How the $ 10 billion / year iPhone repair market affects $ 150 billion / year of iPhone sales revenue

CONTENTS
1. Apple(Iphone) official after-sales repair operating at a loss?
2. Apple’s $10 billion after-sales repair market
3. Changes and consequences of Apple’s after-sales repair strategy
4. Gains and losses brought by the public after-sales repair market to Samsung, Huawei, Xiaomi, OPPO and VIVO
5. Summary and prospect of mobile phone after-sales repair market

1. Apple(Iphone) official after-sales repair operating at a loss?

A few months ago, the U.S. House of Representatives launched an antitrust investigation against the four major technology giants (Apple, Google, Facebook, and Amazon). The research of Apple involved hot issues such as product repairs and software store “Apple tax.”
Apple, Google, Facebook, and Amazon

In its response, Apple said it had not made a profit on the repair business each year since 2009 when the cost of the repair outweighed the value of the recovery. Apple has pointed out that its repair procedures are so stringent that even third-party licensees need adequate training to qualify for Apple’s spare parts and additional repair services outside the Apple Store. Tens of thousands of apple’s authorized repair technicians work at apple stores and third-party retailers.

Apple has also defended its refusal to repair devices in some cases, including devices where the original components (such as the main logic board and housing) have been replaced with non-original components. That’s because to replace those parts, and the device must be removed to the point where it requires apple’s specialized tools and processes to reassemble the device.

Using non-Apple-specific tools for reassembly will cause problems with the device. In addition, when the equipment submitted for repair has been disassembled to the extent that it requires special tools and processes to reassemble; when counterfeit components have replaced Apple genuine components, and the fake parts look like Apple authentic components, but they are not Any functioning component (for example, a fake speaker or a fake camera module); when the equipment is beyond the economic repair scope, that is, repairing the faulty equipment will bring greater costs to the customer than replacing the equipment; there is equipment with missing components and being intentionally Tampered devices … these are all designed to trick Apple.
Apple official after-sales repair

2. Apple’s $10 billion after-sales repair market

Apple’s official after-sales repairs are costly. As can be seen from Apple’s official website, regarding the most easily damaged screens, back covers and batteries, the average OLED screen repair price given by Apple is 300 USD, the average LCD screen repair price is about 165 USD, and the average cost of glass rear cover repairs is as high Above 300usd, the battery repair price is about 60usd.

However, Apple’s claimed tens of thousands of Apple-authorized repair technicians do not include the aftermarket of the open market. According to the information we have learned from the industry, the annual maintenance rate of Apple mobile phones is generally around 7% to 9%. Based on the market holdings of about 1.5 billion units, more than 100 million Apple mobile phones need maintenance every year.
Apple after-sales repair in open market
Apple after-sales repair in huaqiangbei
The repair products accepted by Apple or its three-party authorized repairers are less than 2%, and the other 5% ~ 7% of the damaged Apple phones are mainly repaired by the open market.

If calculated, according to Apple’s official maintenance costs, the maintenance cost of an Apple phone is around $ 150 (a careful consideration). In the open market, the repair price is generally only about half of Apple or Apple-authorized repairers, which is about 75 dollars each.

It also means that even base the maintenance price of the open market, the size of Apple’s after-sales maintenance market has reached $ 7.5 billion per year. After considering the official after-sales and other factors, the actual market size is more than 10 billion US dollars a year.

3. Changes and consequences of Apple’s after-sales repair strategy

Before the advent of the iPhone 4, Apple ’s mobile phones had a small market share and low shipments, and there was not much interest in Apple ’s mobile phones in the open market. However, after the iPhone 4 as Apple’s first best-selling mobile phone appeared on the market, not only the sales volume increased sharply, but its double-sided glass design also almost doubled the iPhone 4 after-sales repair rate.
iphone4

Based on this huge market demand, many manufacturers serving China’s Huaqiang North have found business opportunities. They began to produce iPhone 4 screens, covers, batteries, and other accessories in cooperation with the open market. At the same time, these manufacturers also began to use these accessories to assemble fake iPhone 4 phones.

In the beginning, Apple also actively contacted Chinese domestic law enforcement agencies to crack down the Apple aftermarket maintenance industry chain in the Huaqiangbei market. However, after a period of implementation, Apple suddenly found that compared to the sales of genuine mobile phones due to the appearance of these assembly machines, the decline in sales due to inconvenient maintenance caused Apple to lose more… Therefore, Apple decisively gave up the blow to the open market, and canceled the original design of adding its logo on the front cover, and reused the simple design to facilitate the open market to serve its products.

The change in Apple’s strategy has enabled Huaqiangbei’s Apple after-sales maintenance industry chain to grow and serve the global market through online transactions rapidly. Apple’s iPhone 4S phones have also achieved great success in markets outside the United States. The latest data shows that iPhone sales worldwide generated more than 142.38 billion U.S. dollars in revenues in 2019.

And because Apple’s after-sales repair policy is more perfect than other brands, it’s starting to lead to another phenomenon: some people use open-market spare parts to assemble them into mobile phones, and then go to Apple’s official after-sales replacement of new machines for profit. This is also the aforementioned deliberate tampering of the device, designed to deceive Apple.

So in order to protect itself, apple began to extend the chargers’ coding technology to other major components in subsequent models: if they are not genuine apple components, they will lose after-sales support when connected to the apple motherboard, and the use of some functions will be restricted. For example, if the display screen does not match the code, the point-to-point display function can not be achieved; If the battery is not on the code, quick charging or power management functions can not be used.

However, because the iPhone can be easily and quickly repaired on the open market, consumers ’worries are much relieved, so Apple’s mobile phone sales have grown tremendously.

4. Gains and losses brought by the public after-sales repair market to Samsung, Huawei, Xiaomi, OPPO and VIVO

The market is very keen. In the open market, mobile phone brands with high sales volume will generally receive priority accessories.
For example, from the end of 2014 to 2015, due to the popularity of Samsung mobile phones and Xiaomi’s Redmi mobile phones in the market, the open after-sales maintenance market has also begun to produce accessories with these models, which has also seen an after-sales maintenance market similar to Apple’s mobile phones.
samsung and xiaomi

At that time, Samsung and Xiaomi also learned from Apple’s old methods, hired a large number of detectives in Guangzhou and Shenzhen, and organized huge “anti-counterfeit teams” to report on the open market manufacturers involved in their brands. Because Samsung and Xiaomi’s components carry LOGOs, open market accessory sellers are easily caught by law enforcement agencies.

To avoid being cleared by law enforcement, manufacturers on the open market also quickly averted Xiaomi and Samsung’s mobile phone accessories. Samsung and Xiaomi seem to have won the war on counterfeiting but lost the market.
anti-counterfeit teams
And it was also the time when Samsung ’s mobile phone changed the display from LCD to OLED, and the OLED display screen was not available on the open market, so the personnel engaged in Samsung repairs quickly moved to repair Apple phones. Xiaomi is even worse. At that time, there were no offline maintenance points. After the open market was destroyed, the after-sales maintenance experience of Xiaomi mobile phone users was inferior. And the after-sales repair rate of about 15% for Android phones makes consumers’ experience worse.

Samsung and Xiaomi have started to decline in mobile phone sales since 2015. Compared with other factors of the two brands, at least half of the elements are inconvenient to repair when the phone is broken.

Although these brands themselves will not acknowledge the existence of these factors when Xiaomi found out the reason, the first thing was to remove the LOGO on the front panel. The anti-counterfeiting department no longer targeted the accessory manufacturers on the open market, only the entire phone manufacturers for counterfeiting. Therefore, Xiaomi’s mobile phone sales have rebounded since 2017.

Inspired and benefited by the incident, it is the BBK group (OPPO & VIVO), which is extremely sensitive to the market. OPPO & VIVO has built a sizeable offline system. In addition to its excellent market sales, its more convenient after-sales maintenance service than the open market is the biggest motivation to attract consumers without worrying.

Therefore, we can see that after 2015, the sales of OPPO & VIVO have soared. The same situation also appears on Huawei phones that replicate the BBK offline channels. After 2017, offline sales of Huawei and Honor phones skyrocketed.
huawei,oppo and vivo

Only Samsung, which still insists on anti-counterfeiting offline, has begun to encounter situations where the main components are not produced by third parties. At the same time, after the sharp decline in after-sales maintenance experience, it also encountered price wars and political factors, so it quickly fell back in the Chinese mainland market.

5. Summary and prospect of mobile phone after-sales repair market

Apple’s decline in sales outside the United States in the past two years has similar reasons. The first is the reason for the limited function of the uncoded components. The after-sales service experience of Apple mobile phones in the open market is not good. In markets outside the United States, the lack of Apple outlets and the policy of unconditionally replacing new machines have begun to affect Apple sales.

Besides, the conversion of Apple to an OLED display and the increase in functional integration with the back cover glass also makes it challenging to produce the same accessories on the open market, so support for Apple mobile phones in the open market has also rapidly weakened.

Huaqiangbei’s public aftermarket maintenance market has shrunk in the past two years, far less than the hustle and bustle of three years ago. As Huawei has recently begun to crack the public maintenance market like Apple, Samsung, and Xiaomi, Huaqiangbei’s public aftermarket maintenance market is even less attractive.

With the upgrade of mobile phone component technology, the increase in processing difficulty, and the decline in market convenience, coupled with the change in after-sales maintenance policies of various brands, in addition to incorporating brands in the open after-sales maintenance market like the BBK series, they will continue to increase sales. In addition to leading, other mobile phone brands will eventually pay for their after-sales maintenance losses in a large market environment where mobile phone innovation is weak.