How can a startup protect their technology from being copied by a manufacturer? Is it just a matter of contracts and trust?
For example, Apple doesn't assemble iPads. How do they prevent their manufacturers from copying it all? What prevents Chinese manufacturers from copying the iPad assembly process and just changing the color?
There's a reason why there are so many copycat products coming out of China. The Chinese have a tendency of reverse engineering anything they can get their hands on. I'm no expert on the Chinese culture, but my sense is that this is socially and culturally acceptable. Just like it's socially acceptable for the Chinese government to spy on their citizens.
What can you do to fight this?
Apple's legal firepower and brand recognition are obviously much stronger than a startups, and even they can't truly prevent this from happening. It's like asking someone to sign an NDA. The person is legally bound by that NDA, but the NDA can't actually prevent that person from disclosing your information. All you can do is sue them after the fact if they do.
There are fake iPads in China, but most people will know they are fakes. Since they are much cheaper than the real thing, only those that can't afford a real iPad will purchase them, and these people are not in Apple's target market anyways. This is because of Apple's powerful brand - people want the real thing, not some stupid knockoff. I recently heard a story that a Chinese citizen sold his kidney to pay for an iPad and an iPhone. Again, you don't have Apple's brand recognition, so this doesn't help you, but it answers your question about how Apple does it.
Lastly, keep in mind that these knockoff devices will likely stay within China. Is China part of your target audience? If not, you won't be losing much anyways.
This is just part of the cost of doing business. You have to decide if the risk is worth it to you. If so, you simply have to be aware of it, do what you can within reason to limit your loses, and build in costs associated with this into your business plan. This is analogous to the issue of theft at Walmart, and other retail stores.
It's not always possible, but you could use multiple suppliers for different parts and then assemble the product yourselves.
Generally though, use a reputable supplier. Their business is in making these products for companies like yours, they wouldn't get any customers if they went around doing this. Just get references and find someone trustworthy.
I would expect like most problems that people worry about, this isn't your biggest concern. If you product is so good that they people start making knock-offs, well thats a better problem to have than most businesses.