Employees work at a Foxconn factory in Wuhan, Hubei province. The firm will buy and re-sell iPhones in China as part of Apple’s trade-in programme.
Bloomberg/Beijing
Apple Inc plans to introduce a trade-in programme for iPhones in China, people familiar with the effort said, after a similar programme bolstered sales in the US. Consumers will be able to take older iPhones to Apple stores in China for credit against the company’s products as soon as March 31, the people said, asking not to be identified as the details aren’t public. Foxconn Technology Group will buy and re-sell the phones as part of the programme, one of the people said. Natalie Kerris, an Apple representative, didn’t respond to a request for comment. Foxconn declined to comment.
Chief Executive Officer Tim Cook has said China is poised to overtake the US as Apple’s biggest market, and he’s working to about double the number of stores in Greater China by the middle of next year. Chinese demand for larger-screen iPhones helped fuel a record profit of $18bn during the final quarter last year.
Its China trade-in plan follows an expansion of a similar programme started in 2013 in the US, where the company is accepting non-Apple devices for the first time.
“It has certainly been a driver for sales pickup,” said Roger Entner, an analyst with Recon Analytics, who estimates about half the people buying iPhones in the US during the final quarter of 2014 traded in their older phones.
The deal with Foxconn deepens Apple’s relationship with its largest supplier, whose Taipei-listed flagship Hon Hai Precision Industry gets half its revenue from making iPhones, iPads and MacBooks.
Hon Hai shares erased a drop of as much as 1.5% after the news to close unchanged in Taipei, while the benchmark Taiex index fell 0.5%.
Under the China programme, retail staff at Apple outlets will assess an iPhone’s condition before offering store credit for those originally bought in Greater China, the person said.
Foxconn will buy the phone directly without Apple ever taking ownership, according to the person.
Foxconn will repair the devices if needed and then sell them through its e-commerce sites eFeihu and FLNet, and through Alibaba Group Holding’s Taobao online store, one person said. Foxconn also is in talks to sell the iPhones through physical stores and may take the trade-in programme online in the future, the person said.
Buying a new iPhone in the US has come to resemble buying a new car, with owners trading in their old model to defray the cost of an upgrade. Apple’s US partner is Brightstar Corp, which resells the devices overseas to customers for a profit.
While Apple doesn’t break out regional unit shipments, researcher IDC estimates iPhone sales, which previously were tepid in China, spiked 42% during the 2014 calendar year to 46.3mn. That’s about 24% of the phones Apple sold globally during that period.
US wireless carriers blanketed consumers with buyback offers in advance of the iPhone 6 and 6 Plus debut in September, offering as much as $300 in credit for old models Cupertino, California-based Apple faces harder year-over- year comparisons in the second half of the fiscal year.
Revenue growth could slow if demand for larger-screened iPhones isn’t enough to sustain market share gains and consumers react to lower carrier subsidies that make phones more expensive, Katy Huberty, an analyst for Morgan Stanley, said in a note to investors this month. In the final three months of last year, Apple’s iPhone market share rose to 12.3% in China, in second place behind domestic maker Xiaomi Corp, according to IDC. For the total year, Apple wasn’t even in the top five phone makers in China.
Another researcher, Canalys, estimated Apple gained enough market share in the quarter to be the top seller in China for the first time, which it said was impressive given the average selling price of Apple’s devices are almost double its nearest competitor.
