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Apple Said To Have 'Dramatically Reduced' Multi-Billion-Dollar iPhone Repair Fraud in China (macrumors.com)
From a report: Within the past four years, Apple has managed to "dramatically reduce" the rate of iPhone-related repair fraud in its retail stores in China, according to The Information's Wayne Ma. The report is based on interviews with more than a dozen former Apple employees who spoke on condition of anonymity. In 2013, Apple is said to have discovered a highly sophisticated fraud scheme in which organized thieves would buy or steal iPhones, remove valuable components like the processor or logic board, swap in fake components, and return the "broken" iPhones to receive replacements they could resell. From the report: "Thieves would stand outside stores with suitcases full of iPhones with some of the original components stripped out and replaced with inferior parts, two of the people said. The fraudsters would hire people to pretend to be customers to return them, each taking a device to stand in line at the Genius Bar, the people said. Once the phones were swapped, the actors would pass the new phones to the fraudsters and get paid for their time, the people said."
I wonder where all the parts they are ripping out of the insides end up?
A lot of them end up in fake iPhones, using either knock-off cases, or cases stolen from the Apple factory in Shenzhen.
In any area frequented by gullible foreigners, you can find people selling iPhones on street corners. They often work just well enough to turn on and run a demo to "show that they work".
The sellers are rotated to different street corners every few hours, so when you go back later to demand your money back, it is not the same person, and they will claim (correctly) that they have never seen you before.
Not all Chinese fakes are like this. For instance, the fake Rolex watches work very well. I bought my wife a fake LV handbag that seems stitch by stitch identical to the real thing. She has no idea that it isn't real.