Since July 6,2018, the United States and China have been engaged in a trade war, trying to damage each other’s trade by imposition of tariffs and quota restrictions. It looks like the situation is getting worse after the Trump administration added Huawei to its "entity list", which bans the company from acquiring technology from US firms without government approval. After that, Google revoked Huawei’s Android license.There is no need to say, the trade war will have lots of impact on our daily life and international trade.
But how will it affect our cellphone repair and recycling industry?Below is our thoughts.
1.Lesser used phones and parts come to HK and China for 2 reasons.
USA and China are becoming more strict on importing products from each other. As we all know, there are many used cellphone LCDs, parts,and faulty or BER(Beyond Economical Repair) phones coming from USA to China for repair, refurbishment and recycling.
These used cellphone parts sell to China eventually for very good reasons. China have the world's most hard working technicians here,the labor cost here are almost 20% compared with USA and West Europe.
Shenzhen has the most sophisticated cellphone life-cycle ecosystem and network in the world, basically you can sell everything related with cellphone in Hua Qiang Bei market, and in return repair/refurbishment required parts here are the cheapest in this industry. Especially for board level phone repair, such as water damaged, no power, and failed former repair. One single repair might need 1~2 hours, it might not be worthwhile to repair in USA, but electronic recyclers could still sell these at a very good price in China.
Obviously,China is the best choice to dispose these used electronics for volume and good price. Statistics shows above 30% used electronics come to HK and Mainland China eventually.
But right now things are changing,reclaimed parts or refurbished cellphones will mostly sold back to USA and Europe after being recycled in China. Since the USA customs are becoming more strict on imported products from China, instead they are working more closely with countries like Vietnam, Philippines, and Mexico, where the labor cost there is about 30%~70% compared with China.
Vietnam already has become the Samsung global R&D headquarters with nearly 160,000 Vietnamese employees in total. In our cellphone repair/recycle industry, we have noticed there are more used electronics going into HoChiMinh City and Hanoi, Vietnam even though the customs is still very tricky there, people have to pay 1~1.5 USD “commission” to the middleman working in the customs bureau. Regions like Vietnam still can’t hold good volume even though their buying price for some used cellphone parts is higher.
Additionally technicians there are still inexperienced, but they might be more competitive if the trade war between USA and China continues to escalate.
Most consumers have data security concern when they decide to recycle their personal electronics,it won’t be a problem if the device could be power up and able to connect with the computers,most recyclers got the software to clear the data automatically without using too many labor.After sorted and labeled,most of these electronics will sent to HK and Dubai for remarketing and retailing.
After the trade war started last year, the Commerce Department’s Bureau of Industry and Security (BIS) proposed regulations that would strengthen U.S. government oversight of discarded electronic waste export policies that affect U.S. regulations,the goal is to reduce the feedstock for producing counterfeit goods that are imported back to USA,the untested end of life devices would be prohibited from export”
Today, black market traders use electronic scrap to harvest and fraudulently remarket substandard chips and components which threaten our national security. The global environment too is damaged from the open burning of e-wastes abroad. Meanwhile our own legitimate recyclers at home are forced to compete with these polluting operators, costing us thousands of jobs in the circular economy," explained Jim Puckett, executive director of the Basel Action Network.In fact,the source of used electronics comes from everywhere so controlling e-waste export won't stop or fix the counterfeit or security issues.And there is no concrete fact that e-waste export much related with national securities just like the ban on HuaWei equipment.
On the contrary,losing the ability to leverage global market for Date destruction,parts repair,refurbish,and recycle,the BIS regulation will leave USA companies at an unfair situation to competitors in the world market.
2.High copy or refurbished original parts might have more problem in US customs.
Since 2015,high copies started to play a very important role in cellphone repair industry,Tianma,Jingdongfang,AUO,and other brands supply millions of LCD modules to the market every month,and these third party factories in Shenzhen assemble them into LCD assembly,one big local wholesaler in USA could supply more than 50K pcs LCDs to these smaller repair shops.
Many people had lost their products by millions at customs or even got arrested by US federal officials for shipping counterfeit iPhone Samsung parts from China.
In April this year,a cellphone parts wholesaler was allegedly conspired to bring into the country knockoff screens and other parts used in devices made by Apple, Samsung, Nokia and other companies starting in 2010.He admitted in a plea deal that he sold nearly $19 million worth of cellphone and electronic components for resale from China,he could face up to 45 years in federal prison for the conspiracy charges and a mandatory two-year sentence for the identity theft charge, officials said.
There is big possibilities that the USA customs will be more strict on imported cellphone repair parts from China than ever before as the trade war continues.
3.Huawei repair and recycling demand in Europe might be greatly affected by The trade war.
Despite the fact that they gained the biggest market share in China, they also doing very good in Europe. Following statistics shows about Huawei sales in Europe (Both Eastern Europe and Western Europe).
A. US ban on Huawei
A week after US administration order released,Huawei sales in France dropped 20% ,carriers like EE,Vodafone stop aligning with the tech giant ,many retail store in Europe stop supplying Huawei products. All this happened will freeze the repair and recycling business in a short time.
Based on the bleak situation Huawei are facing, there’s a rumor said the company has canceled several production line in Foxconn(the world’s NO.1 contract electronics maker)in order to decrease smartphone orders and if they do produce less, it will shrink the repair and recycling business for sure.
B. Domino effect
It is true to say that each country make decision based on their own interest and position.
But for most of the European countries who followed to restrict Huawei products, it’s more likely they want to be away from the chaos to avoid the next potential ‘exclusion'. More or less ,European countries have connected with the US both politically and economically , so oppose to US policy does not seem like a smart choice at such a critical time.
C. Consumer psychology
“Is my Huawei phone useless or Is my Huawei phone going to be useless ?”
Huawei products has been popular among European consumers in the past few years because it’s very affordable and desirable.Lack of software support is the least thing that every phone user to expect. Without all the significant function,consumer lose their buying intention sooner or later, and it does not match the theory of “You get what you paid for”.When there is less buying desire on Huawei products, it’s not hard to imagine how its secondary market will turn out.
At the end of this blog,we would like to share with you our position about the Trade war.
We hope that the US government can ease the economic intervention on trading.In fact, the States was maintained more trading benefits in a long run.
Instead,most of the Asian countries, they are at the low end of the industrial chain for decades and decades. What trade war will affect is disrupting the labor division system in the global industrial chain and killing the efficiency.
For people who visit China often usually have more and better understanding of the whole situation. Against each other would not make it a better place for any kind of business to grow and develop in the upcoming 5G era .
Cellphone recycling industry will bloom with massive new opportunities,because most of people won’t keep their phone for years.
The co-founder of ERI recycling stated: “In our society, we always have to have the new, best product, the latest advancement is 5G. With 5G, networks will be more reliable than ever before. Downloads will be lightning fast. It’s going to make it easier to interact and find information in seconds. People want this and will be happy to ditch older devices for the sheer speed and ease of completing business and personal transactions. Verizon claims 5G is 20 times faster than 4G.
One of the aspects of 5G that’s so exciting is that despite the exploding numbers of devices being used, 5G is going to be able to keep up. It’s estimated that 8.4 devices are connected to the nation’s networks. That number is expected to reach 20.4 billion in another year. With 5G technology, networks will have no problems making sure there’s bandwidth for all of these phones, tablets, and other devices.’’
The whole industry is preparing for 5G, what about you? what is your next move?