Apple says it’s cracking down on leaks — but all the reports about the iPhone 8 show just how hard that will be

By on Jul 16, 2017 in Mobility Strategy | 0 comments


Tim Cook
Apple CEO Tim Cook
discusses business with SVP Eddy Cue and Disney CEO Bob
Iger.

Drew Angerer/Getty
Images


Two top Apple execs were treated like rock stars in front of a
sold-out crowd in a theatre in San Jose last month. 

The crowd couldn’t have been friendlier. Phil Schiller and Craig
Federighi, Apple’s heads of marketing and software engineering,
respectively, were being interviewed by blogger and podcaster
John Gruber, whose Daring Fireball blog has been a must-read for
Apple enthusiasts for over a decade. 

The two talked about the announcements that had been made the day
before at WWDC, Apple’s annual developer conference. They were
revealing new details about Apple’s products, and the crowd was
loving it.

But at the very end of the interview, Gruber asked a question
that wasn’t about Apple’s products — it was about Apple’s
corporate culture and its penchant for secrecy.

Gruber noted that leaks to the press seem to anger Apple.
Schiller nodded, and said they did, adding that the company
was putting in place a “double-down on secrecy.”

The mood in the auditorium shifted. 

“There’s a lot of work that’s gone on,” Schiller said. “There are
people on teams that work really hard at it, across
every organization, how we manage secrecy, and with suppliers and
partners.

“It’s a really hard challenge, it’s no question,” Schiller
continued, “and we may never be perfect at it, but the teams work
hard at it.”

Federighi and Schiller explained that one of the reasons that
Apple places such a premium on secrecy is out of respect for its
engineers who are developing new products. 

Apple’s engineers “get really angry when one of these [leaks]
happens,” Federighi said. “It’s just a huge disservice to the
amount of work they put into it when it does.”

“There were many topics covered yesterday that weren’t leaked,
weren’t written up, weren’t with screenshots,” Schiller added.
“And to me, the first thing I think about is I’m so happy for
those teams that they got that moments, that they can go home to
their kids and say ‘this is what I worked on’ and you can see,
and it’s fun.”

That line got a huge round of applause from the audience in the
nearly-sold out California Theatre. 

The secrecy team


iphone 7 leak
Leaked photos of iPhone 7 housings from the summer of
2016.

nowhereelse.fr

Secrecy is in Apple’s DNA. Late CEO Steve Jobs famously insisted
on it, and even current exec Jimmy Iovine
calls
the Apple “the most secretive company in the
history of the planet.”

The organization inside Apple that Schiller was referring to
that’s charged with preventing leaks is the New Product
Introduction team in its Global Security group. That team is
tasked with ferreting out leaks, whether they come from within
Apple and from its manufacturing or other partners. 

Apple has been bulking up its Global Security group.
It recently posted a job listing for a “hardware secrecy
specialist” to “track and distribute our most confidential
prototypes.”

It also posted a job opening for an investigator on the team.
That job listing revealed some of what the Global Security
group handles: 

“The successful candidate will conduct investigations related to
Apple’s personnel, property, products and reputation. Such
matters will include, but will not be limited to, cyber crimes;
complex frauds against the Apple Online Store, iTunes, and Apple
Retail stores; cargo thefts; thefts of intellectual property;
leaks; threats; and internal investigations.”

The job listing says that “experience as a prosecutor or law
enforcement officer is a plus.”

Indeed, Apple seems to be particularly focused on hiring
people for its Global Security team that have law
enforcement, military or security backgrounds.

The best look at Apple’s Global Security team comes from a
recording that was ironically leaked to William Turton of the
Outline.
According to the report
 that was based on the
leaked recording, David Rice, Apple’s Director of
Global Security, is a former staffer for the National
Security Agency and a Navy veteran. Other members of the team
have worked at the FBI, for the Secret Service, and for the
Department of State.

Apple’s effort to quell leaks, particular those coming
from factories in China, has been “trench warfare non-stop,”
Rice reportedly said on the leaked recording.

Business reasons


KGI securities
The April 28 note in which KGI Securities nailed
manufacturing details of the HomePod.

KGI Securities

Although, Schiller said Apple’s motivations for stopping leaks
are related to boosting morale among its engineers, the company
has other reasons to keep lips shut. Among them: Leaks can
depress sales. 

“We’re seeing what we believe to be a pause in purchases on
iPhone, which we believe are due to the earlier and much more
frequent reports about future iPhones,” CEO Tim Cook said in
May on an earnings call.

Even The Wall Street Journal suggests that iPhone users shopping
for a new phone in the summer should wait to upgrade, because
Apple usually launches a new one in the fall. This year, with
rumors suggesting Apple is preparing an all-new premium iPhone
model, there may be even more reason to put off a purchase.

But even as leaks can hurt Apple’s sales, they can also help its
competitors. There is always the chance that leakers could sell
information to Apple’s rivals. By getting information on the
features that will be in the latest iPhones, rival manufacturers
could try to build them into their own devices — and then preempt
Apple by releasing their phones first. 

But Apple’s competitors may not need to
get information directly from the leakers themselves.
Instead they may be getting it indirectly.

Ming-Chi Kuo, a mysterious sell-side analyst at KGI Securities,
has become a go-to source for information on Apple’s
unreleased products. He’s also been accused of paying for
leaks. 

Kuo’s reports are often touted by Apple rumor sites. But they’re
also likely purchased by Apple’s rivals that are looking for
competitive information, said independent analyst Neil Cybart in
a newsletter earlier this month.

“Kuo is getting the bulk of his information from third-party
entities that traffic in intel coming predominately out of
Foxconn,” Apple’s main manufacturing partner, Cybart
said. “KGI Securities, among other companies, is likely
paying these third-party entities for the information.” 


apple is selling homepod as a fantastic speaker first and foremost
A cutaway view of the
HomePod showing its tweeter speakers.

Apple

Have there been more leaks? 

So how’s Apple’s anti-leak campaign going? Have there
been fewer leaks this year, as Schiller and Rice assert?

It doesn’t really look like it. 

Take the case of the HomePod, the new smart speaker Apple
unveiled last month at WWDC. 

Long before Apple announced the HomePod, The Information broke
the news that Apple was developing it. Then last September,
Bloomberg’s Mark Gurman reported a slew of
new details
about the then still-unreleased device.

And in April, Kuo released a research note that was spot-on in
some of its details. Kuo correctly forecast the number of
tweeters — speakers used to produce high frequency sounds — that
would be in the HomePod. He also accurately predicted
the chip Apple would include in the device.

Rice took a shot at Bloomberg’s reporting in the meeting
described by the Outline. And Bloomberg’s report didn’t
include the product’s name or price. But the outlet got
nearly every other detail about the HomePod right, including the
fact that the device would not include a touchscreen.  

But it’s not just with new products where the leaks continue.
It’s also with Apple’s established ones, most notably the iPhone.

In July last year, Business Insider, after closely examining
leaked pictures and drawings purportedly of the rear housing of
the upcoming iPhone 7,
noted that they were all almost identical
. What’s more, as it
turned out, those photos and drawings ended up closely matching
the actually iPhone 7 Apple launched in September. 


screen shot 2017 06 29 at 092234
A
model that resembles what the iPhone 8 is believed to look
like

Steve
Hemmerstoffer


This year, there have been several photos of “dummies,” or
non-working phones based on a supposedly leaked design file of
the next iPhone that was sent to factories. But there
have been fewer leaked photos purporting to be of the actual
device.

And photos showing the rear housing of the new phone are
especially hard to come by. That’s important — Photos of that
area are particularly valuable, because they can tell someone
with a trained eye the precise design of the new phone, an Apple
security specialist said in the leaked recording.

But even if there have been fewer photos, there have still been
plenty of other leaks purportedly about the new
gadget. Bloomberg, the Wall Street Journal, and other
outlets have reported key details about the next iPhone, and
other rumors have been floating around. The new phone will
reportedly have an OLED screen, a glass case and a more
advanced camera with 3D sensing capabilities. It will also
reportedly support wireless charging.

And those details aren’t just coming from journalists and
bloggers. Some Wall Street analysts who cover Apple have offered
similar details in their own reports.

The iPhone is the most profitable consumer product, perhaps ever,
and tens of millions of people around the world are wondering
what the next one will be like. So blogs, and even top-tier
business publications will continue to “post stuff out of a
misplaced love of” Apple, as Schiller put it to the crowd of
Apple fans last month. And the vast majority of Apple’s fans will
continue to consume Apple rumors based on leaks and reporting.

If Apple is really successful at quashing leaks, you may still
see those posts. They’ll just be wrong. 

Email the author at kleswing@businessinsider.com

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