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Why This $449 iPhone Isn't an Android Killer

By Ashraf Eassa - Oct 19, 2017 at 9:11PM

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Refurbished iPhones have their place, but they're not a big piece of the pie.

On Sept. 20, BGR published an article titled "The Android-killing iPhone is finally here, and it's not the iPhone X," in which author Chris Smith argues that a refurbished Apple (AAPL -0.25%) iPhone 6s at $449 should be "enough to make you ignore any budget Android phone that launches around the same time."

Smith has a point in observing that a key advantage to owning an iPhone -- even an older, factory-refurbished model -- is that Apple will continue to support the device with operating system updates "long after its life expectancy should be over."

Unfortunately, at least for Apple and its stockholders, there's a simple reason that discounted refurbs of older-generation iPhones aren't going to disrupt the market for similarly priced Android devices.

An Apple iPhone 8 running a 3D game.

Image source: Apple.

Not enough refurbs exist

Apple only began selling refurbished iPhones in its online store about  a year ago, according to 9to5Mac. A refurbished iPhone could come to be in several ways. For instance, when somebody sends in an iPhone with a cracked screen, Apple probably transplants the logic board into a new case and outfits the device with a new battery (according to its website, all refurbished iPhones have new cases and batteries) and sells it as refurbished.

I also wouldn't be surprised if phones that Apple receives as part of its iPhone Upgrade Program are spruced up in the manner described above and sold as refurbs.

Apple surely gets quite a few phones this way, which is why it's not terribly difficult to buy a refurbished iPhone 6s or iPhone 7 from its online store today. But I can't imagine that it takes in enough devices through its warranty or Apple Care program, as well as through the iPhone Upgrade Program, to be able to serve as a true "Android killer."

Not everyone wants one

There's also the simple fact that the word "refurbished" immediately devalues a product in the minds of consumers. Even though a refurbished iPhone is going to be, for all intents and purposes, indistinguishable from a new iPhone, people (understandably) find value in products that are truly new.

For Apple, this is mostly a good thing. It gets paid more when it sells a new iPhone as opposed to a refurbished one, which means higher iPhone average selling prices, greater revenue, and ultimately fatter profits for the company and its stockholders.

There will be those whose budgets can't quite be stretched to allow them to buy the new iPhone that they want, and instead of buying refurbished iPhones, they'll opt for lower-cost Android-based smartphones. In that case, Apple loses a potential sale. But I don't think that applies to a ton of people.

An undeniable value proposition

I'm not going to argue against Smith's main point that refurbished iPhones are a good deal -- because they really are. In fact, thanks to the aggressive pricing of refurbished iPhones, I bought two of them -- one iPhone 6s and one iPhone 6s Plus -- as Christmas gifts for family members this year.

That really wouldn't have been possible with full-priced iPhones, and if you don't care about having a truly new iPhone (though it will be indistinguishable from a new one), I'd highly recommend a refurbished, older-generation iPhone. 

But neither Apple nor its shareholders should rely on attractively priced refurbished iPhones to allow the company to significantly boost its iPhone business at the expense of the various Android phone vendors out there, as both supply and customer preferences for new devices keep a lid on refurbished iPhone sales.

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