Intellectual property (IP) theft is inflicting staggering financial damage on the global economy. In the US alone, losses range between £177 billion and £472 billion annually. In the UK, IP-related cybercrime costs are estimated at £9.2 billion per year, with counterfeit electronics imports valued at £7.1 billion. While across the European Union, total losses from IP infringement reach approximately £51 billion annually.

For companies manufacturing electronic products and circuit boards, these figures aren’t just statistics – they’re a warning. Designs, data, and innovations are prime targets for theft, cloning, and misuse. Most firms rely on contract manufacturers to handle production, whether due to cost, scale, or capability. From agile UK startups to global names like Dyson – whose innovative devices are built with help from Asian partners – outsourcing is standard practice. But once a design leaves your hands, it becomes vulnerable to misuse or outright theft.

Here, I will explore the key risks facing companies in contract manufacturing, from insider threats to cyberattacks. More importantly, I can share proven strategies to safeguard your designs, firmware, and security certificates from unauthorised access and misuse.

Intellectual property risks in contract manufacturing

While outsourcing remains a cost-effective route for electronics manufacturing, it brings critical risks that can undermine innovation and revenue. One of the most pressing is overproduction. When manufacturers exceed licensed volumes without authorisation, IP is effectively exploited, and margins erode. Without enforceable controls in place, there is a reliance on reported figures rather than verified output – a fragile foundation for protecting high-value designs.

Trust, indeed, can falter. In 2023, ASML – a global leader in semiconductor equipment – suffered a major IP breach when a former employee based in China stole confidential chipmaking data. The stolen information reportedly ended up with Huawei, underscoring the danger of insider threats and the vulnerability of outsourced relationships. Managing these partnerships demands a combination of technical safeguards, contractual protections, and continuous oversight.

Insider breaches continue to pose a serious threat, particularly when proprietary information that governs a product’s performance, functionality, and security is left unprotected. Electronic boards are especially exposed. Firmware in embedded systems often contains tightly guarded algorithms that represent a company’s core intellectual property. If accessed or copied, this code can be reverse-engineered and replicated in counterfeit products, undermining competitive advantage and eroding brand value.

And it’s not just insiders. Cyberattacks are increasingly targeting design files, production systems, and IP repositories. In May 2025, a major breach at Nucor Corporation disrupted production by targeting proprietary data, exposing weak points across global supply chains, especially in electronics manufacturing.

Managing IoT device certificates and compliance risk

As cyber and insider threats continue to expose weaknesses in manufacturing and supply chains, regulatory scrutiny is intensifying, particularly for connected electronics. IoT products bring a unique layer of complexity, where secure communication depends on managing digital certificates. These certificates are not just compliance tools. They are assets that, if mishandled, can compromise the security of entire product fleets. Granting uncontrolled access to them is effectively handing over the keys to your electronics patents and IP.

To address this, the EU’s Cyber Resilience Act has already introduced strict requirements for certificate management. From the end of 2027, the Act will require CE marking for all connected devices sold in the EU, with non-compliance penalties reaching up to 2.5 per cent of global turnover. These rules raise the bar not only for cybersecurity but for visibility and control across manufacturing partnerships.

In the UK, updates to the Intellectual Property Act 2014 have increased enforcement strength and shifted the responsibility for compliance squarely onto manufacturers. Together, these evolving legal frameworks are reshaping how companies must approach IP protection – linking technical security with regulatory exposure in ways that can no longer be separated.

Strategies to protect your intellectual property

At ByteSnap Design, we recommend a layered, proactive approach to IP protection in contract manufacturing. Embedding secure elements – such as hardware-based security chips – into boards helps lock firmware and prevent unauthorised access or cloning.

Additionally, encrypting software that is deployed from cloud systems during production ensures only authorised code can run on your devices. Assigning unique identifiers to every printed circuit board assembly (PCBA) enables full traceability, while real-time analytics can detect production issues early, improving quality control and compliance. We advise limiting production batches – for example, to 500 boards per order – to help prevent overproduction and preserve licensing accuracy.

Further, remote certificate management via server-based systems avoids the need to share sensitive credentials with manufacturers, aligning with EU regulatory expectations and reducing long-term risk. Implementing digital production test logs, recorded per serial number, supports traceability, warranty claims, and faster resolution of defects.

Strong contracts must include IP protection clauses, production limits, and audit rights. These should be paired with periodic audits to hold manufacturers accountable. Finally, staying aligned with evolving regulations is essential. The EU’s proposed Design Directive recast (2024) promotes harmonised design protections and addresses emerging digital threats such as 3D printing and IP theft in virtual environments.

The convergence of IP protection needs with regulatory compliance indeed creates an opportunity to solve multiple challenges with integrated solutions. Instead of treating security, licensing control, and production management as separate issues, forward-thinking companies are implementing holistic approaches that address all of these simultaneously.

Real-world implementation of IP risk mitigation in electronics

Take Versinetic, a UK-based electronics design consultancy specialising in hardware, firmware, and software solutions for electric vehicle (EV) charging systems. With a growing client base and international deployments, the firm outsources the manufacture of its charger control boards.

To address the IP risks, ByteSnap Design supported Versinetic by implementing the SnapPRO IQ system – a modular security and compliance platform combining embedded firmware, secure hardware elements, and cloud-based infrastructure. Each charger control board was embedded with a secure element, storing digital certificates and device-specific cryptographic keys.

During production, boards were tested using a custom test fixture that interfaced with a secure server. This ensured that only approved units could be programmed and authorised for deployment. Certificate requests were handled individually, with each board receiving its credentials only after passing validation and test requirements. All results were logged and associated with unique identifiers, providing Versinetic with full visibility over which units had been manufactured, tested, and licensed.

This process provides traceability across production batches and helps reduce the risk of unauthorised overproduction. It also supports Versinetic’s compliance with emerging regulatory frameworks, including the EU’s Cyber Resilience Act, by ensuring tight control over device identity and secure communication credentials. While the technology alone is not a silver bullet, integrating secure provisioning, test logging, and licensing enforcement into the production process gives Versinetic greater control over a critical part of its value chain.

Conclusion: secure your innovation before someone else does

According to Santander, US economic losses from Chinese IP theft alone are estimated between £175.5 billion and £468 billion annually, underscoring the scale of the threat across manufacturing sectors, including electronics. IP theft is not a distant concern – it is a present, growing risk affecting companies of all sizes.

To prevent IP theft, electronics designers and manufacturers must act now. Rather than treating regulation as a burden, proactive manufacturers are turning compliance into a competitive edge – strengthening IP controls, building reliable licensing models, and accelerating access to tightly regulated markets.

Start by reviewing contracts, securing firmware, and enforcing controlled production systems. Embed compliance throughout development and manufacturing. With the right safeguards, trusted partners, and focused oversight, innovation can remain protected, and profitable.

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