Date: 2024-10-31 Page is: DBtxt003.php txt00026637
WASTE
What Really Happens When You Trade In an iPhone at the Apple Store
Apple touts its network of shredding robots and contractors as a greener way to reuse old gadgets. A lengthy court battle and a Businessweek investigation have cast some light on the recycling industry’s dirty secrets.
What Really Happens When You Trade In an iPhone at the Apple Store
Apple touts its network of shredding robots and contractors as a greener way to reuse old gadgets. A lengthy court battle and a Businessweek investigation have cast some light on the recycling industry’s dirty secrets.
Illustration: Irene Suosalo for Bloomberg Businessweek
Original article: https://www.bloomberg.com/news/features/2024-04-18/apple-iphone-recycling-program-has-secrets
Peter Burgess COMMENTARY
Peter Burgess
April 18, 2024 at 5:00 AM EDT
Few workers at the recycling plant had access to the secure room that some called the “Apple cage.” Behind its locked door, past a metal detector and under surveillance cameras, a small team of employees of GEEP Canada Inc., an electronic-waste processor north of Toronto, sifted through pallet-size boxes full of used iPhones. Prying each one open manually at a set of tables, they ripped out batteries and other parts and tossed the components into sorting bins. When enough material piled up in one of the bins, it was forklifted to a larger area of the warehouse, where its contents were dumped into big industrial shredders that loudly pulverized the gadgetry into tiny shards.
Even if the iPhones looked good enough for resale, Apple Inc.’s contract with GEEP (said with a hard “g”) explicitly required that every product it sent be destroyed. In Apple’s view, these devices, the kind usually disposed of at its stores or collected from trade-ins when customers upgraded to a new model, were better off scrapped for their precious metals than refurbished. And Apple was scrapping tons: In its first couple years working with GEEP, the company shipped it more than 530,000 iPhones, 25,000 iPads and 19,000 Watches.
But not all of them ended up in the shredders. Products were disappearing from the facility, though nobody at GEEP seemed to notice or talk about it. Apple was an extremely important client and as stringent about security as GEEP’s government customers, mandating procedures for how its detritus was stored and supervised. “They scrutinize you and do a deep dive and due diligence on your operations,” says a former top GEEP executive who, like most sources cited in this story, spoke on the condition of anonymity to avoid career reprisals and association with any wrongdoing. “They’re absolutely anal about their brand.”
A major part of Apple’s concern was theft, a challenge for any recycler dealing with valuable hardware. If these iPhones and iPads were being crushed anyhow, what was the harm in nabbing some before the slaughterhouse? But staffers were monitored to prevent such temptations. Apple’s contract also stipulated that it retained ownership of everything it dispatched to GEEP; stealing an item here would be no different than swiping the Watch off Chief Executive Officer Tim Cook’s wrist. Some GEEP managers seemed so anxious about violating the rules that when boxes of T-shirts with the Apple logo showed up, they made sure to shred every last thread.
Then came the surprise Apple audit. When corporate investigators arrived to search the space, an oversight right Apple included in its agreement, they discovered a series of alarming issues. Tons of gadgets had gone missing. There were data discrepancies in GEEP’s paperwork. And, tellingly, auditors found two bins of intact Watches in an off-camera section of the facility, something that’s contractually forbidden. Workers on the floor sensed their bosses were nervous but didn’t know why.
Apple soon accused GEEP of failing to recycle at least 99,975 items. Cellular and other device identifiers revealed iPhones that should have been crunched into croutons were instead reactivated by new users in China. In 2020, Apple sued GEEP in Ontario court for C$31 million ($22.6 million) for breach of contract, alleging a “carefully orchestrated scheme” wherein employees stole and diverted its products to third parties who fixed up and “resold them in the grey-market to unsuspecting consumers.” GEEP acknowledged Apple goods were misappropriated, but blamed the scheme on several “rogue employees,” whom the company separately sued; it denied violating the terms of its deal with Apple or that it was “vicariously liable.”
When the lawsuits came to light, first reported in late 2020 by the Logic, a Canadian news outlet, industry observers were stunned. It wasn’t just the shocking scale of the purported heist; the incident implied that Apple was forcing a recycling partner to shred tens of thousands of iPhones that were apparently in prime condition for refurbishment. The timing was awkward: That same year, Apple had publicly committed to reaching 100% carbon neutrality across its product life cycle by 2030 and specified in an environmental report that “reuse is our first choice.” The shredding, critics said, contradicted Apple’s green marketing and was likely a way to keep cheaper used hardware from interfering with sales of new products.
And then nothing happened for four years. Today the case remains a mystery. No new motions have been filed, and, without further actions, GEEP and Apple’s lawsuits could be automatically dismissed as soon as August and January, respectively. Why would Apple expose some of the inner workings of its recycling program in a suit only to let the matter rest there?
An Apple spokesperson says electronics recycling today has advanced by “leaps and bounds” since the GEEP lawsuit was filed, and that the company creates long-lasting products that often serve multiple owners. “Apple’s industry-leading recycling program offers customers easy ways to bring their devices back to be analyzed for refurbishment and reuse,” the spokesperson says. “When a device finally reaches the end of its life, we’re pioneering innovative new ways to recover the valuable materials inside.” John Longo, an attorney for GEEP, says he has “no comment while this matter is before the courts.”
Longtime e-waste leaders, who say theft is more rampant than people realize, suggest that Apple’s complaint alone was enough to make a vicious example of GEEP and send an aggressive message to its other partners that it may go after them, too, for iPhone pilfering. Citing a Chinese proverb, one industry exec puts it this way: “Kill the chicken to scare the monkey.”
GEEP isn’t the only recycling vendor Apple has grappled with. In the 2010s the company investigated theft issues at recyclers ranging from Li Tong Group in Asia to Stena Metall AB in Europe, says a former Apple executive familiar with its vendor audits. Redacted legal filings indicate that in 2015 the company uncovered an alleged plot at Tes-Amm in Singapore involving employees stealing Apple devices and parts, including large quantities of expensive circuit boards. To cover their tracks, the workers mixed boxes of Apple scrap with non-Apple scrap to match the facility’s incoming and outgoing weights, a metric Apple tracked closely. (A spokesperson for Tes-Amm says that it cannot confirm or comment on any client relationships but that security is paramount to its organization. Li Tong declined to comment. Stena says the former Apple exec “appears to be misinformed” but wouldn’t elaborate.)
To deter burglary, Apple has hired outside security consultants to escort trucks to its recyclers, witness the unloading and shredding and generally document the process. Given the volumes Apple facilitates, however, the lure for low-wage workers to skirt the supervision and swipe gadgets is obvious, especially with the iPhone. “It’s teeny, fits in a pocket and is worth a bundle,” says Renee St. Denis, Apple’s senior manager of global recycling until mid-2018. “Unfortunately, sometimes management gets involved, too.” A recycling engineer who’s worked with Apple in the US and China at several e-waste companies remembers an incident with a water cooler on a steel cart that would be rolled in during shifts. An employee was surreptitiously taping iPhones to the bottom of the cart and, when the cooler needed a refill, sneaking them through the metal detector. The guard assumed the cart caused the beeping.
There are a variety of reasons for electronics makers and retailers to pay to have their goods shredded. Some want to remove unsold inventory from shelves to make room for new product generations. Used items might contain personal data that needs to be destroyed. Shredding also mitigates the risk that sought-after pieces—camera modules, sensors, chipsets—could fall into the wrong hands and wind up in a so-called Frankenstein device. These are fixed up to look like the real thing and illegally resold or even fraudulently returned. (Last year one group of conspirators was sentenced to jail for attempting to exchange more than 10,000 counterfeit iPhones and iPads for genuine versions at hundreds of Apple Stores from 2011 to 2019.)
It may sound eco-friendly to smelt a device’s metals so they can reenter the supply chain, but recycling is far from the greenest option. The recovery value of an iPhone is low, and with 80% of its carbon footprint emitted during production, the most environmentally sound path is to keep the gadget alive as long as possible. “The goal really is to minimize the amount of material that has to go out to the recycler, whether that’s by making a device last longer or making sure parts and modules have a way to be reused,” says Nirav Patel, founder of Framework Computer Inc., a startup that builds laptops designed for easy repairs. “Recycling is the last resort.”
Of course, a lot of the products sent to the shredders are in fact kaput or too old to salvage. And the iPhone’s durable design can make it tougher to repair. But Apple’s business model of enticing users to regularly upgrade to the latest and greatest hasn’t exactly incentivized the company to fix every device it can. “Apple can’t sell a brand-new phone for $1,000 if they have a bunch of two-generation-old phones still on the market,” says the recycling engineer. “The more older phones they can get rid of, the more newer phones they can sell.”
Apple improved the efficiency (and security) of its recycling by bringing some of it in-house. Its environmental innovation team developed a robot called Liam, unveiled in 2016, that could dismantle an iPhone 6 into eight separate components. This comprehensive presorting enabled Apple to recover more metals, whereas traditional shredders typically chewed up intact or minimally disassembled devices. Magnets and other mechanisms that try to separate the mashed-together bits after shredding lose lots of material in the process.
Liam’s precision automation, however, proved a dead end. It could handle just one iPhone model, and not that well. If a device had corroded screws or sticky insides, the robot would glitch. A person familiar with the project estimates Liam could run for about 10 minutes without human intervention. Another person says Apple at times fed the robot still-functioning iPhones and, for media demos, cherry-picked cleaner units so it didn’t crash, suggesting Liam was geared more for promotion than scalability.
Apple introduced Daisy, Liam’s successor, a few years later. It took a promising destructive approach: Instead of delicately removing parts, Daisy’s robot arms and four stations of machinery ripped off screens, punched out screws, froze batteries for easier extraction and knocked modules onto conveyor belts. The discrete output led to better recovery rates for elements such as cobalt and tungsten. By 2019, when Apple opened the material recovery lab in Texas where Daisy currently resides, the robot could process and disassemble 15 iPhone models at a rate of up to 200 units per hour. Apple soon added a second Daisy to an associated DB Schenker logistics center in the Netherlands, for European recycling.
Still, while Apple recycling veterans and industry experts generally laud the innovation, some are surprised that Apple continues to hype a machine that’s now six years old and capable of processing only up to 1.2 million iPhones per year—about what the company sells every 48 hours. Apple envisions third-party recyclers licensing the technology and erecting their own automated systems, but that hasn’t happened, likely because of the robot’s cost and iPhone-limited architecture. Matthew Travers, a scientist at Carnegie Mellon University’s Robotics Institute who does work with Apple’s recycling engineers, says incremental automation is more likely to augment hand disassembly and existing shredding infrastructure in the near future. “In the next five years, I’d be very, very surprised if there was a fully automated robot solution that solves the e-waste problem,” he says.
The reality on the ground at traditional demanufacturing plants is much less high-tech. Around the time Apple was bringing Daisy online in the Netherlands, a person then employed at Re-Teck, another Apple recycling partner down the street, recalls witnessing the crushing of tons of AirPods, Macs and Watches, many of which appeared to be in good shape. (Re-Teck declined to comment.) In some cases, the employee says, workers would smash the devices with hammers.
GEEP’s 500,000-square-foot facility, in an industrial area of Barrie, Ontario, was a mess of open boxes packed with aged computers, TVs and bulky appliances. Line workers wore orange coveralls and respirators. A conveyor slanted up almost two stories to the primary “chain shredder.” When a huge office printer slid into its chamber of spinning grinders, the disintegration sounded like an earthquake.
All kinds of random stuff came through the warehouse, from Bose headphones and Microsoft Surface tablets to Shrek 2 DVDs and sex toys. Some workers felt weird destroying perfectly usable hardware such as new hard drives or flat-screen TVs with only superficial defects. “It was insane,” says former scale operator Zachary Jackson, who remembers thinking, “I really don’t want to break this. All this is totally fine.”
Winning the Apple contract in late 2014 was a big deal. Two former longtime employees say GEEP’s business, which then had operations in Vancouver and Montreal among other locations, had been struggling for years. Yes, Apple was exceptionally demanding. (When originally setting up the metal detector for the Apple cage, GEEP had a worker hide small electronics in their boots and underwear to test if it would set off the alarm. “If you tried to shove a microchip down your pants, that metal detector would pick it up,” says an ex-staffer.) But Apple was also the kind of banner customer that could attract other business. And it paid on time—not a given in the rough-and-tumble scrap world, where operators haggle over pennies per pound processed. From 2015 to 2017, thousands of Apple products arrived at GEEP’s docks in Barrie for unloading.
Attempting to keep the plant on track was Roger Micks, an unsmiling manager with a thick strip of hair running down his chin. Described as a taskmaster, Micks was constantly yelling at underlings about throughput or equipment failures or disappointing load prices, though some sensed it was an act. One victim of his temper recalls seeing him unabashedly sleeping in his office chair on multiple occasions after tirades. In his off time, he enjoyed wrangling fish on a boat named Ballz Deep.
There were rumors of theft happening at GEEP, though usually in small doses. Even after an employee was caught stealing Beats by Dre headphones to sell online, it wasn’t too difficult to sneak out video games or cameras slated for shredding. Some sensed shadier things were happening. A former commodities analyst once noticed Micks mislabeling recycled materials set to ship to an e-waste partner and reported it to compliance, but they never heard what came of the issue. Micks couldn’t be reached for comment.
GEEP was supposed to destroy every iPhone, iPad and Watch beyond reuse within 45 days of receipt. Apple representatives regularly showed up to monitor goods arriving, even escorting forklifts from the Apple cage to the shredders, says one person familiar with the process. Still, it wasn’t impossible to circumvent security. Nobody would think twice if Micks ordered a pallet moved to another location or transported to an outside vendor. “You’re looking at hundreds of thousands of pounds of material,” this person says. “If you’re skimming 100 pounds here and there, nobody is really going to know.”
Making off with millions of dollars of Apple product at GEEP, it turned out, didn’t require Ocean’s Eleven-style cunning—just accounting and logistics tricks. Someone began altering electronic records and reclassifying Apple shipments with codes for copper bearings and other materials. As GEEP later determined, these loads were then transported to Whitby Recycling Inc., a scrap brokerage 90 minutes away near Lake Ontario that GEEP did business with. David Rubin, an attorney for Whitby and its president, Fu Yuan Yang, says Yang denies any involvement in the conspiracy and was merely buying and selling scrap metal. “It had nothing to do with iPhones,” Rubin says. “If somebody substituted other stuff in there that wasn’t supposed to be there, he had no idea and no part of it.”“I really don’t want to break this. All this is totally fine”
It’s unclear exactly when Apple began to notice questionable activity. Besides tracking the devices it sends to recyclers, the company analyzes data reports that often detail destruction weights and commodity yields. If the percentage mix of precious metals coming from a batch of iPhones looks off, that can raise red flags in Cupertino.
In August 2017, Apple conducted its surprise inspection of GEEP. Auditors, poring over corporate documents and interviewing employees, quickly realized way more gadgets had gone missing than could be stuffed in a worker’s underwear. Apple met with GEEP leaders to share the findings of its investigation in January 2018, ultimately killing the contract and concluding that at least 11,766 pounds of Apple hardware had vanished without being shredded.
The following year, GEEP sued Micks and two former colleagues, Ted Cooper and Steve White, accusing them of redirecting nearly 100,000 Apple devices to Yang’s company in exchange for kickbacks. These products were shipped overseas and resold. Cooper, who declined to comment through his lawyers, denied any involvement in a legal filing. White never filed a statement of defense and didn’t respond to requests for comment. Micks, who was fired during Apple’s investigation, did not file a defense statement. GEEP said in a court claim that he admitted to diverting iPhones when confronted with evidence of the scheme.
Apple filed its own lawsuit against GEEP in January 2020. “The business imploded when we had this Apple thing,” says the former top GEEP executive. “Imagine if you’re Hewlett-Packard and dealing with GEEP. You have to question: ‘If they do that to Apple, what are they going to do to us?’ ”
After an initial flurry of legal activity, there were no subsequent filings in either case in 2021 or since. It’s possible Apple gave up on litigation to avoid more public scrutiny of its recycling program, or because it settled the issue privately. At this point, GEEP Canada no longer exists. Through a merger, the Barrie plant is now part of Quantum Lifecycle Partners LP, which says it’s not party to Apple’s lawsuit. Unless the Apple case moves to trial soon, the matter will likely be terminated by default in January 2025, as per a notice in its initial complaint.
Without court proceedings, it’s much tougher to say who knew about the alleged thefts and when they knew it. Some wonder if the blame was unfairly pinned on Cooper, White and Micks, given the complexity of the plot. What’s undeniable is that the lawsuit was a lightning bolt for Apple’s other recycling partners to shore up their security and stay quiet about Apple’s operations. “It reverberated all across the industry: If you weren’t strict then, you [expletive] well are now,” says a recycling adviser who’s worked on the shredding of accessories like AirPods for Apple in recent years. (The compact design of AirPods is notorious for making repairs impossible, never mind the earwax they collect.) The lawsuit appears to have made recyclers even cagier about discussing the already-opaque practice of forced destruction, which is still common among electronics makers. “Apple does it more than the others,” says another consultant involved until 2023 with turning “perfectly reusable” iPhones and iPads into “metal muesli.”
Apple reports the number of devices it refurbishes each year—about 12 million—but it doesn’t disclose how many units it receives and opts to recycle rather than resell. A person familiar with the operation says secondary retailers could sell lots of the lower-quality iPhones that Apple shreds because they aren’t pristine enough for its official “certified refurbished” program. It has continued investing in recycling machines, including Taz, an advanced shredder introduced in 2022 that was designed to better recover metals from audio modules, and the company still publicly markets its flashy Daisy robot, which can now process 29 iPhone models. After years of resisting outside initiatives to make its devices easier to fix, Apple also recently announced support for a California right-to-repair law that goes into effect this July. It will require manufacturers to make repair manuals, parts and tools available at reasonable prices.