In global recession, outsourcing becomes a question of survival for most executives who need to restore profitability and growth. One of the critical challenges faced by such decisions is the potential risk of leaking confidential information through shared suppliers and partners. In this paper, a new approach is proposed to decompose a product into several sub-components for mitigating the risk of Intellectual Property (IP) leakage caused by inferences in supply chains. A design structure matrix is employed to study the potential risk of IP leakage considering different types of interactions between product components. Based on such a matrix, a clustering algorithm is developed to decompose and allocate the product components regarding IP protection issue. This methodology can be considered as a decision support tool to help the manufacturer select a set of optimal suppliers while minimizing the information leakage risk and the manufacturing cost.