Apple’s War on iPhone Fraud in China
Five years ago, Apple was forced to temporarily close what was then its only retail store in Shenzhen, China, after it was besieged by lines of hundreds of customers waiting to swap broken iPhones for new devices, according to two former Apple employees who were briefed about the matter. In May 2013, the Shenzhen store logged more than 2,000 warranty claims a week, more than any other Apple retail store in the world, one of those people said.
After some investigation, Apple discovered the skyrocketing requests for replacements was due to a highly sophisticated fraud scheme run by organized teams. Rings of thieves were buying or stealing iPhones and removing valuable components like CPUs, screens and logic boards, replacing them with fake components or even chewing gum wrappers, more than a half-dozen former employees familiar with the fraud said. The thieves would then return the iPhones, claiming they were broken, and receive replacements they could then resell, according to three of those people.
Hesitant to get Chinese authorities involved, due to the risks of public backlash and negative publicity in state-run media, Apple launched an online reservation system that required proof of ownership, and later developed diagnostic software that allowed retail employees to quickly detect fake parts in iPhones.
Fraudsters found ways to evade these tactics, however, and even went as far as obtaining Apple customer records, including serial numbers, for iPhones that had already been sold in China.
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Apple also began dipping batteries in a special dye that could only be seen under a high-frequency light to authenticate them during repairs, the report says. A-series chips in iPhones are also allegedly coated in a waterproof sealant that can be seen under certain wavelengths, offering another countermeasure.
