
Apple Said to Have 'Dramatically Reduced' iPhone Repair Fraud in China - drfuchs
https://www.macrumors.com/2018/10/09/apple-dramatically-reduces-iphone-fraud-in-china/
======
joncrane
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
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.

------
rasz
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
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.

~~~
turkeywelder
Not always.

I took a 14 month old iPhone 7 into the store which wouldn't charge or
communicate via the lightning port. In the engineer's words it was "in perfect
condition".

They couldn't repair it, wouldn't do anything because I didn't have apple care
and the only way to get around it was a new device.

Nice paperweight though

~~~
Cthulhu_
14 month falls under a reasonable warranty period, so you could've claimed
that. In the EU at least you'd have a very good case and they wouldn't cause
trouble.

It could've been something trivial though, lint tends to pile up in the back
of the lightning port, eventually causing the problem you described. Poking
the back of the port with a needle or something often helps.

~~~
turkeywelder
I'm pursuing the retailer/credit card company under the consumer rights and
consumer credit act in the UK but they're requesting an engineer's report
stating this is a manufacturing fault which is very difficult to get.

Tried cleaning it, there's no dirt or anything in there

~~~
candiodari
So you're in the EU, and Apple isn't helping you, nor is the EU bothering to
enforce it's own laws.

I must say, I'm still wondering why Apple gets a pass on the "usb charging for
all phones" laws.

------
oliwarner
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
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
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.

~~~
AllenKids
And he would be wrong.

Remember, these criminals essentially get these parts for "free", they can
undercut Apple even if Apple sells at cost.

And Apple never sells anything at cost.

~~~
sbov
Just like reputable shops don't sell stolen goods, reputable repair shops
wouldn't use stolen parts.

I mean, yeah, they would be cheaper, but that's the case for anything stolen.
Yet we don't have an epidemic of all shops in the USA selling stolen goods
they got for cheap.

------
opencl
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
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
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.

~~~
close04
> It's more like Apple comes to the court of public opinion for equitable
> relief, but has unclean hands.

This is not about what Apple is doing, it's about people justifying stealing
and suddenly finding it OK because Apple is on the other end. Of course I'm
not OK with what Apple is doing but morally you can't justify doing something
shitty because "they" do it too.

> Apple elected to operate the Apple repair business as a monopoly

Again, this is trying to justify stealing. The way they choose to run their
business does not justify breaking the law. It justifies changing it.

> they deserve to lose some of their repair revenues because their repair
> policies are unreasonable

And doing that by stealing or justifying this method makes you no better than
them or the fraudsters. If you want them to lose revenue buy/repair with
someone else, don't steal.

How is this different from someone stealing a phone and saying "it's because
Apple made them so unreasonably expensive"?

It reminded me of this parody:
[https://www.youtube.com/watch?v=51-hepLP8J4](https://www.youtube.com/watch?v=51-hepLP8J4)

~~~
logfromblammo
> _This is not about what Apple is doing, it 's about people justifying
> stealing and suddenly finding it OK because Apple is on the other end. Of
> course I'm not OK with what Apple is doing but morally you can't justify
> doing something shitty because "they" do it too._

Actually, you can. It is not a criminal defense, but it is an equitable
defense, and the court of public opinion is a court of equity.
[https://en.wikipedia.org/wiki/Clean_hands](https://en.wikipedia.org/wiki/Clean_hands)

To be more nuanced, it isn't justifying the stealing so much as ignoring
Apple's complaints when they whine about it. Who are we to care if two
blackguards are to brawl in the gutter? It's bad that the stealing by fraud is
happening. But because it is Apple that is the victim, I am entirely unwilling
to help them with this problem that they brought upon themselves with their
own avarice.

And that's fine. They're dealing with it alone, apparently. But not with my
revenues. I won't willingly enter the garden with the highest walls and the
most dongles with proprietary patented connectors and the most secret repair
procedures. I can still hate the thieves while expressing zero or negative
sympathy to the victim.

The situation is akin to a heroin dealer getting robbed of his cash. The
robber is scum for stealing money, but so too is the dealer scum for peddling
poison to junkies in lieu of a more ethical product with lower margins. I'd
have more sympathy for a marijuana dispensary, and perhaps some actual
motivation to punish the robber if the victim were an entirely-lawful
pharmacy. If you want a society to help you with your problems, you need to do
things that the society likes.

In short, until Apple respects right to repair and starts selling genuine
repair parts at reasonable cost (including bureaucratic procedural cost), I
won't care one whit that they're being fleeced for billions on repair fraud.

~~~
close04
In the court of public opinion you can judge anything any way you like if you
have enough people behind it. That seems to work ok with extremism, why
wouldn’t it work with stealing, right? Just because you can judge doesn’t mean
you’re right.

In the meantime Apple is immoral for profit. You’re immoral out of principle.

As I said before, in the court of public opinion even rape is justifiable by
what the victim did (Dressed too provocatively? Got too drunk? Deserved it).
“The public said it, must be correct”.

~~~
logfromblammo
You're tilting at strawmen, I think. I'm rather confident at this point that
you either cannot understand my position, by cognitive insufficiency, or will
not, by rhetorical malice. Either way, I won't be wasting any more replies.

~~~
close04
> cognitive insufficiency

You sure made your point insulting me... Congratulations, following the values
of decency and of HN to the letter. You’re definitely perfectly qualified to
serve in the court of public opinion.

I completely understand your position. I simply consider it wrong and you
brought no _argument_ to support it besides “some random people on the
internet agree with me”. This is everything suporting your position at this
point. To support my position I have the law and an overwhelming consensus
that stealing to line your pockets is wrong.

You have an opinion and an internet connection. And you won’t let something as
insignificant as it being illegal stop you from strongly supporting it
(insults included).

You will slowly realize why the court of public opinion is worthless when it
comes to a moral judgement. Yes, great for a media circus and anonymous pearls
of wisdom. Not so great for any judgement of value.

------
userbinator
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)
.

~~~
xoa
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.

~~~
thecatspaw
> a right to have problems dealt with at zero monetary cost for a reasonable
> period of time in line with the sticker price

so If I am clumsy and accidentially break my display of my macbook (entirely
my fault), apple should replace it for free?

~~~
JoeAltmaier
Dell replaces (or used to anyway) failed-upon-receipt 'new' machines with
refurbs. You order a new laptop, it comes and doesn't turn on, you return it,
ok so far. Then you get a refurb in the mail as a 'warranty replacement'. Paid
for new, got used. How do they get away with it?

~~~
dsfyu404ed
Because if they fixed the exact laptop you bought then it's basically a refurb
at that point.

~~~
JoeAltmaier
How about, they send you a fricking new laptop that works? Like you paid for.
And refurb that dead-on-arrival thing to sell to somebody that wants a refurb.

------
davidhyde
> 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
_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_
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.

------
ckastner
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)

------
ksec
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.

------
rkho
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.

------
factsaresacred
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.

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

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

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

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

------
getpost
"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.

~~~
FabHK
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.

------
mschuster91
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.

~~~
reaperhulk
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
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.

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

~~~
DangerousPie
Given that we're talking about organized crime here I would assume that these
ways include very credible threats of violence.

~~~
bayesian_horse
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.

------
dejaime
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...

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

~~~
ksec
Why would it drop?

------
gbarry333
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.

------
trumped
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)

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

