Friday Rant: If Apple Can't Control IP Leaks — Can You?

This rant is brought to you by Spend Matters' own Thomas Kase.

I've been tracking iPad 3 news for some time (and planning my purchases around what the grapevine tells). This probably doesn't make Apple's marketing team particularly happy.

Tracking upcoming Apple products has become a sport. I've found several sites focused on this, one being MacRumors. The soon-to-be-released iPad 3 is featured in many current stories, one example here. Apple is known for ferociously protecting its IP (terminating employees who speak out of turn) and even suing media outlets who report on what Apple considers off limits. Needless to say, don't be surprised if some of the site's links are dead.

Even if you weren't aware of where many of Apple's products are built (hint, SE Asia), it's clear from the kanji (Chinese characters) in many of the pictures where the leaked/scooped content comes from. Here's the rub: if the world's highest-valued company, with nearly bottomless pockets (nearly $7 billion in profits on close to $30 billion in Q4 revenue last year) and several law firms on their payroll can't control their IP -- who can?

Sooner or later we'll see another Concorde episode. For those who aren't aware of the history behind the world's first (and notably loud and fuel-inefficient) supersonic passenger airplane, during the 1960's Cold War, the ability to claim "we built it first" carried much political weight. The Soviets weren't gunning for the number two spot, so with much cloak and dagger effort, they "appropriated" Concorde designs and managed to build a copy (the Tupolev 144) so rapidly that they actually had their plane ready at the same air show as the Anglo-French team! The Soviets had quite a track record of "borrowing" design from the West -- witness the MIG15/F-86, Tu4/B-29, MIG29/F-14, and a very long list of airplanes, cars and other products. The initial "Konkordski" was a dysfunctional copy, which goes to show that copying without understanding is a bad idea (but that's another story).

Fast-forward to current high-tech consumer products. This is a world where supply chain professionals plan their product lifecycles with price points and order volumes intricately linked to demand forecasts mapped out over time. In this scenario, if many target customers (like myself) postpone purchase decisions based on what is around the corner, this can force manufacturers to cut back production and miss commit volumes and price breaks, and even force them to prematurely reduce current pricing. These losses add up when your supply chain touches 50 to 70 million iPad units in a single year!

With the above in mind, at what point are the manufacturing benefits associated with farming out product builds to China -- or other cheap labor countries -- offset by the marketing leakage and resulting loss of sales? Seriously, someone at Apple has to be calculating the sales loss of their current (iPad 2) product line and put this in a supply chain context. Will the more robust legal protections around IP in the US be a strong motivator to on-shore both development and production?

Closing with reaching out to those in supply chain with stories to tell -- is your company re-evaluating off-shoring decisions based on IP leakage? Also, is this a phenomenon isolated to China and surrounding countries, or is it just as bad everywhere? I'm curious to hear your thoughts...

- Thomas Kase

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First Voice

  1. Thomas Kase:

    No sooner had this post gone up than Best Buy starts to discount the iPad 2:

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