Why Apple and carriers want your old iPhone


Why Apple and the Carriers Want Your Old iPhone

When you trade in a smartphone, here’s how it gets refurbished and makes companies money

Inside the Lucrative–and Secretive–Business of iPhone Trade-Ins
So you just traded in your old iPhone to get a deal on a new one. Where does that old phone go? Who makes money on it? WSJ’s Joanna Stern follows an iPhone through the refurbishment process to explain why the secondhand phone market is booming. Photo illustration: Kenny Wassus

By Joanna SternFollow

March 15, 2023 7:00 am ET

Cellular carrier: Trade in your old phone and we’ll give you a free brand spankin’ new iPhone 14!  

You: Really? Pretty sure there’s a booger in my iPhone 11’s charging port.

Cellular carrier: We don’t care if the phone has been used as a toilet brush. Just give it up—oh, and sign away the next three years of your life to us.

Phone makers and cellular carriers have become obsessed with getting your dirty old phone. But why?

Sure, there’s the environment. Trade-in programs theoretically save phones from ending up in a landfill or gathering dust in your cluttered desk drawer. But also…money. 

Analyst firm IDC calculates that over 282 million secondhand smartphones shipped in 2022. (Those include refurbished and just plain used.) While that is substantially less than the 1.2 billion new smartphones shipped that year, IDC projects the secondhand market will grow more than 10% annually until 2026.

If so many phones are being shipped, where are they going? And who makes money on them? I asked AT&TVerizon and T-Mobile along with Apple and Samsung, and none would specify where phones end up. The most they shared was that they monitor trade-in pricing to get the best deal for customers, and that phones are either resold or recycled. Why so cagey?

U.S. Mobile Phones, based in New Jersey, processed more than 2.5 million traded-in devices last year.PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL

So I badgered the companies that buy the phones from carriers. Many of them were also mum. Finally, U.S. Mobile Phones, which goes by USMP, let me into its warehouse. At the facility in New Brunswick, N.J., it processed more than 2.5 million traded-in devices last year—mostly Apple iPhones. I got a lot of answers by tracing one iPhone through the refurbishing process.

The Trade-In

While I was there, a shipment of 3,000 traded-in iPhones arrived from one of the major U.S. mobile carriers. (The company wouldn’t specify which.) With the help of USMP’s director of operations, Sammy Sabbagh, I opened a ginormous box and pulled out a crusty 128GB iPhone 11.

U.S. Mobile Phones received these boxes, containing around 3,000 old iPhones from an unnamed cellular carrier.PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL

Used phones don’t come with autobiographies, unfortunately. Here’s what I could deduce about this device:

  • The previous owner—let’s call him Bob—kept the phone in good condition. No big scratches or broken glass, so he likely would get the maximum trade-in credit for it. That is about $200, according to Apple’s website, which industry people say is the best way to check how much someone might give you for your old iPhone.
  • But Bob’s carrier probably gave him more, in monthly credit. AT&TVerizon and T-Mobile currently offer an $800 iPhone 14 “free.” You have to trade in an iPhone 11 like Bob’s and have an eligible plan with the carrier.
  • USMP bought Bob’s traded-in iPhone 11 from an unnamed carrier for around $250.

How did an old $200 phone score Bob a new $800 iPhone 14? Through multiyear payment plans, carriers get you to stick with their cellular service and may even strongly encourage you to choose a higher-tier 5G data plan, Carolina Milanesi, a technology analyst with Creative Strategies, told me. Over time, this helps recoup the cost of the new phone.

The Refurbish

Two-thirds of the phones that arrive at the USMP facility get data-wiped, cleaned up and sold off to wholesalers, often overseas. The other third goes to its sister company, Back in the Box, to be cleaned up, refurbished and sold to buyers on Amazon or Back Market, a popular secondhand-phone marketplace.

What about Android? Refurbishers prefer taking in iPhones for the same reason thieves prefer stealing them: more money. While Back in the Box does resell some Android devices, the majority are iPhones and iPads, said its chief executive, Ari Marinovsky. A big reason is that Apple updates device software for more years than its competitors do.

A traded-in iPhone 11 gets put through the cleaning process at the U.S. Mobile Phones facility.PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL

Touring the refurbished warehouse was like visiting Willy Wonka’s factory—minus a boat down a chocolate river. Mr. Sabbagh took me and Bob’s old iPhone 11 to four key stops. (You can come along for the tour in my video.)

  • Data erasure and triage: Special software removes any data left by the previous owner. Workers then put the device through tests to confirm everything works: microphone, speakers, screen, camera, buttons, wireless radios, etc. During this step, they also test batteries. Devices whose battery health is 80% or lower—that is, their ability to hold energy has declined by 20% or more—are set aside to be resold cheaply elsewhere. 
  • Cleaning: Workers use toothbrushes to get into the crevices, plastic picks to get stickers off and hand sanitizer and microfiber cloths to wipe down screens. It’s like a smartphone carwash. No dirt, germs or boogers survive.
  • Grading: The phone is inspected for cosmetics and assigned a grade so a price can be determined. Our iPhone 11 got an A, meaning its screen didn’t have any scratches, and any micro-scratches to the housing weren’t visible from 8 inches away.
  • Kitting: Workers slide our clean, healthy iPhone 11 into a padded pouch and stick the pouch in a box with a new charging cable.

The Resale 

Mr. Marinovsky said Back in the Box typically prices refurbished products, depending on their final grade, 20% to 30% below the retail price of the same phone purchased new. In the case of our used iPhone 11, the company listed it at around $350 on Back Market. Apple doesn’t sell the iPhone 11 anymore, but you can find it new at some retailers for $500.

After the iPhones are data-wiped, cleaned and graded, they go into boxes with new chargers to be shipped to buyers.PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL

That pricing, Mr. Marinovsky said, gives the consumer a good discount. It also gives the business enough margin—somewhere between 10% to 15%—to have some profit. Even though you might calculate Back in the Box and USMP making up to $100 on this particular phone, the refurbishing labor and Back Market’s 10% cut eat into the profit. So does the prevalence of dud phones that must be sold off at a loss, he said.

Who is scrolling away on Bob’s iPhone 11 now? I have no idea. What I do know is that phones really do have a circle of life—cue Elton John—and selling booger-free used phones can benefit carriers, resellers and maybe Apple, too: Even a refurbished iPhone means a blue bubble in your messaging app.

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