Secondary market spotlight: Where do old phones go?

For most people in the US, the end of the life cycle of their beloved smartphone happens once a person decides to upgrade to newer, better technology. In most cases, this happens due to a perceived need to upgrade rather than the need due to the failure of the phone. In many cases, there is the potential for a cellular phone to serve a purpose beyond sitting around until the day comes to throw it away. Refurbishing and repairing electronics have always been a market segment in business; however, only in recent years has it been taking more of a presence in the minds of consumers. There is a growing perception has become that a phone is more of a consumable rather than a durable. However, many manufacturers realize that the useful life of technology far exceeds the use by the original owner and so there is a growing market for refurbished smart phones.

In recent years, there are more companies that are actively refurbishing electronics. These companies are actively seeking new customers to address the growing demand in the secondary market. Companies like Gazelle and uSell are actively seeking people to sell their old electronics. Many people do not want to part with their old phones until they are comfortable with the new one. However, this perception shifts when the individual realizes that someone will offer a little money from these forgotten electronics.

Not only have these large national internet companies been penetrating the secondary market, but there are also local companies penetrating this market. I have been recently working with Wireless Repair World in Pembroke Pines, FL, which is a local business that does repair for phone as well as purchasing used, but good, phones. One aspect of their business is to purchase old phones and refurbish them for the secondary market. As for my experience with this entrepreneurial company, I liked the personal contact with this organization, and they offered a better price than online companies. They seemed to be positioned for success in this realm, as long as they can make good customer relationships with the local community.

There are more cellular phones on the planet than ever before, and new ones seem to come out every year or two, there is still a need to reuse the parts from some of this equipment. Apple has been buying back old phones from consumers in order to retrieve the useful parts from these phones. Although many of these parts are small, they can still be used in other applications if they are found to be in good shape. Consider that the useful life of a part should be many years, as it would be possible to keep a phone for several years. However, many consumers will purchase a new phone prior to the end of life of their old phone. This means that some of the parts in an old phone have value to the right company.

Samsung has been recycling and recovering parts from consumers since 2007. Their S.T.A.R. program allows consumers to send electronics to Samsung for recycling. In some cases, the materials recovered are good and can be used in other applications. As more usable parts get recovered, the more the value chain for refurbished goods grows. Samsung and others can then sell refurbished goods at a lower price. However, there costs are lower than for new product making it a lucrative business.

In the future, there will be more companies that leverage different aspects of the secondary market. This will be an important growth area for reverse logistics. Consider this final thought. If the US secondary market is growing, consider the potential if one starts exploring internationally. Recently CNN reported that there is a growing secondary market for the iPhone 6 in Hong Kong. If the iPhone 6 market is growing, there must have been a market in the past for the iPhone 4 and 5.

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However, there does come a point where the product is too old, too worn out to recover usable parts, or it would cost more to recover the useful parts than the cost of the parts. At that point, recycling would appear to be the only solution. Consider the untapped material that can be found in even old and unusable cell phones.

In 100,000 cell phones, there are an estimated 2.4 kilograms of gold, 900 kilograms of copper, and 25 kilograms of silver. Depending on the market prices, that could be around $250,000 worth of scrap metal.

This means that even old electronic technology that has no value as parts can still have value in scrap. Although this seems like a lot of money for scrap phones, the problem is that each metal requires different processing in order to get it out of these phones. This can amount to extensive labor costs to get at this trapped material. However, the VTT Technical Research Center of Finland has developed a method to use fungus to recover these precious metals. In the future, it will be very likely that instead of using chemicals, we will be using fungus to help us recycle.

Ultimately, the manner and process in which material is recycled is fundamentally changing. In the future, there will be more of a focus on recycling precious materials rather than having to extract this material from the earth.

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Dr. Robert Gordon
Dr. Robert Lee Gordon is currently an associate professor with American Public University System in Reverse Logistics Management program. He has four published books, three regarding project management and one regarding reverse logistics in addition to dozens of articles. Dr. Gordon curates a Reverse Logistics topic at http://www.scoop.it/t/reverse-logistics-by-robert-gordon2.