Slashdot Mirror

← Back to Stories (view on slashdot.org)

Apple Said To Have 'Dramatically Reduced' Multi-Billion-Dollar iPhone Repair Fraud in China (macrumors.com)

Posted by msmash on from the closer-look dept.

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."

50 of 87 comments (clear)

  1. 20+% still pretty horrible by SuperKendall · · Score: 1

    That is pretty awful nonsense to have to deal with, I wonder where all the parts they are ripping out of the insides end up?

    --
    "There is more worth loving than we have strength to love." - Brian Jay Stanley
    1. Re:20+% still pretty horrible by ShanghaiBill · · Score: 4, Interesting

      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.

    2. Re:20+% still pretty horrible by Luthair · · Score: 2

      I was wondering if they might actually be the source of parts for independent repair shops.

    3. Re:20+% still pretty horrible by TheFakeTimCook · · Score: 1

      That is pretty awful nonsense to have to deal with, I wonder where all the parts they are ripping out of the insides end up?

      As replacement parts used by third-party repair companies.

    4. Re:20+% still pretty horrible by TheFakeTimCook · · Score: 1

      I was wondering if they might actually be the source of parts for independent repair shops.

      For some unscrupulous repair shops, yes.

      I say "unscrupulous" because these repair shop have GOT to know that they are purchasing black-market parts, period.

    5. Re:20+% still pretty horrible by b0s0z0ku · · Score: 1

      If they buy on EBay, who knows the real source? And ultimately, who cares? Shops need to stay in business, and Apple makes it impossible to officially buy parts unless you're blessed, authorized, and branded for life by Apple.

    6. Re:20+% still pretty horrible by Luthair · · Score: 1

      From the sound of it the scale here is pretty large, its not hard to imagine these aggregate into a few suppliers which sold in volume enough for independents to assume it was legitimate.

    7. Re:20+% still pretty horrible by TheFakeTimCook · · Score: 1

      If they buy on EBay, who knows the real source? And ultimately, who cares? Shops need to stay in business, and Apple makes it impossible to officially buy parts unless you're blessed, authorized, and branded for life by Apple.

      So, simply ripping-off the parts is perfectly ok, then?

    8. Re:20+% still pretty horrible by TheFakeTimCook · · Score: 1

      From the sound of it the scale here is pretty large, its not hard to imagine these aggregate into a few suppliers which sold in volume enough for independents to assume it was legitimate.

      KNOWING that they are actually, REALLY Genuine Apple parts, AND KNOWING that Apple doesn't sell parts to independents?

      Sorry. Unpossible.

  2. No wonder!!! by sentiblue · · Score: 4, Insightful

    So for a long time I kinda didn't like how Apple would disable iPhones because they were not repaired by authorized dealers or by Apple itself. I thought Apple was trying to monopolize the repair works to itself... Now that I read this article, I see what kind of battle they've been trying to fight.

    1. Re:No wonder!!! by sentiblue · · Score: 1

      I think you missed the point. They swapped out the good parts with fake parts rendering the phones broken. They return the broken phones to get a refund. Apple suffers all the set backs in this situation because they're not even exchanging for another device.

    2. Re:No wonder!!! by viperidaenz · · Score: 1

      They're fighting this battle because they've made a very lucrative market by refusing to sell spare parts at any price.
      That's further inflated because Apple charge huge amounts for simple repairs.

    3. Re:No wonder!!! by TheFakeTimCook · · Score: 1

      So for a long time I kinda didn't like how Apple would disable iPhones because they were not repaired by authorized dealers or by Apple itself. I thought Apple was trying to monopolize the repair works to itself... Now that I read this article, I see what kind of battle they've been trying to fight.

      If you are referring to the infamous "Error 53" when an aftermarket replacement was done on the iPhone's Fingerprint Sensor, that was found to be the result of some debug code left in the Production build of the OS, and was corrected by an OS update.

      But yes, Apple, more than ANY other company on the planet, has to deal with this sort of fraud for years, and especially for their iOS-based products.

    4. Re:No wonder!!! by TheFakeTimCook · · Score: 1

      That makes no sense. Just randomly swapping components could break the phone regardless of any Apple security features. And non-working phones would be replaced anyway, so...

      There is no good reason for Apple's tight-fisted control over repairs other than greed. They can push people toward purchasing entire replacement units rather than cheap repairs.

      I am here to tell you that factory-repairs, and ESPECIALLY Warranty Repairs, are NEVER a profit center for ANY company. At best, they may generate a LITTLE profit; but certainly not enough to design elaborate schemes to protect.

    5. Re:No wonder!!! by TheFakeTimCook · · Score: 1

      They're fighting this battle because they've made a very lucrative market by refusing to sell spare parts at any price.
      That's further inflated because Apple charge huge amounts for simple repairs.

      Prove it.

    6. Re:No wonder!!! by viperidaenz · · Score: 1

      Here's a video by CBC news
      https://www.youtube.com/watch?...

    7. Re:No wonder!!! by TheFakeTimCook · · Score: 1

      Here's a video by CBC news
      https://www.youtube.com/watch?...

      1. The moisture sensors WERE "triggered"; so that was no lie. Oh, and it shows that the Genius did in fact open the unit up.

      2. Apple Stores have never done much, if any, component-level diagnosis and repair. They run their diagnostic suite, and generally have a quick look-see; but they sure as hell don't get out the video microscope and peer at stuff at that level. Many, many companies don't do component level diagnosis and repair outside of their factory. And when you handle the sheer volume of repairs that any major tech company handles, even then, component-level diagnosis and repair is seldom practical, even for the manufacturer itself.

      3. I wouldn't be surprised if that whole "independent tech" scene was a setup. I've repaired many an electronic device for a living, and that tech in the video zeroed-in on that conveniently (and unbelievably) "bent pin" just a LITTLE too quickly. And BTW, that would be a VERY unlikely field-failure...

    8. Re:No wonder!!! by AmiMoJo · · Score: 1

      They can clearly detect when third party parts are used in order to disable functionality. Yet for some reason they can't just have a little flag displayed somewhere that says "third party parts used, warranty void".

      Instead of dealing with the fraud themselves during the warranty process they shifted the burden on to the consumer by disallowing repairs with third party parts.

      And in any case in many places they can't disallow warranty repairs because the phone has some third party parts, unless the failure is due to those parts. Similar to how using a third party air filter can't invalidate the warranty on your car unless they can prove that the air filter is/caused the fault.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
  3. millions? or billions by Anonymous Coward · · Score: 1

    2000 iphones a week times $1000 iphone times 52 weeks is about 100 million. And I don't think they were losing $1000 per iphone. Of course, the abundant availability of the OEM spare parts probably also offloaded repairs from apple onto 3rd party repair shops which may possibly be a weak profit center for apple.

  4. Cut Out the Middle Man? by Kunedog · · Score: 4, Insightful

    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.

    How about simply selling the bought/stolen iphones instead? I don't understand the scam, unless they are removing enough parts over time to occasionally construct a whole iphone. And even then I don't understand.

    Is this just propaganda pushing a narrative to justify Apple locking out third-party repair services?

    1. Re:Cut Out the Middle Man? by SethJohnson · · Score: 4, Informative

      I don't understand the scam, unless they are removing enough parts over time to occasionally construct a whole iphone.

      Once you've had your phone repaired, you'll see that there is a spectrum of quality in the replacement parts that can be used by the repair shop. The parts cost scales with the quality. Two big dollar items that are frequently replaced are screens and batteries.

      In this scenario, the fraudster is buying a brand-new phone. Then taking out the top-shelf battery and screen and replacing them both with sub-par components. The fraudster is then commissioning a straw man to return the phone to the store, receiving a brand-new phone which is then sold to recoup the initial cash outlay for the original purchase of the phone. The fraudster is then selling the screen and battery as OEM-quality replacement parts to repair shops. This last part is where the ??? profit exists.

      --
      $5 / month hosted VPS on linux = awesome!
    2. Re:Cut Out the Middle Man? by ShanghaiBill · · Score: 2

      How about simply selling the bought/stolen iphones instead?

      1. The phone would have to be sold as "used", without a box. If they exchange it at the Apple store, they will get a brand new phone, still in the box, with all the documentation and accessories. It will sell for a much higher price.

      2. The phone contains an IMEI that can identify it as stolen, so it may be locked out of some cellular networks. So why wasn't Apple checking the IMEI before authorizing an exchange? No idea. But maybe they were stolen and exchanged so quickly that it wasn't reported yet. Thieves often have remarkably efficient logistics.

    3. Re:Cut Out the Middle Man? by TheFakeTimCook · · Score: 3, Informative

      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.

      How about simply selling the bought/stolen iphones instead? I don't understand the scam, unless they are removing enough parts over time to occasionally construct a whole iphone. And even then I don't understand.

      Is this just propaganda pushing a narrative to justify Apple locking out third-party repair services?

      You aren't comprehending the scope of this.

      The fraudsters are taking out anything that doesn't show without a disassembly, then returning the phones for an EXCHANGE. Apple then has to pretty much SCRAP what is left.

      How does that NOT damage Apple?

    4. Re:Cut Out the Middle Man? by b0s0z0ku · · Score: 2

      If Apple sold replacement parts at a reasonable price over the counter, this type of scam/black market wouldn't be needed.

    5. Re:Cut Out the Middle Man? by TheFakeTimCook · · Score: 1

      The margins must be pretty thin on this scheme. You presumably buy the original phone a full retail, then buy a crappy screen (it must cost something), replace it for the OEM screen, then return the phone, sell the replacement at a small loss (I presume), then sell the OEM screen. If the crappy replacement screen cost 50% of a genuine pare, and you get 90% for the returned phone, that can't leave a lot of room for paying all the middle men.

      Who says the "screen" is even an actual Display? These "phones" are SUPPOSED to be BROKEN, remember? Unless the Genius Bar took the time to actually pop the glass off the phone before accepting it for replacement (which Apple MAY start doing with it's new in-store robotic repair machine), there is really no way to tell the difference between a gutted phone and completely non-functional one. I assume that, whatever fake parts are put in the phones, the WEIGHT is close-enough to the same to avoid tipping-off a fraudulent phone by that simple metric.

    6. Re:Cut Out the Middle Man? by EvilSS · · Score: 1

      They sell the original Apple parts to repair centers. Since Apple won't sell parts to most repair shops, there is a lucrative market for them. In the scam they buy a phone, remove and sell parts, replace with junk, return for warranty swap, rinse, repeat.

      --
      I browse on +1 so AC's need not respond, I won't see it.
    7. Re:Cut Out the Middle Man? by SethJohnson · · Score: 1

      that can't leave a lot of room for paying all the middle men.

      It's Chinese labor, remember? Cheap!

      The fraudsters selling the OEM-quality components to repair shops might be doing it over Alibaba, so they might be fetching US-scaled pricing for the repair parts and netting even more of a margin.

      Keep in mind, this is the region of the world where the fake 500GB USB hard drive scam was born. Assigning programmers capable of creating crazy firmware for a 128mb flash drive is cheap enough to be supported by a street-level scam.

      --
      $5 / month hosted VPS on linux = awesome!
    8. Re:Cut Out the Middle Man? by TheFakeTimCook · · Score: 1

      If Apple sold replacement parts at a reasonable price over the counter, this type of scam/black market wouldn't be needed.

      I have both worked as a repair tech for consumer electronic gear and as an embedded developer for, among other employers, one that made industrial controls, and it is my experience that many companies have policies of not selling parts nor service docs to non-authorized service centers, or simply not selling any replacement parts at all for their products.

      For example, I can pretty much guarantee if I kill some custom part in my LG TV, I won't be able to buy it from anyone, either.

      Sorry to ruin your ideal view of the world; but, Right or wrong, Apple is doing nothing different from what a zillion other companies are doing every day.

    9. Re:Cut Out the Middle Man? by jabuzz · · Score: 1

      Nobody is saying that Apple are not doing anything different from other companies. What they are say is that if they did it differently; that is make parts available at reasonable prices, then this scam/black market would evaporate almost overnight.

      That is the scam/black market exists only because of Apples actions to stiff customers so hard to feel sorry for them.

    10. Re:Cut Out the Middle Man? by bungo · · Score: 1

      And if women didn't wear short skirts, then they wouldn't be assaulted.

      Because blaming the victim is the right think to do.

      If you don't like Apple, then you're free to avoid their products. Apple are free to run their business any way they see fit, as long as it's legal.

      Should I charge less for my time, just because someone in India is cheaper?

      Do I deserve not get paid at all because someone in India is cheaper?

      --
      "The best part? I became an ordained minister while not wearing pants." -- CleverNickName
  5. Apple repair fraud. by mrclmn · · Score: 2

    Good on you Apple. Now I hear there's a ton of fraud in Toronto with regards to Apple repair. Any comments on that? Are those crickets I hear?

  6. Apple Business Practices by jeti · · Score: 1

    When I read Apple Repair Fraud, I thought of another video about Apple employees pushing unneeded repairs.

  7. Louiss Rossman voiced different opinion on that by NuclearCat · · Score: 2

    I suggest to watch, here voice of well known repair professional
    https://www.youtube.com/watch?...

    1. Re:Louiss Rossman voiced different opinion on that by tlhIngan · · Score: 1

      I suggest to watch, here voice of well known repair professional

      Of course he has a different opinion - his views are on the opposite of the equation.

      The problem is, he doesn't see the fraud - he just feels the effects of trying to prevent it, which irritates people like him because well, it affects his business.

      If he was subject to the same fraud he probably would be singing a different tune. I'm sure his policies will change pretty fast the moment he gets dozens or more people refusing to pay for his services daily or having to repair the same device over and over and over and over again on his dime because the customer keeps bringing it back broken with the same fault.

      When he starts losing money to fraudsters, I'll take his opinion a bit more seriously.

    2. Re:Louiss Rossman voiced different opinion on that by NuclearCat · · Score: 1

      It seems you didn't watched video.
      His point is simple: Chinese factories removing broken glass, putting new, and shipping back same product(not counterfeit), repaired.
      I dont see here any fraud. Only greedy Apple want to fabricate repair as fraud, to deny right to repair, and after that they will be quite happy to put you such repair price, that you will prefer to buy a new phone

    3. Re:Louiss Rossman voiced different opinion on that by b0s0z0ku · · Score: 1

      The fraud wouldn't exist if Apple sold repair parts to owners or independent repair shops in the first place. Scarcity breeds a black market.

  8. People Would Also Repair Broken Phones by BrendaEM · · Score: 1

    Come-on people, there are two sides to this coin.

    --
    https://www.youtube.com/c/BrendaEM
    1. Re:People Would Also Repair Broken Phones by TheFakeTimCook · · Score: 1

      Come-on people, there are two sides to this coin.

      Actually, there is only one side to this particular coin,

      This is fraud in its most classic form, pure and simple. The comparison with an automobile chop-shop is EXACTLY correct.

      The fact that the Haters (not you) think that Apple is somehow to blame for attempting to plug this hole is what is truly sickening.

    2. Re:People Would Also Repair Broken Phones by b0s0z0ku · · Score: 1

      Except that car makers (possibly excluding Tesla) actually sell replacement parts to end users at reasonable prices. So there's not as much of a 3rd-party/black market for auto parts.

    3. Re:People Would Also Repair Broken Phones by TheFakeTimCook · · Score: 1

      Except that car makers (possibly excluding Tesla) actually sell replacement parts to end users at reasonable prices. So there's not as much of a 3rd-party/black market for auto parts.

      And so where are the torches and pitchforks going after Tesla?

      As I said, it is not that uncommon, and the more proprietary the component, the less like.y it will be available outside a controlled group of outside sources.

  9. Which parts? by Gabest · · Score: 1

    Every component looks so high end in an iphone, I cannot imagine any of those reproduced by a third party. Maybe the ribbon cables.

    1. Re:Which parts? by b0s0z0ku · · Score: 1

      LCD/OLED is likely a commodity part. At the end of the day, design of new electronics is 90% assembly, 10% custom design.

    2. Re:Which parts? by TheFakeTimCook · · Score: 1

      Every component looks so high end in an iphone, I cannot imagine any of those reproduced by a third party. Maybe the ribbon cables.

      The person accepting the phone never gets to that level of detail. As long as it doesn't change the OUTWARD APPEARANCE of the Phone, it will likely be accepted. The trick that makes this work is that the phones are SUPPOSED to be non-functional when presented by the "mule".

    3. Re:Which parts? by b0s0z0ku · · Score: 1

      Simple solution: log the serial # of the in-store replacement. If the returned phone is found to be tampered, remotely brick the replacement and void all warranty on it.

    4. Re:Which parts? by TheFakeTimCook · · Score: 1

      Simple solution: log the serial # of the in-store replacement. If the returned phone is found to be tampered, remotely brick the replacement and void all warranty on it.

      And then Apple would get even MORE hate from Slashtards.

    5. Re:Which parts? by Carewolf · · Score: 1

      Every component looks so high end in an iphone, I cannot imagine any of those reproduced by a third party. Maybe the ribbon cables.

      What are you blathering about you sheep. They are ALL made by third parties, and most of them are not high-end. Apple is infamous for using as low quality components as they can get away with.

  10. Re:Our Servers Are 100% Not Chinese by b0s0z0ku · · Score: 1

    If markets go down another 10-20% by Nov 2018, Democratic House/Senate, here we come! I'll enjoy that :D Not to mention profitability by buying low/(re)selling high after the crash.

  11. Here is a thought.. by CptLoRes · · Score: 1

    If Apple would sell replacement parts, then people would not have to scam service centers to get them would they?

  12. Ethnic Slur For This? by QuadEddie · · Score: 1

    We've got Indian Giver, N*gg*rd, Jewed, Gypt... what slur can Apple use on their internal reports to describe this behavior by the Chinese? May I suggest: "We got 'chinked' out of billions".

  13. Advance Exchanges by spinitch · · Score: 1

    If u invest in an device protection program (e.g. Ashiron, Assurant, etc..) Careful if you do an exchange, ask to get a CPO iPhone - These are Apple certified otherwise do a same device repair. Unscrupulous repairman have existed in auto industry for a long time using similar scams. Kind of a lottery. Get a good case! Be careful.