Apple eyes iPhone trade-in program in China

Customers would get store credits for Apple products, while manufacturer Foxconn would resell the iPhones after fixing them up.

Don Reisinger
CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
2 min read

A Foxconn worker assembling an Apple product in China. Apple

Apple is turning to one of its top manufacturers to help boost sales in China, a new report says.

As early as March 31, Apple and Foxconn will introduce a program that would allow current iPhone owners to trade in their devices at an Apple Store, Bloomberg is reporting, citing people who claim to have knowledge of the plans. After an Apple Store employee determines a device's value, customers would receive trade-in credit that can be used on Apple's products.

Foxconn, rather than Apple itself, would buy the iPhone from the customer, according to Bloomberg. The manufacturer would then fix up the devices and resell them through its own e-commerce sites in China, including one on the Alibaba Taobao store, according to Bloomberg's sources. Foxconn may also bring its trade-in deals online at some point, the report claimed.

China is a critical market for Apple. In the fourth quarter of 2014, Apple generated $16.1 billion of revenue in the country, representing a sizable chunk of its $74.6 billion in total revenue. Apple's China revenue was up 20 percent year over year and 66 percent compared to the third quarter of 2014.

At a press event earlier this month where Apple shared more details on its Apple Watch, CEO Tim Cook spent time discussing China's importance, saying that the company had opened six more retail stores in six weeks in the country. The effort is part of a broader push on Apple's part to expand its presence in China and generate far more cash from a massive and growing middle class.

Last month, research firm IDC put a finer point on just how desirable Apple's products can be after it announced that the company nabbed 12.3 percent of the Chinese smartphone market, beating out Huawei, Lenovo and Samsung. Shipments were up 99.7 percent during the period.

For Foxconn, the deal with Apple could be major. The manufacturer generates about half of its revenue from producing Apple products, but has not had a way to generate extra cash on those devices. Under the deal with Apple, Foxconn would be able to profit from the sale of used iPhones in China, but it's unclear whether Apple will share in the proceeds.

Regardless, Apple stands to benefit from the program, which could drive more customers into Apple Stores. And since the company's margins are exceedingly high -- Apple averaged a gross margin of 40 percent in the fourth quarter -- Apple can offer customers a slight credit on its products while still making boatloads of cash whenever they purchase a device.

Neither Foxconn nor Apple have immediately responded to a request for comment.