Ever wonder what happens to the used iPhones being bought by companies such as Gazelle or San Diego’s EcoATM? When I met with the CEO of EcoATM in June, she was reluctant to answer the question, saying it was confidential.
EcoATM buys back used cellphones from individuals when they trade up to a new model. It’s done using their ingenious machines similar to ATMs that examine and pay for the phone on the spot. Gazelle and other services similarly buy back old iPhones and other smartphones over the Web.
Typically they pay $100 to more than $200 for an iPhone5S, depending on condition, carrier and memory size. Both services are a boon to the environment, allowing a phone to be reused rather than ending up in a landfill.
But why confidential? Such a response made me only more curious, so I have been speaking with industry analysts, phone company employees and manufacturers over the past several months.
I finally got the answer on a recent visit to China, speaking with a senior executive for a major Chinese consumer products manufacturing company that I’ve known for more than 20 years. He said it’s common knowledge there about what happens to the used iPhones bought in the United States.
He said that about 80 percent of the used iPhones are shipped to Hong Kong, where daily auctions are held to sell the phones in large lots. These lots of iPhones are bought by many manufacturing companies that take the phones to their facilities in southern China for refurbishing.
The process includes refinishing the cases and removing scratches from the screens, sometimes replacing the touch-screen surface or the glass. Normally, they don’t bother to replace the batteries.
When the iPhones’ housings have a ding or deep scratch and cannot be repaired, they are replaced with independently manufactured, look-alike housings.
There are two levels of housings: highly accurate copies and cheaper lower-tier copies. Once the refurbishment is complete, the iPhones are categorized by the refurbishers into four tiers of quality varying from “like new” to “fair.”
Each iPhone is put into brand new packaging that’s an exact copy of Apple’s iPhone boxes and sold mostly as new phones to retailers throughout China. While Apple also retails its iPhones in China, the demand is so great that many retailers, particularly those that don’t have a relationship with Apple, will sell whatever they can get. And they typically sell them as new phones.
I asked EcoATM representatives to comment, but they declined. Instead, they explained how “they adhere to strict environmental and recycling standards, and that all the devices they take in are sent to certified buyers.”
They said that “75 percent of the devices collected have found a second life, and 25 percent have been recycled (meaning junked for material).” Of the 75 percent, iPhones represent almost half of EcoATM’s purchases, another source said.
“Their network of international and national buyers are refurbishers and also recyclers,” the company added. “And it’s their documentation that we use during our auditing process, in addition to our own.”
As EcoATM says, creating a way for people to sell their phones so they can be reused rather than disposed of is a major benefit to the environment. I just found it surprising that the phones end up being sold as new phones to unsuspecting Chinese customers. I suspect it’s this secret that most of the companies that sell to refurbishers know or could easily find out, if they wanted to.
However, this practice is not illegal here, as the phones are being bought and not being sold as new in the United States. It may or may not be illegal in China; the U.S. companies are certainly not implicated — it’s the refurbishers that are duping their customers. Still, I think it’s questionable to profit from these sales.Read More...