Apple will start an iPhone trade-in plan in China with Foxconn, sources say
March 26, 2015 03:33 PM
(Bloomberg)—Apple Inc. plans to introduce a trade-in program for iPhones in China, people familiar with the effort said, after a similar program bolstered sales in the U.S.
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 program, one of the people said. Natalie Kerris, an Apple representative, didn’t respond to a request for comment. Foxconn declined to comment.
CEO Tim Cook has said China is poised to overtake the U.S. 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 $18 billion during the final quarter last year. Apple is No. 2 in the Internet Retailer 2014 Top 500 Guide.
Its China trade-in plan follows an expansion of a similar program started in 2013 in the U.S., 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 LLC, who estimates about half the people buying iPhones in the U.S. 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 Co. gets half its revenue from making iPhones, iPads and MacBooks.
Under the China program, 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 Ltd.’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 program online in the future, the person said.
Buying a new iPhone in the U.S. has come to resemble buying a new car, with owners trading in their old model to defray the cost of an upgrade. Apple’s U.S. 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 46.3 million. That’s about 24% of the phones Apple sold globally during that period.
U.S. 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, Calif.-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 percent 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.