Refurbishing the Innovator's Dilemma
Nota Bene #Duo #Office Hours #Q&A · 3 comments
by Horace Dediu
An Office Hours question asked by Fred S., September 11, 2026.
Q: Will Apple follow what carmakers have done with certified pre-owned, taking the phones returned through Apple Upgrade, putting them in a nice package and selling them?
They do, on the Apple Store, but at small scale, and refurbishment is a scale game. Today the refurbs come from the refund policy: someone returns a phone a month later that they barely used, and Apple resells it, almost new, at a slight discount. What you're referring to is lease returns, one- to two-year-old phones. They will probably take those in huge numbers, refurbish them in a very high-volume facility, and pump them back out at minimal profit. I don't think it's about profit. I think it's about knowledge of the market. Once a phone goes into the secondary market, Apple doesn't know much about it or what pricing people are getting; they have to sample it. Leased products that return to Apple are under their control and visibility. That information is super important. The lowest-priced new iPhone is now in the 800s. It used to be 400. That slot is now taken by the used market.
The auto market is the key question, because there are four used cars sold for every new car. The used market is now becoming the primary market, because cars are so expensive. Only twelve percent of Americans today can afford a new car. It used to be sixty or seventy percent. Prices have exploded, so one in six Americans are buying new cars, and that determines why the cars we find available are all enormous SUVs: that 12% is the wealthiest 12%, and they're saying no to economy cars.
This is a very important observation, because a lot of classical disruption theory depends on the low end and the mass market being interested in good enough. The problem is that the auto industry has completely dehydrated itself of visibility into that market. The challenge for Apple is not to fall into the trap of making things for the rich few, and yet not compromise on quality. If there's one thing I would advise Apple on, it's not to fall into the innovator's dilemma. It's a trap to think that more profitability is always the right answer. Apple being a premium brand, people already assume it's an exclusive, frivolous type of product, but they're not thinking fully about what's going on there.
One of the questions asked in Asymco Office Hours. The full recording and transcript are available to Asymco One subscribers.
See the proceedings at asymco.com/live.
3 comments
rbgayle ·
I'm hoping that one the force that will keep Apple's eyes on the correct road to success and avoid the Dilemma is software. The software business, especially for subscriptions, wants to have as many iPhones in the hands of as many people as possible. Lower ASP is made up by more money from the software. Of course, that also has its own Dilemma of raising fees to make more money. But perhaps the different needs of hardware and software will help keep Apple on the best path. It's worked so far.
Sacto Joe ·
You're right, Robert.
Apple's installed base has been an ace in the hole for years. I worked after retirement for a year at an Apple (iPad) "refurbishing" center in Elk Grove, CA. ("Refurbishing" is a misnomer; it's actually testing and grading. And if an iPad looked like it had been hit with a sander but was structurally and operationally sound, it was sent on to be sold by a non-Apple reseller.
It had to be absolutely cherry to be resold by Apple.
deemery ·
It really annoys me that Apple gives no credit in trade-ins for storage. A 1TB trade-in gets valued the same way as a 256mb. That's something they need to change.