back to article Report: Apple returned 8M shoddy iPhones to Foxconn

Foxconn has apparently botched a batch of iPhones, which Apple returned to the contract manufacturer because they were not fit for sale. Details of just what went wrong are sketchy, as the source for this tale is an anonymous Foxconn staffer chatting to China Business. That report, after being forced through a couple of …

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  1. Allan Thomas

    Foxconn takes 16bn hit?

    Ummm, 8 million x $200 = 1.6 billion.

    Unless the phones are $2,000 a pop or it was 80 million phones replaced then it would be $16bn.

    1. Anonymous Coward
      Anonymous Coward

      Reality Distortion Field again

      x10 happens

    2. Anonymous Coward
      Anonymous Coward

      Shows

      Apple take product quality seriously, other manufacturers could learn something here about not sending out a substandard product.

      1. Anonymous Coward
        Anonymous Coward

        Re: Shows

        "Apple take product quality seriously, other manufacturers could learn something here about not sending out a substandard product."

        1) Other manufacturers like Foxconn? Didn't Foxconn send the substandard product out?

        2) When did Apple become a "manufacturer" again?

        1. Anonymous Coward
          Anonymous Coward

          Re: Shows

          2) When did Apple become a "manufacturer" again?

          Pretty much everyone uses third party's to produce components and build them.

          Once bought a JVC telly (shudder) it went wrong within weeks and after the repair man told me the one I had was licensed by JVC but had components from Eastern Europe in it, it went back.

          1. Anonymous Coward
            Anonymous Coward

            Re: Shows

            "Pretty much everyone uses third party's to produce components and build them."

            Which also means that they are no longer a manufacturer.

        2. Anonymous Coward
          Anonymous Coward

          Re: Shows

          @AC, Apple is becoming a manufacturer again by assembling the 'new Mac Pro' in the US. :-)

          1. Anonymous Coward
            Anonymous Coward

            Re: Shows

            @SP,

            Try again. The plant will be a Foxconn plant.

        3. Joe Gurman

          Re: Shows

          Apple does manufacture some of its own desktop kit in the US, but no phones as far as I know.

          1. kain preacher

            Re: Shows

            They refurbish iphones .

      2. Fred Flintstone Gold badge

        Re: Shows

        Apple take product quality seriously, other manufacturers could learn something here about not sending out a substandard product.

        Yes and no. Good points for sending back substandard gear, bad marks for not spotting a production going off its quality bell curve before so many units were manufactured: it seems to suggest Apple is quite a distance from the production quality control, which has resulted in a substantial supply chain hit.

        1. The Man Who Fell To Earth Silver badge
          Boffin

          Re: Shows

          The real issue is whether the phones were rejected for cosmetic reasons or functional reasons. If cosmetic, then the bulk of the units can be recycled as is and new shells substituted for the old. If the rejections were due to the units being non-functional, then how much the rework, if they can be reworked at all, is a lot more complicated.

        2. Anonymous Coward
          Anonymous Coward

          Re: Shows

          Isn't the whole point of going overseas to decouple yourself from Production QA and make Foxconn pay for it?

        3. asdf
          Trollface

          Re: Shows

          > it seems to suggest Apple is quite a distance from the production quality control, which has resulted in a substantial supply chain hit.

          Welcome to doing business in China. Yes its cheap but transparency not so much.

        4. aslwin

          Re: Shows

          My had mal-function Iphone 4 (only 6 months old), but Apple would not want to look at it because it was opened by non-Apple person (void the warrant). What if this phone is one of this bad phone from Foxconn....

        5. Apple and Others

          Re: Shows

          Its not true. They just dump this crap in places like India... most companies do that. You can find a stark difference in quality and reliability of products not wanted on western shelves being dumped on to ill-informed buyers thru "attractive schemes and promos".

        6. cortland

          Re: Shows

          Some 20+ years ago, a firm in whose R&D department I worked entered the *really cheap* consumer electronics business. I passed one of those stores on my daily commute, so when I saw a pyramid of color televisions discounted 75%, I had to ask what was going on.

          The manager pointed to the sign: AS IS. It seems the Chinese manufacturer was not testing them to see if they worked, and when the US retailer complained, told them they were cheap; throw the bad ones away and try again. It was a simpler time...

          I won't mention the name of that (defunct) chain, but see below:

          " ... Lay on, [_______],

          And damn'd be him that first cries, 'Hold, enough!' "

          1. Anonymous Coward
            Anonymous Coward

            Re: Shows

            cortland wrote:

            I won't mention the name of that (defunct) chain, but see below:

            " ... Lay on, [_______],

            And damn'd be him that first cries, 'Hold, enough!' "

            Nope, your clue, if that is what it is, doesn't make any sense whatsoever.

      3. Khaptain Silver badge
        FAIL

        Re: Shows

        Quote : Apple take product quality seriously, other manufacturers could learn something here about not sending out a substandard product.

        Of course they do, it's just that you are holding it wrong....

      4. Roderick

        Re: Shows

        Considering the number of failed post productions units rejected it suggests that there is no Q.A process present which in turn suggests that they are not serious about Quality at all. If they did there would be quality process's in place to stop the release of this many sub standard products.

        1. MrXavia

          Re: Shows

          And 8 Million of them makes it sound to me that a specific failure was found, and needs fixing, but should also have been picked up early in the QA process...

          1. g e
            Joke

            Re: Shows

            @MrXavia -

            Maybe they were QA'ing it the wrong way ;o)

        2. cortland

          Re: Shows

          Bingo!

      5. g e
        Facepalm

        Re: Shows

        @AC (they're all AC when it's an Apple post these days it seems?)

        "not sending out a substandard product"

        Maps. Not even substandard, actually unfit for purpose.

        1. chadbag

          Re: Shows

          I am getting tired of this bashing of Apple Maps. I've had more problems with Google Maps giving incorrect routes than any problems I have had with Apple Maps. And I've used both a lot since the time that Apple Maps has come out. I have had 0 incorrect routes with Apple Maps. I did have one where the endpoint was slightly off -- the store I was looking for was in a corner that had an offramp of the freeway on the bottom side of the lot, and the main road on the left side, and Apple Maps decided I was there while I was abutting the property on the offramp instead of while abutting the property on the main street. Google Maps has, on the other hand, tried to send me down non existent roads a few times, but where Apple Maps had it right.

          Most of the problems with Apple Maps was with the 3D rendering, which could be awful, but was a feature that Google Maps that it replaced did not even have. And there were a bunch of isolated cases of geographic features or locations (town or crossroad or whatever) being placed incorrectly in their data feed, which translated to bad data on their map. That was a problem, but was one that Google Maps has suffered with as well. And it was pretty isolated. I've yet to encounter it personally and only know it from the humorous examples listed on the internet.

          I've used Apple Maps for all sorts of navigation purposes, and it has always gotten me there safe and sound, and the one time I mentioned above, I could see the store when it said I was there so it was not an issue, even if not 100% correct.

          1. asdf
            FAIL

            Re: Shows

            >I am getting tired of this bashing of Apple Maps.

            When the first sentence starts like that you know you don't have to read the rest of the what look like long boring post (wouldn't know didn't read lol).

      6. big_D Silver badge
        FAIL

        Re: Shows

        Apple could learn a lot from others as well.

        Here, in Germany, it is still a case of dud iPhones being picked up and returned 2 weeks later, hopefully, fixed. Other manufacturers deliver a replacement device, when the pick up the dud.

        We've also had 7 or 8 defect iPhones delivered to us over the last couple of years. Always either Bluetooth and Wifi doesn't work, or the battery won't hold a charge...

      7. Anonymous Coward
        Anonymous Coward

        Re: Shows

        Apple take product quality seriously

        alternatively ... sales are lower than expected (n.b. this probably means haven't grown as much as expected) so Apple are looking to avoid having excess inventory around for when they annouce their next point upgrade

      8. Loyal Commenter Silver badge

        Re: Shows

        Apple take product quality seriously, other manufacturers could learn something here about not sending out a substandard product.

        1) I have never seen a non-Apple phone with a shattered screen, but plenty of iPhones suffer this fate

        2) They don't have a great track record in aerial design now, do they?

        3) or mapping software, come to think of it.

        Before you hold someone up as a paragon of product quality, it doesn't hurt to engage your brain first.

        1. big_D Silver badge

          Re: Shows @Loayal Commenter

          We've had to get both iPhone and non-iPhone smartphone displays replaced, because they have been dropped and shattered.

        2. LarsG
          Meh

          Re: Shows@ loyal commenter

          I think the point is being made about the phone construction not the software that can be rectified.

          If you go down that route then consider the number of malware apps available to android and consider the number of patches and updates on android.

          Then consider how the patches and updates dry up with the introduction of a new Android phone.

          As to broken screen, it happens to all phones and the aerial design was fixed in a fashion and sorted in the next incarnation, that's called development.

          I agree with you on the mapping software, it is still sh*t but the guy who was responsible has gone. Anyway google maps is available as an app so that pretty much sorts that out.

        3. asdf

          Re: Shows

          > I have never seen a non-Apple phone with a shattered screen

          Not to defend Apple but this means one of two things.

          1. You have either never owned a non Apple smartphone

          2. If you did you didn't have a 2 yo in the house. Otterbox business model depends on little ones.

        4. chadbag

          Re: Shows

          I've seen lots of non-Apple phones with shattered screens. In fact, last night, at a football (soccer) game we were at, the lady sitting in front of me had a Galaxy 3 and it had a big impact shatter point in the upper left quadrant. And I saw a couple Android based phones at church the other day with similarly cracked screen from some sort of fall or impact. To be fair, I've seen a couple iPhone 4/4S recently that had similar impact point cracks or dropped phone cracks on the screens. All, both iPhone and Android-based phones [most likely Samsungs since Samsung is the largest Android vendor but I did not see what the phone model was in some cases] usually all use the same sort of glass, Gorilla Glass, and all suffer from similar issues when impacted or possibly dropped.

          Luckily for me, despite repeated drops, non of my iPhones (original, 3GS, 4, 4S, or 5, or wife's 4 or 5) or iPads (original, 3, mini) have suffered any cracked or broken glass. The original iPad was dropped on its corner once, and there is a noticeable bend in the device casing on the corner, but the glass did not crack at all and the iPad does function 100% still.

      9. Ian Johnston Silver badge
        FAIL

        Re: Shows

        <cough>Apple maps<cough>

    3. GettinSadda
      Boffin

      Re: Foxconn takes 16bn hit?

      The article is now corrected, but even so it won't be a $1.6bn hit.

      Whatever is wrong with those phones it won't be every component that is faulty. 8 million items is enough to set up a workshop to replace the faulty parts with new ones and return the fixed items to Apple.

    4. Loyal Commenter Silver badge

      Re: Foxconn takes 16bn hit?

      More likely 8 million x replacement of $5 faulty part in $200 phone = $40m, as I seriously doubt they'd write off all those handsets.

  2. This post has been deleted by a moderator

    1. Turtle

      @Zola: Re: Maybe it's a missing decimal point, which is easily done...

      Well, many people mistake a "spell-checker" for a "proof-reader". I'm among them, I have to admit...

  3. Big-nosed Pengie
    Devil

    How long before they're on sale on ebay for $400 each?

    1. Anonymous Coward
      Anonymous Coward

      If they can replace the case with something less apple-design-patented, and flash something generic over the iOS, they may well resurface down the line.

  4. Tom 35

    quality control?

    How could you keep producing duds for that long without noticing? You would think they would pull random samples for testing and notice any fault long before they piled up millions of duds.

    1. csumpi
      Holmes

      Re: quality control?

      My thoughts exactly. If Apple didn't keep an eye on the production and truly let 8 million rejects made, they deserve to eat most of the cost.

      1. Paw Bokenfohr

        Re: quality control?

        "If Apple didn't keep an eye on the production and truly let 8 million rejects made, they deserve to eat most of the cost."

        ...but why? That would be like me being to blame for buying 10 Blackberrys to distribute to people at work, and one of them being faulty. I have a right to the expectation that what I buy will be as promised, just as Apple did here from the business that it buys the phones from and if not, to have them replaced with ones that are right.

        I'm sure that there is a set acceptable failure rate in the contract, and Foxconn have obviously exceeded that, if this story is accurate, since it's all based on rumour.

    2. Andrew Moore

      Re: quality control?

      My guess is it was something that surfaced when Apple tested beta loads of v6.2 of iOS.

  5. csumpi
    Paris Hilton

    Why the negativity?

    Can't we just look at this from a positive angle? Why not use this headline:

    "Large Asian corporate buyer purchases batch of 8 million iPhones."

    Throw some iPads in there and fingers crossed that would even prop up the AAPL stock a bit so I could dump it.

  6. Paul J Turner

    Porno Perverts eh?

    from - http://www.theregister.co.uk/2013/04/18/apple_china_obscene/

    “Apple really has to work hard on government relations.”

    Oh, I think the Chinese have just got the message alright.

  7. Rentaguru

    Annoying innit

    When they put the decimal point in and your comment is then pointless!

  8. bazza Silver badge

    Don't Beggar Thy Supplier

    Apple might have to be a bit careful. $1.6billion is a lot of money, even for Foxconn. Apple would seem to be playing hard ball, but they can't do that too much. A contract won't count for much if Foxconn ever decides that working for Apple isn't worth the hassle, especially in China...

    1. Snake Silver badge
      Thumb Up

      Re: Don't Beggar Thy Supplier

      BINGO!! I wondered if at least ONE person here would realize this.

      Foxconn is a contract supplier. If the contract no longer meets a benefit vs cost ratio, any sane contractor will reexamine the cost of doing business with the customer and say "No, thank you!" to the next contract. Foxconn may not do this in its entirety but, considering the well documented difficulties with manufacture of the iPhone5's design and final finish requirements, don't be surprised if Foxconn decided to have much more say in the next iPhone design: "We can not manufacture that design to your satisfaction, so we won't. Redo the design so that we can actually built it".

      As a manufacturer, I / we have certainly said "No, thank you!" to repeatedly difficult clients. After a while the benefit vs cost is simply not worth it; we have indeed used the line 'We can not manufacture this design to your satisfaction, so we won't' several times in the past.

  9. Bob Vistakin
    Facepalm

    Someone noticed it was a batch that had not really changed much in 5 years?

    Oh, wait...

  10. xyz

    As anyone who buys stuff from China knows..

    quality control is a nightmare and unless you keep on top of it about 50% of goods delivered need to go back or put in the bin.

    1. cortland

      Re: As anyone who buys stuff from China knows..

      You get 10,000 upvotes. Untested.

  11. tempemeaty
    Black Helicopters

    Weird

    Somebody in China hoping quality control is like Dells' was all those years ago and trying to do the same thing to Apple now?

  12. Fihart

    Trouble, predictable.

    Didn't reports surface fairly early on that the new iPhone was proving difficult to build.

    Based on my experience of dismantling iPods (thin ribbon cable attached to a plug that's hard to unhook, result unhappiness) -- I avoid fixing Apple products.

    Also Foxconn -- little or no end user support on their site, bulging capacitors on a couple of mobos I've seen.

  13. Si 1

    Maybe the black iPhone 5?

    There were a lot of reports early on about people getting black iPhone 5's that already had scratches and marks on the black coating on the antenna. Maybe Apple sent back the worst of these?

  14. Frankee Llonnygog

    Over what period

    Admittedly I read the original China Business article in Googlish, but I couldn't figure out over what period the alleged 5-8 million phones were returned

  15. Tim Worstal

    Hmmm

    I have a feeling that this is total returns, not one batch returned.

    We know the failure rate is high, 5% or more. 100 million or so shipped so far (I think?). 6-8 million as total returns rather than one batch that was screwed up?

    Anyone else want to buy that version?

  16. Steve Todd Silver badge

    Scrap or rework?

    If the fault was a scratch to the case then most of the value of the work is retained. The lose to Foxconn would be far less than the $200 being talked about.

    The other point is over what period? They are making something like 30-40 million per quarter. If that's a years returns then its less than a 5% return rate, which isn't too horrible in the scheme of things.

    1. wowfood

      Re: Scrap or rework?

      It's most probably a faulty component further down the supply chain. If for exampke, during transit one of the chips were exposed to magnetism, or some form of mild EMP (lightning striking nearby?) it could result in fried chips.

      These fried chips may not be integral to core services, so they put the phones together, turn them on and it all works. Until you try a specific functionality (GPS maybe?) at which point the chip does nothing.

      OR

      another options which many companies seem to do, they tried to scrimp. "Apple are paying us $200 per phone we make, it costs us $150 per phone we make... If we change supplier from "WeMakeGoodChips" to "WeDon't" we could save $30 per device, and it'll work virtually the same!"

      followed by a load of units making it past testing, making it to stores, and then somebody noticing that one of the chips on the inside is the wrong type during some kind of diagnostic test. Apple return items to foxcomm, foxcomm deny responsibility for the incorrect chip, citing a shipping error or something and get away with just a fine (in the form of replacing all those chips)

  17. Anonymous Coward
    Anonymous Coward

    The Chinese article states it's 200 RMB or 32 US dollars per phone in labor cost alone and up to 16 billion RMB or 2.6 billion US dollars total to cover new parts costs and whatnot. This will eat up 66% of iDPBG's profit from 2012. iDPBG is the subsidiary of Foxconn that's responsible for making iPhones. The reason for the return is substandard exteriors.

  18. Pulse

    mazuma are gonna be busy

    processing 8 million phones, at least foxconn can get some money back.

  19. Silverburn
    Facepalm

    $1.6bn of rejects...ooooh.

    Regardless of the reasons/blame, that's gonna sting a bit. Looks like the rumours of hard-to-manufacture was true afterall.

    Maybe Sir Ives would like to consider manufacturability over obsession with "eyecandy-ness" for ver 6...? 1mm of thinness and micron-levels of fit and finish is worth jack shit if you can't reliably manufacture the damned thing.

    1. Oninoshiko

      That won't work.

      If it doesn't have at least as much, preferably more eye-candyness then the 5, who will buy the 6?

      It will be the windows 8 of smartphones.

  20. lump1

    I imagine that these were sent for repair, not just "sent back"

    I'm sure that Foxconn will replace one or two parts on these phones and ship them back to Apple. The article makes it sound like they're just being thrown in the bin, which is stupid. They would never stay in the bin; they would end up being sold illegally, eating into Apple's market and tarnishing the reputation of their products. Apple aren't stupid, and they won't let this happen.

  21. Anonymous Coward
    Anonymous Coward

    Suggest that design and engineering is marginal at best if so may are failing/DOA. I thought Cook was a 'genious' on the supply chain?

  22. Jim O'Reilly
    Headmaster

    Major failure by both companies' QA

    What a mess. This would have Demming and Taguchi turning in their graves!

    With these levels of product flow, quick turn QA detection of problems is critical. Hours, not weeks to detect a problem, and if necessary (as in this case) to stop the line.

  23. url
    Meh

    these will obviously never ever find their way to market, and Apple certainly wont be able to use the as their new iPhone 3rd World Edition (Blessed by Steve Peace be Upon Him)

  24. Anonymous Coward
    Anonymous Coward

    Why does everybody assume the problem was immediately detectable?

    Lots of fingers pointed at QC on Foxconn and Apple's part, but some flaws only surface with time. It's possible that nobody did anything wrong here. I assume these things happen over the normal course of business.

  25. Gannon (J.) Dick
    WTF?

    I have no Ax to grind

    They would probably say I was holding it wrong anyway.

  26. Anonymous Coward
    Anonymous Coward

    Tax writeoff time?

    I wonder if there is some way for Foxconn to write it off on their taxes. If so, then maybe it's survivable?

  27. Anonymous Coward
    Anonymous Coward

    Excuses excuses

    Apple will of course be claiming the shelves are empty because of demand....

  28. Mitoo Bobsworth
    Meh

    Corporate malaise setting in?

    Probably just me, but I get a sense that Apple is entering into another round of standard corporate fog. It first happened when Mr Jobs was booted out of his beloved company & the suits applied their suit mentality, churning out endless ( some would say aimless) variations on a theme. When he did return, Apples revival was, like it or not, a remarkable success.

    I'm not so sure it can go a second round of his absence.

    Steve Jobs was Apple, love him or loathe him - he was part of the brand. One can only succeed such a polarising personality, and while I'm sure Tim Cook is a fine CEO, the tone of Apple will never be the same. Without that obsessive mercurial energy and marketing/PR savvy driving & directing it I think corporate suitness will eventually take over - maybe for the better, but from my observations and experience, that's rarely the case.

  29. Anonymous Coward
    Anonymous Coward

    White iPhone?

    Finally a reason for the pro-longed release of the whitey?

  30. Tezfair
    Coat

    What actually happened...

    This is the batch where the auditors came around and all the children were sent home so the cleaners had to fill in for a few days.

  31. Dropper

    Kids these days..

    Is it me or is anyone else totally unsurprised that today's kids don't take the time to do a job properly. I blame the parents of the children making the phones... they're obviously not teaching them to appreciate what they have.

  32. timtylin

    Point-by-point translation of the original article

    I'm a native Chinese speaker, and here's a more accurate translation of the entire Chinese source article which I think will help clear some confusion:

    1) The article is reporting the 200 per unit number in Chinese RMB (~32 USD). The total cost would be 1.6 billion RMB (~260 million USD), which is actually a lower bound, because...

    2) the 200 RMB per unit cost is the just the labour cost of remanufacturing (essentially fixing mistakes), and does NOT include any additional parts needed. Exactly what is wrong on what models were not specified in the report.

    3) 1.6 billion RMB represents 2/3 of the operating profit of the Foxconn subsidiary (iDPBG, apparently a separate corporate entity) that is responsible for manufacturing Apple products. The former president of said subunit (himself only took over at the end of 2012) was abruptly let go at the end of March and replaced with someone much more inexperienced.

    4) This isn't the first time Apple rejected Foxconn shipments. In August 2010 Foxconn compensated Apple 800 million RMB due to quality problems (unknown product at an unspecified quantity). This time around there seems to be no compensation from Foxconn as of yet.

    5) The highlight of the original article is actually about "growing pains" issues at the Foxconn subsidiary iDPBG. Apparently this issue is old hat (extending at least back to 2010) and is related to the explosive growth in demand for Apple products over the past 5 years. Essentially, iDPBG grew too fast too quickly and is causing quite a number of QC problems as the i-products got more complicated. This resulted in...

    6) extremely authoritative power handed to Internal Audit and QC departments at Foxconn. Significant friction and pressure to deliver were thus propagated down the whole chain to the individual worker level. Apparently (according tot he article) this was a major contributor the suicide reports and alleged worker abuse related to Foxconn in big media last year.

    7) Outside pressure to relax working condition meant that some powers were also taken from QC, which meant that standards were also inevitably loosened somewhat. However, now instead of labour problems we again have QC woes.

    8) Foxconn is now seriously focusing on the QC issues. Terry Guo (Foxconn CEO and founder) apparently set-up an office at the iDPBG campus, and is not leaving until it gets sorted out. Apple personnel is also apparently involved. Productions were halted at all three iDPBG plants in the beginning of April for investigation. Production slowly resumed on April 15, but it was reported in the article that even with low yields (1000~2000 unit per line per day) the pass rate for QC remains suboptimal at 95%.

    TL;DR

    - Foxconn has people problems

    - 200 RMB, not USD

    - 200 RMB is labour only

  33. Gil Grissum

    What model of iPhone got sent back

    Since it couldn't be the iPhone 3GS or iPhone 4, is it iPhone 4S or iPhone 5 that was sent back to Foxconn?

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