel in a corner of a room behind a large piece of machinery, hoping to use it to ferry stolen parts to the outside world. “People were chipping away little by little at the wall ‘Shawshank Redemption’ style,” the person said.
“Scrapping” companies, which help Apple suppliers destroy prototypes and defective parts, have also been a source of leaks. Apple once traced leaked enclosures to a major scrapping vendor, Singapore’s Tes-Amm. Apple removed the company from its approved list of vendors for a year but was forced to restore it because its options were limited, a person familiar with the matter said. Tes-Amm didn’t reply to a request for comment. Apple’s supplier security policies require an Apple employee or an Apple-approved contractor to be physically present when scrap is destroyed.
Leaks also can come from Apple’s packaging and printing contractors. One worker snuck a smartphone into a printing factory in 2017 and was able to take photos of an instruction manual for the iPhone X before its release. Apple quickly revised its policies to begin auditing these types of contractors many more months in advance, one person familiar with the matter said.
Many of Apple’s stolen parts end up in China’s largest electronics market, known as Huaqiangbei, in the technology hub of Shenzhen. Apple routinely sends undercover employees and contractors to hunt for, buy back and trace stolen parts, according to people familiar with the matter.
In one instance, before the iPhone X was released, a business that teaches technicians how to repair Apple devices had access to leaked glass screens for the new phone and began holding classes on repairing the screens. Apple secretly enrolled a contractor in the class to trace the source of the leaks, the person said.
A year after the iPhone 5C theft at Jabil, Apple’s investigators discovered and purchased 180 iPhone 6 enclosures made available for sale on the black market before the device was released, returning them to Jabil’s top security officer. Jabil caught the two employees responsible: a night shift supervisor and an engineer who manipulated an inventory tracking system to make the parts appear as if they were indefinitely in process of manufacturing, according to a person with direct knowledge of the matter.
Apple struggled to prosecute the leakers, the person said. To make a strong criminal case, Apple must provide detailed descriptions of the parts to Chinese law enforcement, which the company is unwilling to do, people familiar with the matter say. In China, Apple is unable to prosecute thieves based on the intellectual-property value of stolen parts, which means thieves face penalties based on their street value only, two people familiar with the matter said. Often, Apple doesn’t even involve local law enforcement as it doesn’t want to draw attention to unreleased products, one of the people said.
“People were chipping away little by little at the wall ‘Shawshank Redemption’ style.”
Before creating the New Product Security team, Apple operated a group of about 10 security assessors in China who visited suppliers once every few months to check their security. But the NPS team created after the Jabil theft operated differently. It recruited former U.S. military and intelligence people fluent in Chinese, many of whom had backgrounds in physical security, to be supplier security managers. It also employed an army of third-party auditors tasked with going to factories on a weekly basis.
The team at one point topped more than 30 people and remains the largest of its kind when compared with Apple’s competitors. Apple’s supplier security managers assess more than 100 factories handling unreleased products. Suppliers receive scores weekly based on their physical and electronic security to determine whether they can continue working for Apple. If scores are too low, Apple will withhold schematics and refuse to allow suppliers to begin mass production.
Each year, Apple sends a confidential document to its suppliers outlining their security responsibilities. The document includes basic guidelines on physical and electronic access, but also drills down into an unprecedented level of detail for some measures, such as how to operate security checkpoints and track inventory.
Occasionally, Apple’s security policies have gotten pushback. Pregnant workers have complained about the use of metal detectors at facilities that make new products, only to be told they would have to change to less sensitive roles if they weren’t willing to submit to screening. Apple’s security policies specifically say no exceptions can be made for pregnancy.
Female employees at Apple’s largest iPhone assembler, Foxconn Technology, have complained that they have to wear metal-free bras to get past metal detectors, according to one person familiar with the matter. Foxconn even opened shops outside its factory gates to sell special bras, the person said.
To prevent theft, Foxconn once floated the idea of making employees wear skintight suits. Apple rejected the idea, deeming it too invasive, two people familiar with the matter said. Foxconn didn’t respond to a request for comment.
While Apple requires suppliers to provide its security managers with unfettered access to factories, occasionally they are met with resistance. Samsung, which made the display for the iPhone X, once refused entry to an Apple security manager out of concern the manager could steal its manufacturing techniques. A compromise was eventually reached where the security manager could walk through the factory but couldn’t stop, a person familiar with the matter said.
Apple’s security measures are constantly being refined as leakers adapt and try to circumvent its policies.
Suppliers must now make sure containers storing parts are opaque but that trash bags are clear and screened for metal before they are removed from the premises. Storage containers must be sealed with tamper-evident stickers, which also require their own serial numbers. The components themselves must have unique serial numbers that can be traced back to specific factory lines. Inventory must be counted daily, and the quantity of scrapped parts must be reported weekly.
Apple requires suppliers to operate physically separate computer networks to handle the manufacturing of unreleased products. For computer-assisted drawings, or CADs, of unreleased products, Apple requires an additional computer network walled off inside the first network. Apple CAD files must be watermarked and include unique color patterns—known as colorbars—to discourage employees from taking screenshots. Furthermore, Apple doesn’t allow the use of third-party services such as Google Enterprise and Dropbox, and it prohibits public email services such as Google, Yahoo and Hotmail for communicating with Apple.
Last year, Apple added a few more electronic controls. It now mandates computer networks hosting CAD files use two-factor authentication and run Windows 7 or later, which is more secure.
Meanwhile, Apple’s suppliers are forbidden from referring to Apple by name or its project code names anywhere in buildings. Suppliers must reimburse Apple for investigations and often must pay penalties when leaks are traced back to them.
Jabil, for example, is liable for $25 million in penalties if leaks occur, according to a person familiar with the matter. The supplier has spent millions of dollars to upgrade its security since the iPhone 5C theft, people familiar with the matter said. Jabil workers now use facial recognition cameras to enter factory lines. The supplier now operates an extensive network of security cameras that cover its facilities, spending about $600,000 per building. It also employs around 600 security guards overseeing about 50,000 workers at factories in China.
Foxconn was once the largest source of iPhone enclosure leaks as it employed hundreds of thousands of workers in Shenzhen, according to people familiar with the matter. However, it is one of a handful of Apple suppliers that can’t be fined for leaks because of its strong leverage against Apple, according to three people familiar with the matter. Foxconn is Apple’s biggest supplier of the iPhone, providing everything from the production of small components to the final assembly of the devices.
Apple leaks ebb and flow based on whether there are significant design changes from year to year. One person close to Apple’s suppliers said there haven’t been as many leaks in recent years as the designs of the last few iPhones have been similar. “The motivation isn’t there when there isn’t a design change,” the person said.