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Turning old mobile junk into gold
2015-11-27, FAN FEIFEI

Ever wondered what happens to the millions of old mobile phones, laptops and other assorted hardware junk created as a billion-plus consumers regularly buy new devices?

These days, old devices, millions of them, find their way to online platforms, which either channel them to recycling firms if they are deemed low-value items or resell them at attractive prices.

Aihuishou.com is one of China’s online electronic products recycling platforms. Chen Xuefeng, the company’s founder and CEO, said that the website currently recycles about 10,000 mobile phones every day. “When the iPhone 6S was released not long ago, that number more than doubled to over 20,000 per day,” Chen added.

Meanwhile, about 20,000 mobile phones are recycled each month on Ihuigo.com, which was established in 2010 by Zhou Xu. The company brokers deals valued at up to 20 million yuan ($3 million) each month. On its site, the average price of a recycling deal is 800 yuan.

That recycling of discarded electronic products has become a legitimate business has been known for some time. But what is little known is that the business is now attracting serious funding from investors.

In August, Aihuishou, which connects electronics consumers with recyclers, secured $60 million in funding from Tiantu Capital, JD.com and Greenwoods Investment.

Chen and Sun Wenjun, both Shanghai-based Fudan University graduates, founded Aihuishou in 2011. “E-waste recycling is a huge market,” said Chen. “In the past, the cell phone recycling trade relied on individual vendors who lacked transparency and credibility.”

It is a view that finds an echo in some consumers, such as Song Wei, a 50-year-old Apple fan from Shanxi province.

Song is considering upgrading to an iPhone 6S from an iPhone 5. “I plan to sell my old phone,” Song said. “But I don’t trust street vendors who engage in mobile phone recycling. I will probably choose a formal channel that offers a clear price for old phones.”

Chen’s assurance should comfort Song. “Online recycling platforms provide users with a reliable recycling channel with transparent prices as per different models, colors and functions of mobile phones,” Chen said.

Scope for such activity is enormous. China had 1.28 billion mobile phone users in 2014. Some 452 million mobile phones were shipped domestically in 2014, although new mobile subscribers were only 56.98 million.

According to figures from the Ministry of Industry and Information Technology, about 400 million old mobile phones are discarded every year. Only 1 percent of them are recycled. To raise that figure, firms such as Aihuishou offer a transparent trading system that guarantees relatively high prices for used products.

A user can choose different trading methods, like making an appointment for a door-to-door service, visiting an offline store or mailing the phone directly to Aihuishou, Chen explained.

The company has set up more than 50 offline stores in Beijing, Shanghai, Guangzhou and Shenzhen, offering door-to-door testing and recycling services.

Lower-end mobile phones are valued at between 5 yuan and 20 yuan, and account for 20 to 30 percent of recycled phones. They are handed over to Green Eco-Manufacture, a Shenzhen-based electronic waste recycler, for metal and component extraction and environmentally friendly destruction.

On the other hand, high-end phones, which account for 20 percent of recycled phones, are resold as used goods after professional processing. A warranty is even provided. As for mid-range phones, which account for 50 to 60 percent of recycled phones, recyclers bid for them, Chen said.

Besides mobile phones, Aihuishou deals in digital cameras, computers and computer accessories. Its trade-in program, involving mobile majors such as iPhone, Samsung and Xiaomi, encourages consumers to upgrade their phones.

Chen believes the phone recycling market has a huge potential for development.

“The updating cycle of mobile phones is usually about 18 months, and we plan to open more offline stores in first- and second-tier cities. We’ll further explore the market for secondhand mobile phones valued between 20 yuan and 200 yuan, and make profit by disassembling metal parts.”

Like Chen, Zhou of Ihuigo sees gold in junk. After being cheated by a mobile phone recycling vendor, Zhou decided to create an online platform where consumers can check the prices and make recycling deals in a safe environment.

“The traditional offline deals are not transparent and user experience is very poor, which is the most significant distinction,” Zhou said. “In association with smartphone maker Meizu, we also offer a trade-in service. A consumer can buy a new phone for 20 to 150 yuan less by trading in his old phone.”

Some of the recycled mobile phones are resold to users in third- and fourth-tier cities, where demand for used phones is higher. Others are exported to Southeast Asia and Africa at a low price. The rest are destroyed by a green plant in Hong Kong.

“The mobile phone recycling industry is still nascent, but the coming year or two will see rapid growth. Online platforms will become the mainstream in future,” Zhou said.

But for that to happen, awareness of recycling is key. Many consumers still keep used phones at home, he said. However, there are encouraging signs. For instance, 90 percent of sales of new phones are done through trade-in deals, said Sun Wenping, president of the Shenzhen Mobile Communications Association.

Nearly 400 million old mobile phones are expected to be recycled, as 452 million new mobile units were shipped in 2014.

Experts, however, worry there are no standards yet in the sector. Also, phone recycling does not figure in the government list of Regulations on Recovery Processing of Waste Electrical and Electronic Products issued in 2011.

Sun explained that the cost of dismantling old phones and extracting precious metals from them is high. Worse, there are no government subsidies for such companies, even though they play a key role in protecting the environment.

But the country has started to pay attention to this problem, Sun said.

Liang Zhenpeng, who tracks the consumer electronics industry, agrees that the environment is changing. He expects that once subsidies are granted and standards adopted, the situation will improve. 

“Recycling platforms are bound to develop very rapidly, which will attract attention of venture capital firms,” Liang said.


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