We’re often asked by our clients what exactly our company does with the broken LCD screens after we receive them.
In an effort to get down to business and respect your time, we usually answer this question with a simple “They’re sent to our partners overseas in China.”
But somehow this answer just doesn’t seem to justify the complexity of the entire process. So much time, effort, energy, money, and risks are involved; this overly generic answer really doesn’t capture all that goes into the process. So without further ado, we present to you the 17,000+ mile journey of an LCD screen (including the refurbished screens you buy domestically or international).
Lifecycle of a Broken LCD Screen When Sold to Recycling Buyback Company
Shown below is the typical lifecycle for most broken LCD buyback companies. This is most certainly true for iPhone 4/4s, 5, 5s and 5c. These models are almost entirely shipped overseas because of the tedious labor and inconsistencies with maximizing the reclaim yield. Gaining some knowledge about this process will also shed some light on why prices drop and vary from one company to another from week to week.
Interesting and Important Information:
- A typical full sales-cycle is about 50-60 days from the time an order is confirmed from our clients. Pricing must be forecast for this length of time into the future in order for the end buyer and everyone along the way to make a profit or remain competitive in the buyback market.
- When you consider the volatility of the most recent flagship models (Samsung S3, S4, Note 2, etc.), an indication of a strong buyback company is one whose prices are competitive yet accurately forecast future market pricing.
- We’ve noticed over the past year that many of the local part time buyers have vanished. While they might have offered a more competitive rate at the time, the inability to forecast the industries market price two months after purchase has left many of them with unprofitable purchases, making it impossible for them to stay in business.
- 99% of the LCD screens that cell phone repair shops purchase were part of this process.
Underground “Submarine” Logistics from Hong Kong to China
- One of the most interesting parts of the entire process is the methods in which broken LCD screens (and many other used consumer electronics) enter into China. This “submarine” channel if replicated domestically in the USA would land most in a federal prison. However, it’s a somewhat “accepted” practice in the Asian supply chain.
- Mainland China is where 99% of the labor for broken LCD screens is employed. The challenge is that it’s actually “illegal” to import Apple products into China without a letter of license. In addition to the law tariffs, taxes and duties if shipped directly into China are high (about 16%). Unofficially, a native of China would also confirm that customs and border agents have been known to steal parcels (in full, partially, or are simply held until a “fine” is paid directly to officials).
- Since Hong Kong is duty free, all goods typically enter into this British controlled sector of China and are then smuggled into China via a freight forwarder. For smaller volumes of items, such as an iPad or a few handsets, Hong Kong residents who commute to China on a daily basis for school or work will take these items across the boarder and claim them as personal belongings. They’ll be paid a commission for their work – and it can actually be very lucrative for them.
Larger lots for items such as LCD screens are impossible to transport through individual travelers. Typically, these freight forwarding companies have relationships with government officials or customs officials and are able to bypass standard checks or have inside information on when customs will be the least monitored for smuggled merchandise. Of course, this all happens for a fee (usually per piece) and usually goes directly someone in the process.
It’s not uncommon for these “freight forwarders” to shave a few pieces of product for themselves as well.
I’ve heard some pretty crazy stories about submarine transport going wrong that would make most of us located here in the USA thankful for the “high taxes” and tariffs associated with importing products.
LCD Factories and Buyers of Broken Cell Phone LCD Screens
If you’ve ever been on Alibaba trying to source LCD screens, then I’m sure every supplier tells you (and shows pictures) suggesting that they are “the factory” in order to conceal the fact they they’re just a broker for one of the many LCD factories. Usually that’s not the case and not typically the standard in the Asian market.
There is probably less than 10 “serious” LCD factories – “serious” being defined as having a long-term consistent pipeline of LCD screen assembly lines going for years at a time. For every one of these “serious” refurbishers, hundreds (if not thousands) HAD an LCD repair facility open at one point but have since closed down or moved onto other projects. Regardless, many buyers who are not directly associated with a factory take their product directly into the market to be sold by representatives of both large and small businesses who repair LCD screens.
In America, opening a business location is the American Dream. In China, one can rent out a clean room floor and assemble an army of trained workers overnight!
Swap Meet/Flea Market Transactions:
For the most part, after LCD screens have been transported into China, they will arrive at a marketplace similar in fashion to a Saturday afternoon at your local swap meet or flea market location. Instead of selling fruit, popcorn and used clothes, these markets are full of used electronics ranging from cell phone handsets to components for devices. All the serious buyers will arrive and are allowed the opportunity to inspect the lot (sometimes in full or partial) and make an offer.
These markets are what set the price for the rest of the world!
You can compare these marketplaces to the NYSE on Wall Street. Transactions here set the buying and selling price standard. Since most of the product is refurbished and processed here, the price will trickle down to all the other marketplaces at some point in the near future.
These buyer’s main considerations usually include the following:
- How easy it is to sell the last batch of reclaimed goods.
- The price and how easy it is to get the spare parts to refurbish these units.
- How many other pieces have been sold in the marketplace recently. Too much in the market is a bad thing and prices spike downward.
- Industry trends with new releases of models and future predictions of pricing.
- Official manufacturer and carrier releases of brand new product into the market.
Time to Repair and Refurbish!
Now the buyers of these screens transport the product to an LCD factory and start to test and repair the LCD screens into refurbished products for sale. The spare parts for the projects are easy to get; it’s as easy as going down to a Circle-K, Walgreen’s or neighborhood Walmart here in the USA!
The main stages for refurbishing an LCD screen are:
- Pre-testing and screening out bad LCD screens.
- Separating the glass touch panel from the LCD module.
- Cleaning off the excess residue glue after on the LCD screen.
- Reclaiming or using aftermarket spare parts to complete the rest of the LCD assembly.
- Placing a new LCD screen on using LOCA (Liquid Optical Clear Adhesive) or an Optical Adhesive strip.
- Clearing out any bubbles or inconsistencies in the glue using an Autoclave machine.
While many companies here in the USA will use “automated” glass screen removal machines, much of the work in China is done by hand. The labor is cheap enough and the overall yield outcome will be higher than using the machine (which is likely to break a few more than a human would).
Of course, in China it’s very rare to see anyone refurbishing LCD screens unless they’re in a clean room with an anti static environment. However, I have heard stories of families refurbishing cell phones and LCD screens in a home with 20 people where the conditions were horrid!
Finished Product! Now Off to Trading Companies
After the LCD screens are refurbished, the goods are then sold to trading companies in bulk for a discount. Others who can’t afford to buy the product upfront will get orders, collect payment from their clients and then go to the trading companies directly and purchase the screens; this second method is most popular, even for companies who can afford to buy the stock. They simply don’t want the risk of price fluctuations before they close a sale and consider the price volatility more of a risk than an advantage when it comes to buying in bulk for a discount .
Then the product is sold directly back to us, your retail store location or other wholesale refurbishers both here and in various other countries.
Final Thoughts:
LCD screens take a long and adventurous journey after they’ve been damaged, all in an effort to supply cell phone repair shops with a cheaper alternative to buying brand new LCD screens. The amount of hands that touch these screens from the end user and repair technician and all the way to China and back is mind-blowing. This ~two month process creates a lot of risk as prices seem to fluctuate more frequently than with previous LCD screens of older phones.
Our company, Harvest Cellular, has built our process on streamlining and reducing the overall transit time as much as possible to ensure we’re always competitive and knowledgeable about today and tomorrow’s LCD pricing.
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Hi Dustin, have you ever had experience with refurbishing here in the US as opposed to going to China. In large enough volumes is anyone in the US as competitive, especially given that turnaround times might be much shorter and yields should be much higher (same quality, less skimming by brokers along the way)? Just wondering?
where they come from
Great informative article Dustin.