But for people who want to spend even less — in one case, absolutely nothing — to upgrade, Apple (AAPL) and major wireless carriers are doling out big discounts to those trading in their old devices.
T-Mobile (TMUS) and Verizon (VZ) are offering customers trade-in credits ranging from $200 to $850, depending on how old their phone is and whether they already have a plan with the carrier. AT&T (T), meanwhile, will effectively give customers a free phone if they commit to an unlimited data plan for 30 months while also trading in older phones with a value of at least $95. (AT&T (T) owns CNN’s parent company, WarnerMedia).
Apple and other smartphone makers also offer their own trade-in programs, as do some third-party resellers. Apple is currently offering discounts up to $500 for the iPhone 12 lineup if you trade in your old smartphone, depending on its age and condition.
The trade-in values of old smartphones can be surprisingly high because the trade-in has become a critical piece of the device’s lifecycle. Beyond providing users with an opportunity to get a new phone for a fraction of its price, it helps companies boost sales by prompting more frequent upgrades, gives carriers a way to lure customers into long contracts, delivers more affordable devices for secondary markets and provides raw materials that companies can reuse to make new phones more environmentally friendly.
The upgrade push
Trade-in programs give wireless carriers and manufacturers a way to entice new customers and prevent existing customers from switching away from their products – as we saw with AT&T’s free iPhone deal.
“It’s probably the closest thing to reviving subsidies, which were rife in the US when the iPhone first hit the market,” said David McQueen, research director at tech advisory firm ABI Research.
A major issue trade-ins aim to address is the growing tendency of smartphone users to hold onto their devices for longer, often skipping a model or two (sometimes even more) before buying a new one.
“The motivation for subscribers to upgrade smartphones has been a problem over the past few years with most flagships having very little differentiation with their predecessors,” McQueen said.
While companies hope 5G speeds and features provide enough of a reason to upgrade, industry estimates point to the fact that such capability isn’t really that significant a factor for consumers. The still-nascent spread of 5G networks around the world, and the limited use cases for smartphones compared to more advanced technology such as self-driving cars, will likely diminish the appeal for some people of switching over just yet.
“At the moment there does not seem to be any real reason shown by the [carriers] to upgrade to 5G apart from it being marketed as just another ‘G,’” McQueen added.
It’s too early to know how well the iPhone 12 line will sell, but if 5G isn’t a huge draw, trade-ins could help move additional upgrades.
Back on the market
Smartphones often have a shelf life and utility that goes well beyond the frequency of new model releases, giving companies an additional source of revenue even for older devices.
Apple sent more than 11 million devices to be refurbished in 2019, according to the company’s latest environment report.
McQueen says phones that aren’t resold by carriers or smartphone companies might also end up with insurance firms to replace lost or broken devices for their customers or sent to emerging markets where consumers tend to be more price conscious.
Most of the growth in the refurbished smartphone market last year came from regions such as India, Latin America and Africa, according to a recent report from Counterpoint Research.
The programs also sell refurbished phones to users willing to purchase slightly older premium models, according to analysts.
“[It’s] kind of like the used car market; there are some people who would rather have an older Mercedes than a 2021 Hyundai,” said Ross Rubin, principal analyst at Reticle Research. “This allows them to be more aspirational, in a sense, without having to pay the $700 or more to buy into the current generation.”
And it’s a trend that appears likely to get stronger. Research firm IDC predicted earlier this year that there will be around 333 million used smartphones sold in 2023 — nearly double the number sold in 2018 — for a total market value of $67 billion.
What’s inside matters
Another reason old phones are valuable to companies is for what’s in them.
Apple has been working to curb the environmental impact of its massive global manufacturing operations, expanding recycling programs and pledging to go completely carbon neutral by 2030.
“The manufacturers have been emphasizing this focus more, they talk about the recycled materials that they use to produce their phones,” Rubin said.
As part of that effort, Apple touted this commitment to sustainability during Tuesday’s iPhone launch event, boasting that the magnets in the iPhone 12 lineup are all made of 100% recycled rare earth materials. For several years, the company has been developing and showing off robots that strip older iPhones down and separate the components that can be repurposed for new devices. The company also recycles other materials such as aluminum and tungsten that are used in new products.