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Apple Said to Have 'Dramatically Reduced' iPhone Repair Fraud in China

126 points by drfuchs 8y ago

bayesian_horse 8y ago
The fraudsters apparently have ways to prevent their helpers from walking away with a free IPhone.
- DangerousPie 8y ago
  Given that we're talking about organized crime here I would assume that these ways include very credible threats of violence.
  - bayesian_horse 8y ago
    Which may sound easier than it is, considering that the fraudsters need a good quantity of fake customers and want to avoid tipping off the "geniuses" by having enforcers hover in the vicinity.
- GuB-42 8y ago
  The fraudsters could simply sell the fake iPhones to the fake customers for a bit less than the market price of a refurbished iPhone, and then buy the illegally obtained replacement at price. The fake customer gets to keep the difference as a commission, or keep the iPhone if he prefers to. If the swapping fraud works, that's win/win in any case, except for Apple.
  - bayesian_horse 8y ago
    That would mean the fake customers would have to invest the price of an IPhone, and risk losing that amount of money because either the Apple shop is onto the fraud or the fraudsters just rip THEM off, too. Not that simple.
gbarry333 8y ago
Interesting how he used the illustration of a “chop shop”. You would think a multi billion dollar company would have security measures in place for this kind of stuff but it just shows that we will never be able to stop criminal acts, only mitigate them to an extent.
Waterluvian 8y ago
I've never heard Shenzhen be described as a hotbed for criminal activity before.
- pishpash 8y ago
  I mean NYC is also a hotbed for criminal activity, compared to Podunk, so it's true?
moftz 8y ago
The waterproof sealant is just a conformal coating, it glows under a blacklight normally.
userbinator 8y ago
I feel like this is a PR attempt to divert attention away from their intense opposition to right-to-repair, especially given the recent articles such as https://news.ycombinator.com/item?id=18144489 https://news.ycombinator.com/item?id=18144489 .
- ilogik 8y ago
  and this: https://www.youtube.com/watch?v=_XneTBhRPYk https://www.youtube.com/watch?v=_XneTBhRPYk
- sigmar 8y ago
  >later developed diagnostic software that allowed retail employees to quickly detect fake parts in iPhones. agreed. this seems like a very transparent attempt to counter the growing anger over Apple's hostility to right-to-repair
- xoa 8y ago
  If so I hope it works, since "Right To Repair" is itself an attention diverter from what most of the public actually wants/needs and what should really be in law, even if they don't have words for it: a right to have problems dealt with at zero monetary cost for a reasonable period of time in line with the sticker price. "Repairability" is one possible tool in the box to help accomplish this, but for most people it's a tool, not a goal in and of itself. Even on HN where there are a lot of people who want to be able to tinker there are also tons of people who don't want to have to tinker, who appreciate being able to dig in where they like but not need to elsewhere. And repairability forces tradeoffs of its own in other product qualities that people care a great deal about. The frustration people feel over the USA's crappy warranty and consumer protection policies is real and well deserved, but the repair thing is red herring from actually fixing that. In general legislation should focus on goals not means, means change rapidly and different people will desire different tradeoffs, that's what markets are actually good at figuring out. They don't have goals themselves, but they're good at optimizing towards goals and then dynamically adjusting over time. I don't think the "right to repair" groups are all astroturfers and PR campaigns themselves, as well as companies that stand to profit I'm sure there are a few tinkerers who genuinely want it and a much bigger group that just hasn't thought deeply about it, but it's still frustrating to see all this energy finally boil up and end up in something that could be actively harmful to some stuff people like and misses the chance to actually internalize another set of costs and make everything work better. "Right to have dealt with for a time proportional to price paid" doesn't at all roll off the tongue as well but it'd be much better law. Edit: I hope people will not get too bogged down with lack of implementation details here, this post is not a research paper and I could have been more precise (and maybe doing such a thing would genuinely be a worthwhile exercise). Objections have been raised about accidental breakage for example, and I got confused by one reply, while I think the price should remain external for that one but can see an argument that the availability for an extra time period should not. Ie., if you break it then the manufacturer isn't on the hook for the cost (though you can insure) but the manufacturer should still be required to deal with it at cost for an extended time, maybe even after the main coverage period ends. The main take home I wanted to argue was that "repairability" is just one tool in the box, and at least in the legislation attempts I've seen there doesn't seem to be acknowledgement that features like security, worse active matter to dead matter ratios, and durability can all be negatively impacted by "repairability". Implementation details would absolutely have to be carefully examined and argued about, but I stand by the goal being that products "last a reasonable time" and should never be a lottery for the public. None of us should have to wonder about invisible failure rates and repair/replace costs of any sort when browsing the aisle in a store or pages online, that should be the responsibility of whomever is making it. They're the ones best placed to price it in, and to work and innovate to make that price lower or the value higher in whatever way they deem fit.
mschuster91 8y ago
Uhh... they're mentioning that the A-series CPUs are being specially coated. Why? This should only be needed in case that there are fake CPUs or fake motherboards in circulation, in which case Apple has a larger problem than fake batteries. After all customers should immediately notice that their iPhone has no iOS any more after they get it back from the fraudulent repair shop.
- riskneutral 8y ago
  > Apple has a larger problem than fake batteries I bet they do.
- reaperhulk 8y ago
  That’s not the way the fraud is alleged to have worked. The article claims that fraudsters swapped fake parts into legitimate iPhones and then took them to Apple for repair. Apple would then put legitimate parts into the “broken” iPhone.
  - moftz 8y ago
    I think the article was suggesting that they would just give the customer a new phone and trash/send the broken one out for repairs.
opencl 8y ago
What are they expecting when fraud is the only way to get iPhone repair parts short of buying entire phones? They also could have dramatically reduced fraud by creating a legitimate sales channel for the parts rather than making it as difficult as possible for anyone else to fix their devices.
- close04 8y ago
  That's not an excuse. Or at least not any better than someone stealing organs because legal ones are so hard to come by. As long as the law allows Apple to restrict the supply then what they're doing is just immoral, not illegal. What those fraudsters are doing though is both. They're not stealing just to fix their own phones, they're not doing it as a "public service", they're stealing to line their pockets. Pretty sure that if someone stole from you the excuse above wouldn't be acceptable regardless of the circumstances. [Later Edit] Had no idea there are so many "Robin Hoods" on HN.
  - logfromblammo 8y ago
    It's more like Apple comes to the court of public opinion for equitable relief, but has unclean hands. Its history of hostility towards self-repair and independent professional repair basically precludes them from complaining about the grey markets and black markets in Apple device repair parts. Of course the black marketeers are in it to line their own pockets. They wouldn't be able to do that if Apple weren't artificially restricting the supply! It couldn't be a racket without Apple's help. Apple elected to operate the Apple repair business as a monopoly, restricting supply to raise prices, and parasitic businesses are trying to siphon some of the monopoly profit off. It's illegal, but that's just one factor in the economic analysis of potential [criminal] entrepreneurs. It isn't that they deserve to be plundered by poor thieves because they are rich, but that they deserve to lose some of their repair revenues because their repair policies are unreasonable in the opinion of some consumers. Aside from that, I'm glad that they're combating the fraud on their own, rather than pushing the problem onto national criminal justice systems as an externality of their business. But that's mainly because they believe Chinese cops would be uncooperative in prosecuting Chinese citizens on behalf of a foreign-owned company.
factsaresacred 8y ago
Incredible effort on behalf of the fraudsters. Be nice if someone could run the numbers though. After the time and monetary cost spent buying fake components, switching them, planning the deceit, managing 'actors' and adapting to Apple's countermeasures strategy, what's the margin on the stolen components? I guess these are mostly labour costs though, so - if you're a gang - you outsource it to your minions.
joncrane 8y ago
I used to repair smartphones for a living, with the majority being iPhones. Back in the 3G and 3GS days, popping those cracked screens and fixing them for $80 was my bread and butter. From what I understand, factories would receive an order from Apple for X units. They would make 10-20% extra, deliver X to Apple, then sell the extra out the back door of the factory. These parts would make their way onto eBay and I would buy them. I still get spam LinkedIn messages 7 years later from cell phone repair parts dealers in China. In my case AFAIK they were legitimate parts, not backwards engineered. Made by the exact same people, just siphoned out of the supply chain.
- jsjohnst 8y ago
  From my understanding, a lot of that was “slippage” by employees and not the companies intentionally making extra parts. More often than not, they were parts which didn’t pass QC and rather than going through the normal process for those, they just “disappeared”, at least back in those days.
- xienze 8y ago
  > They would make 10-20% extra, deliver X to Apple, then sell the extra out the back door of the factory. Very common in outsourced manufacturing, it's called a "ghost shift" (contracted orders are made 9-5 and a "ghost shift" works later to produce extras). Presumably Apple wised up to this eventually.
- latchkey 8y ago
  This happens in the clothing industry as well. I live in Vietnam where a large part of clothes worn in the US are produced. I can buy major name brands anywhere on the street for a fraction of the cost. They even have labels with US price tags on them already. Repairing electronics is also super cheap here. I went from thinking I needed to buy a new device to just realizing that everything can be repaired since the cost of labor is almost nothing here and the parts come directly from China.
ckastner 8y ago
Reminds me of the fake Apple stores all over China that were closed a few years ago. Interior design was copied, Geniuses with the shirts, and so on. This article [1] mentions 22 stores in one city: [1] https://www.bbc.com/news/technology-14503724 https://www.bbc.com/news/technology-14503724
rasz 8y ago
Thats a nice PR piece pushing criminal fraud narrative, forgetting to mention Apple is at war with people providing 3rd party repair service. The goal? remove alternatives, _any_ small defect = 'genius' telling you to buy new $1-2K device. https://www.youtube.com/watch?v=o2_SZ4tfLns https://www.youtube.com/watch?v=o2_SZ4tfLns
- branksy 8y ago
  Considering Apple has been making old hardware even more performant, that doesn't seem to be their goal at all. I brought my out-of-warranty iPhone to the store last week because its battery was swelling, and they couldn't replace the battery due to employee safety issues. So they simply gave me a brand-new identical phone for the $29 battery replacement price. In my experience, Apple goes further out of their way to give customers low-cost or even free replacements in far more cases than I've ever seen any other company do.
  - bb611 8y ago
    The subsidized battery replacement program is intended to offset the significant civil liability they have from making these phones poorly in the first place. This is not charity or even a long term business decision, it ends January 1. I've built my own PCs for a decade, every hardware manufacturer I've dealt with has a better RMA policy than Apple.
  - rasz 8y ago
    What really happened is Apple was forced to replace your device, because they 1 sold defective devices in the first place, hence 'battery replacement' program aka lets do something after ignoring years of public pressure, but just before big lawsuit comes (famous Fight Club recall equation). 2 designed products and procedures in such a way as to minimize the ability of repair by non specialized technical personnel. Glued parts, sneaky short holes and different length screws, LCD screens blowing backlight circuit if you unplug them without unplugging battery first, etc.
    - ectospheno 8y ago
thatgerhard 8y ago
I have a suspicion that, if this is true, sales will also drop dramatically in China after this.
- ksec 8y ago
  Why would it drop?
davidhyde 8y ago
> Apple also began dipping batteries in a special dye that could only be seen under a high-frequency light to authenticate them during repairs. That's marketing speak for "they used invisible ink and a UV lamp"
- reaperducer 8y ago
  That's marketing speak for "they used invisible ink and a UV lamp" Considering that Apple is the biggest company in Silicon Valley, and every bar and night club bouncer from Boston to Bangkok has access to UV ink, it’s pretty safe to say that this isn’t just hand stamp ink.
  - Cthulhu_ 8y ago
    Is it possible to make inks that are tuned to very specific frequencies? Any UV lamp (that I expect has a pretty broad spectrum still) would be able to see it, but you need a special one tuned to an exact (secret, but probably easily backwards-engineered) frequency to authenticate the specific ink used. And then they can print a bar or QR code with exact tracking information and history for the part.
dejaime 8y ago
Yeah, let's make sure no one can repair anything ever, and they need to buy a new one every time we pull the kill switch! Now, 0% repair fraud, hooray...
oliwarner 8y ago
They've fixed a conduit, they haven't fixed the cause of demand. This scam was a natural side effect of Apple completely locking down their parts supply chain. We've seen from Linus Tech Tips and Louis Rossmann that it's nigh-on-impossible to legitimately purchase parts without becoming a Apple Authorized Service Provider. Even when you've gone that far, some parts are on a one-in-one-out policy. Running a repair shop where you can't keep spares on site is crippling. And becoming and remaining an AASP is an lengthy and recurrently expensive process. None of this is compatible with those generic stalls that can replace your screen for £20, or the DIY market on eBay and beyond. All these users want parts that Apple won't supply. This demand creates a vacuum that black and grey markets are all too happy to fill. By that point people don't care where the parts came from, as long as they do the job. I'm not defending anything here. They are stealing (and elsewhere, illegally copying products) from Apple to supply a black market demand. I'm just pointing out that leaving a demand unsatisfied causes its own problems. If Apple just sold parts direct to market, they'd solve 90% of this problem overnight. I'd happily pay more than the Ebay crap because I'd know they were genuine parts. Edit: Tuned.
- a2tech 8y ago
  No, selling parts for the repair market was a nice extra for these people. This is theft straight up—if you read the article the theives would buy new phones, strip out anything easy to remove (for the repair market you’d assume), and then return the phone for a brand new phone which they’d sell. This is fraud not a right to repair issue.
  - cptskippy 8y ago
    I think what he's saying is that there's a consumer demand for these parts because Apple refuses to sell them outside of their walled garden. It's like illegal drugs, the people producing, smuggling, and selling them are all breaking laws and considered criminals and their motivation is consumer demand. OP isn't justifying the criminal's behavior, just suggesting that the illegal market would evaporate overnight if Apple sold these parts to anyone.
    - 8y ago
getpost 8y ago
"Multi-Billion-Dollar iPhone Repair Fraud in China" "But as the problem started to have a material impact on Apple's financial sheet, to the tune of billions, the company began to take further action." Multi-billion seems implausible. Really? Apple achieves its financial performance despite absorbing multiple billions of dollars in repair costs? And Apple took no action until billions were lost? I don't doubt this was an expensive scam, but extraordinary claims need to be better substantiated.
- imtringued 8y ago
  They probably count each repair as a "lost sale". If someone repairs an iPhone for $100 apple sells one less iPhone for $800. In other words on their theoretical balance sheets each repair is a $700 loss of revenue. Of course this is bullshit but that doesn't change the fact that lawmakers let themselves be influenced by it.
- FabHK 8y ago
  Good point, let's check plausibility: The report notes 2000 cases per week in the Shenzhen store. With 50 weeks per year, 500$ damage per phone, you need 20 store-years to reach a billion. A quick check [1] shows that Apple has 40 stores in China (and that's not counting authorised repair centres), and the problem began 6 years ago. So even assuming the other stores are not as problematic as the Shenzhen ones, the figure could be in the right ballpark. Next, Apple has about USD 250 bn revenue, and 50 bn net income annually [2], so absorbing a billion here and there is not implausible. [1] https://www.apple.com/retail/storelist/ https://www.apple.com/retail/storelist/ [2] https://finance.yahoo.com/quote/AAPL/key-statistics?p=AAPL https://finance.yahoo.com/quote/AAPL/key-statistics?p=AAPL EDIT for clarity.
- syshum 8y ago
  I am sure they are using "Hollywood" or entertainment industry math to come up with that. Tech Companies are Learning from Hollywood on how to make up damage claims, RIAA started it by claiming every Download off Napster was a "lost sale" so they quickly got to millions and millions of lost sales... Microsoft recently used similar "math" in the Recovery CD case to inflate the damages to send a man to prison for redistributing OEM Restore CD's instead of buying Microsoft's over priced "refurbished PC" license on computers that already had a valid OEM License Companies like Apple are very very very good at inflating their losses especially when it comes to Courts and Taxes
emsy 8y ago
As an Apple user I find it sad to see this on the frontpage rather than Apples recent Anti-repair and anti-refurbish stories.
ksec 8y ago
I can't help but think why did this story get posted now when it started in 2012 / 2013 and has been known for a long time, another PR pieces for the on going trade war? Hong Kong got rid of the 14 days return policy because of the exact same problem mentioned, at the time no body cared to write about it because it wasn't "news worthy" enough. Why do they not include all the Genius Bar appointment slot has been pre booked and on-sale in Taobao?( At least some point in the past ) Getting Apple to look at their phone in a timely manner would have some help so people don't go to third party repair shop.
deleted 8y ago
[deleted]
JoshuaAshton 8y ago
It never was fraudulent, first planned obsolesence and now they're trying to control who can repair. Honestly disgusting.
trumped 8y ago
oh good, now they can do the same in the USA: https://www.youtube.com/watch?v=o2_SZ4tfLns https://www.youtube.com/watch?v=o2_SZ4tfLns
rkho 8y ago
From 2010 to 2013, I worked at an Apple Retail store in the East Bay of California and handled phone repairs for the latter two. The amount of fraud was ridiculous. We would get at least a dozen attempts at replacing phones (and sometimes laptops) that were clearly tampered with. You would have people coming in with up to four appointments at a time, each time with a phone that had the same issue -- it wouldn't power on. Why? Because they short circuited the logic board on purpose. If we rejected a claim for tampering, they would pretty much go right out the store and (this is what one of the loss prevention people told me at the time) someone would swap out the internal serial number sticker for one that was more likely to be not blacklisted, and try again at another store in the region the next day. This happened every single day I worked there. I vividly remember one extra aggressive person trying to bully us into a replacement for half an hour after the store had already closed who had already been refused on six separate occasions from different stores in the market. This fraud doesn't just happen in China, it's everywhere.

126 points by drfuchs 8y ago

bayesian_horse 8y ago

The fraudsters apparently have ways to prevent their helpers from walking away with a free IPhone.

DangerousPie 8y ago
Given that we're talking about organized crime here I would assume that these ways include very credible threats of violence.
- bayesian_horse 8y ago
  Which may sound easier than it is, considering that the fraudsters need a good quantity of fake customers and want to avoid tipping off the "geniuses" by having enforcers hover in the vicinity.
GuB-42 8y ago
The fraudsters could simply sell the fake iPhones to the fake customers for a bit less than the market price of a refurbished iPhone, and then buy the illegally obtained replacement at price. The fake customer gets to keep the difference as a commission, or keep the iPhone if he prefers to. If the swapping fraud works, that's win/win in any case, except for Apple.
- bayesian_horse 8y ago
  That would mean the fake customers would have to invest the price of an IPhone, and risk losing that amount of money because either the Apple shop is onto the fraud or the fraudsters just rip THEM off, too. Not that simple.

gbarry333 8y ago

Interesting how he used the illustration of a “chop shop”. You would think a multi billion dollar company would have security measures in place for this kind of stuff but it just shows that we will never be able to stop criminal acts, only mitigate them to an extent.

Waterluvian 8y ago

I've never heard Shenzhen be described as a hotbed for criminal activity before.

pishpash 8y ago
I mean NYC is also a hotbed for criminal activity, compared to Podunk, so it's true?

moftz 8y ago

The waterproof sealant is just a conformal coating, it glows under a blacklight normally.

userbinator 8y ago

I feel like this is a PR attempt to divert attention away from their intense opposition to right-to-repair, especially given the recent articles such as https://news.ycombinator.com/item?id=18144489 https://news.ycombinator.com/item?id=18144489 .

ilogik 8y ago
and this: https://www.youtube.com/watch?v=_XneTBhRPYk https://www.youtube.com/watch?v=_XneTBhRPYk
sigmar 8y ago
>later developed diagnostic software that allowed retail employees to quickly detect fake parts in iPhones. agreed. this seems like a very transparent attempt to counter the growing anger over Apple's hostility to right-to-repair
xoa 8y ago
If so I hope it works, since "Right To Repair" is itself an attention diverter from what most of the public actually wants/needs and what should really be in law, even if they don't have words for it: a right to have problems dealt with at zero monetary cost for a reasonable period of time in line with the sticker price. "Repairability" is one possible tool in the box to help accomplish this, but for most people it's a tool, not a goal in and of itself. Even on HN where there are a lot of people who want to be able to tinker there are also tons of people who don't want to have to tinker, who appreciate being able to dig in where they like but not need to elsewhere. And repairability forces tradeoffs of its own in other product qualities that people care a great deal about. The frustration people feel over the USA's crappy warranty and consumer protection policies is real and well deserved, but the repair thing is red herring from actually fixing that. In general legislation should focus on goals not means, means change rapidly and different people will desire different tradeoffs, that's what markets are actually good at figuring out. They don't have goals themselves, but they're good at optimizing towards goals and then dynamically adjusting over time. I don't think the "right to repair" groups are all astroturfers and PR campaigns themselves, as well as companies that stand to profit I'm sure there are a few tinkerers who genuinely want it and a much bigger group that just hasn't thought deeply about it, but it's still frustrating to see all this energy finally boil up and end up in something that could be actively harmful to some stuff people like and misses the chance to actually internalize another set of costs and make everything work better. "Right to have dealt with for a time proportional to price paid" doesn't at all roll off the tongue as well but it'd be much better law. Edit: I hope people will not get too bogged down with lack of implementation details here, this post is not a research paper and I could have been more precise (and maybe doing such a thing would genuinely be a worthwhile exercise). Objections have been raised about accidental breakage for example, and I got confused by one reply, while I think the price should remain external for that one but can see an argument that the availability for an extra time period should not. Ie., if you break it then the manufacturer isn't on the hook for the cost (though you can insure) but the manufacturer should still be required to deal with it at cost for an extended time, maybe even after the main coverage period ends. The main take home I wanted to argue was that "repairability" is just one tool in the box, and at least in the legislation attempts I've seen there doesn't seem to be acknowledgement that features like security, worse active matter to dead matter ratios, and durability can all be negatively impacted by "repairability". Implementation details would absolutely have to be carefully examined and argued about, but I stand by the goal being that products "last a reasonable time" and should never be a lottery for the public. None of us should have to wonder about invisible failure rates and repair/replace costs of any sort when browsing the aisle in a store or pages online, that should be the responsibility of whomever is making it. They're the ones best placed to price it in, and to work and innovate to make that price lower or the value higher in whatever way they deem fit.

mschuster91 8y ago

Uhh... they're mentioning that the A-series CPUs are being specially coated. Why? This should only be needed in case that there are fake CPUs or fake motherboards in circulation, in which case Apple has a larger problem than fake batteries. After all customers should immediately notice that their iPhone has no iOS any more after they get it back from the fraudulent repair shop.

riskneutral 8y ago
> Apple has a larger problem than fake batteries I bet they do.
reaperhulk 8y ago
That’s not the way the fraud is alleged to have worked. The article claims that fraudsters swapped fake parts into legitimate iPhones and then took them to Apple for repair. Apple would then put legitimate parts into the “broken” iPhone.
- moftz 8y ago
  I think the article was suggesting that they would just give the customer a new phone and trash/send the broken one out for repairs.

opencl 8y ago

What are they expecting when fraud is the only way to get iPhone repair parts short of buying entire phones? They also could have dramatically reduced fraud by creating a legitimate sales channel for the parts rather than making it as difficult as possible for anyone else to fix their devices.

close04 8y ago
That's not an excuse. Or at least not any better than someone stealing organs because legal ones are so hard to come by. As long as the law allows Apple to restrict the supply then what they're doing is just immoral, not illegal. What those fraudsters are doing though is both. They're not stealing just to fix their own phones, they're not doing it as a "public service", they're stealing to line their pockets. Pretty sure that if someone stole from you the excuse above wouldn't be acceptable regardless of the circumstances. [Later Edit] Had no idea there are so many "Robin Hoods" on HN.
- logfromblammo 8y ago
  It's more like Apple comes to the court of public opinion for equitable relief, but has unclean hands. Its history of hostility towards self-repair and independent professional repair basically precludes them from complaining about the grey markets and black markets in Apple device repair parts. Of course the black marketeers are in it to line their own pockets. They wouldn't be able to do that if Apple weren't artificially restricting the supply! It couldn't be a racket without Apple's help. Apple elected to operate the Apple repair business as a monopoly, restricting supply to raise prices, and parasitic businesses are trying to siphon some of the monopoly profit off. It's illegal, but that's just one factor in the economic analysis of potential [criminal] entrepreneurs. It isn't that they deserve to be plundered by poor thieves because they are rich, but that they deserve to lose some of their repair revenues because their repair policies are unreasonable in the opinion of some consumers. Aside from that, I'm glad that they're combating the fraud on their own, rather than pushing the problem onto national criminal justice systems as an externality of their business. But that's mainly because they believe Chinese cops would be uncooperative in prosecuting Chinese citizens on behalf of a foreign-owned company.

factsaresacred 8y ago

Incredible effort on behalf of the fraudsters. Be nice if someone could run the numbers though. After the time and monetary cost spent buying fake components, switching them, planning the deceit, managing 'actors' and adapting to Apple's countermeasures strategy, what's the margin on the stolen components? I guess these are mostly labour costs though, so - if you're a gang - you outsource it to your minions.

joncrane 8y ago

I used to repair smartphones for a living, with the majority being iPhones. Back in the 3G and 3GS days, popping those cracked screens and fixing them for $80 was my bread and butter. From what I understand, factories would receive an order from Apple for X units. They would make 10-20% extra, deliver X to Apple, then sell the extra out the back door of the factory. These parts would make their way onto eBay and I would buy them. I still get spam LinkedIn messages 7 years later from cell phone repair parts dealers in China. In my case AFAIK they were legitimate parts, not backwards engineered. Made by the exact same people, just siphoned out of the supply chain.

jsjohnst 8y ago
From my understanding, a lot of that was “slippage” by employees and not the companies intentionally making extra parts. More often than not, they were parts which didn’t pass QC and rather than going through the normal process for those, they just “disappeared”, at least back in those days.
xienze 8y ago
> They would make 10-20% extra, deliver X to Apple, then sell the extra out the back door of the factory. Very common in outsourced manufacturing, it's called a "ghost shift" (contracted orders are made 9-5 and a "ghost shift" works later to produce extras). Presumably Apple wised up to this eventually.
latchkey 8y ago
This happens in the clothing industry as well. I live in Vietnam where a large part of clothes worn in the US are produced. I can buy major name brands anywhere on the street for a fraction of the cost. They even have labels with US price tags on them already. Repairing electronics is also super cheap here. I went from thinking I needed to buy a new device to just realizing that everything can be repaired since the cost of labor is almost nothing here and the parts come directly from China.

ckastner 8y ago

Reminds me of the fake Apple stores all over China that were closed a few years ago. Interior design was copied, Geniuses with the shirts, and so on. This article [1] mentions 22 stores in one city: [1] https://www.bbc.com/news/technology-14503724 https://www.bbc.com/news/technology-14503724

rasz 8y ago

Thats a nice PR piece pushing criminal fraud narrative, forgetting to mention Apple is at war with people providing 3rd party repair service. The goal? remove alternatives, _any_ small defect = 'genius' telling you to buy new $1-2K device. https://www.youtube.com/watch?v=o2_SZ4tfLns https://www.youtube.com/watch?v=o2_SZ4tfLns

branksy 8y ago
Considering Apple has been making old hardware even more performant, that doesn't seem to be their goal at all. I brought my out-of-warranty iPhone to the store last week because its battery was swelling, and they couldn't replace the battery due to employee safety issues. So they simply gave me a brand-new identical phone for the $29 battery replacement price. In my experience, Apple goes further out of their way to give customers low-cost or even free replacements in far more cases than I've ever seen any other company do.
- bb611 8y ago
  The subsidized battery replacement program is intended to offset the significant civil liability they have from making these phones poorly in the first place. This is not charity or even a long term business decision, it ends January 1. I've built my own PCs for a decade, every hardware manufacturer I've dealt with has a better RMA policy than Apple.
- rasz 8y ago
  What really happened is Apple was forced to replace your device, because they 1 sold defective devices in the first place, hence 'battery replacement' program aka lets do something after ignoring years of public pressure, but just before big lawsuit comes (famous Fight Club recall equation). 2 designed products and procedures in such a way as to minimize the ability of repair by non specialized technical personnel. Glued parts, sneaky short holes and different length screws, LCD screens blowing backlight circuit if you unplug them without unplugging battery first, etc.
  - ectospheno 8y ago

thatgerhard 8y ago

I have a suspicion that, if this is true, sales will also drop dramatically in China after this.

ksec 8y ago
Why would it drop?

davidhyde 8y ago

> Apple also began dipping batteries in a special dye that could only be seen under a high-frequency light to authenticate them during repairs. That's marketing speak for "they used invisible ink and a UV lamp"

reaperducer 8y ago
That's marketing speak for "they used invisible ink and a UV lamp" Considering that Apple is the biggest company in Silicon Valley, and every bar and night club bouncer from Boston to Bangkok has access to UV ink, it’s pretty safe to say that this isn’t just hand stamp ink.
- Cthulhu_ 8y ago
  Is it possible to make inks that are tuned to very specific frequencies? Any UV lamp (that I expect has a pretty broad spectrum still) would be able to see it, but you need a special one tuned to an exact (secret, but probably easily backwards-engineered) frequency to authenticate the specific ink used. And then they can print a bar or QR code with exact tracking information and history for the part.

dejaime 8y ago

Yeah, let's make sure no one can repair anything ever, and they need to buy a new one every time we pull the kill switch! Now, 0% repair fraud, hooray...

oliwarner 8y ago

They've fixed a conduit, they haven't fixed the cause of demand. This scam was a natural side effect of Apple completely locking down their parts supply chain. We've seen from Linus Tech Tips and Louis Rossmann that it's nigh-on-impossible to legitimately purchase parts without becoming a Apple Authorized Service Provider. Even when you've gone that far, some parts are on a one-in-one-out policy. Running a repair shop where you can't keep spares on site is crippling. And becoming and remaining an AASP is an lengthy and recurrently expensive process. None of this is compatible with those generic stalls that can replace your screen for £20, or the DIY market on eBay and beyond. All these users want parts that Apple won't supply. This demand creates a vacuum that black and grey markets are all too happy to fill. By that point people don't care where the parts came from, as long as they do the job. I'm not defending anything here. They are stealing (and elsewhere, illegally copying products) from Apple to supply a black market demand. I'm just pointing out that leaving a demand unsatisfied causes its own problems. If Apple just sold parts direct to market, they'd solve 90% of this problem overnight. I'd happily pay more than the Ebay crap because I'd know they were genuine parts. Edit: Tuned.

a2tech 8y ago
No, selling parts for the repair market was a nice extra for these people. This is theft straight up—if you read the article the theives would buy new phones, strip out anything easy to remove (for the repair market you’d assume), and then return the phone for a brand new phone which they’d sell. This is fraud not a right to repair issue.
- cptskippy 8y ago
  I think what he's saying is that there's a consumer demand for these parts because Apple refuses to sell them outside of their walled garden. It's like illegal drugs, the people producing, smuggling, and selling them are all breaking laws and considered criminals and their motivation is consumer demand. OP isn't justifying the criminal's behavior, just suggesting that the illegal market would evaporate overnight if Apple sold these parts to anyone.
  - 8y ago

getpost 8y ago

"Multi-Billion-Dollar iPhone Repair Fraud in China" "But as the problem started to have a material impact on Apple's financial sheet, to the tune of billions, the company began to take further action." Multi-billion seems implausible. Really? Apple achieves its financial performance despite absorbing multiple billions of dollars in repair costs? And Apple took no action until billions were lost? I don't doubt this was an expensive scam, but extraordinary claims need to be better substantiated.

imtringued 8y ago
They probably count each repair as a "lost sale". If someone repairs an iPhone for $100 apple sells one less iPhone for $800. In other words on their theoretical balance sheets each repair is a $700 loss of revenue. Of course this is bullshit but that doesn't change the fact that lawmakers let themselves be influenced by it.
FabHK 8y ago
Good point, let's check plausibility: The report notes 2000 cases per week in the Shenzhen store. With 50 weeks per year, 500$ damage per phone, you need 20 store-years to reach a billion. A quick check [1] shows that Apple has 40 stores in China (and that's not counting authorised repair centres), and the problem began 6 years ago. So even assuming the other stores are not as problematic as the Shenzhen ones, the figure could be in the right ballpark. Next, Apple has about USD 250 bn revenue, and 50 bn net income annually [2], so absorbing a billion here and there is not implausible. [1] https://www.apple.com/retail/storelist/ https://www.apple.com/retail/storelist/ [2] https://finance.yahoo.com/quote/AAPL/key-statistics?p=AAPL https://finance.yahoo.com/quote/AAPL/key-statistics?p=AAPL EDIT for clarity.
syshum 8y ago
I am sure they are using "Hollywood" or entertainment industry math to come up with that. Tech Companies are Learning from Hollywood on how to make up damage claims, RIAA started it by claiming every Download off Napster was a "lost sale" so they quickly got to millions and millions of lost sales... Microsoft recently used similar "math" in the Recovery CD case to inflate the damages to send a man to prison for redistributing OEM Restore CD's instead of buying Microsoft's over priced "refurbished PC" license on computers that already had a valid OEM License Companies like Apple are very very very good at inflating their losses especially when it comes to Courts and Taxes

emsy 8y ago

As an Apple user I find it sad to see this on the frontpage rather than Apples recent Anti-repair and anti-refurbish stories.

ksec 8y ago

I can't help but think why did this story get posted now when it started in 2012 / 2013 and has been known for a long time, another PR pieces for the on going trade war? Hong Kong got rid of the 14 days return policy because of the exact same problem mentioned, at the time no body cared to write about it because it wasn't "news worthy" enough. Why do they not include all the Genius Bar appointment slot has been pre booked and on-sale in Taobao?( At least some point in the past ) Getting Apple to look at their phone in a timely manner would have some help so people don't go to third party repair shop.

deleted 8y ago

[deleted]

JoshuaAshton 8y ago

It never was fraudulent, first planned obsolesence and now they're trying to control who can repair. Honestly disgusting.

trumped 8y ago

oh good, now they can do the same in the USA: https://www.youtube.com/watch?v=o2_SZ4tfLns https://www.youtube.com/watch?v=o2_SZ4tfLns

rkho 8y ago

From 2010 to 2013, I worked at an Apple Retail store in the East Bay of California and handled phone repairs for the latter two. The amount of fraud was ridiculous. We would get at least a dozen attempts at replacing phones (and sometimes laptops) that were clearly tampered with. You would have people coming in with up to four appointments at a time, each time with a phone that had the same issue -- it wouldn't power on. Why? Because they short circuited the logic board on purpose. If we rejected a claim for tampering, they would pretty much go right out the store and (this is what one of the loss prevention people told me at the time) someone would swap out the internal serial number sticker for one that was more likely to be not blacklisted, and try again at another store in the region the next day. This happened every single day I worked there. I vividly remember one extra aggressive person trying to bully us into a replacement for half an hour after the store had already closed who had already been refused on six separate occasions from different stores in the market. This fraud doesn't just happen in China, it's everywhere.