Are iPhones the new international currency?

Tom Kaneshige
26 February, 2014
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When Americans jet set around the world, why should they carry cash in their pockets when they can have iPhones in their suitcases? These days gold iPhones are as good as cash, maybe even better, depending on what country you’re in. They also make great gifts for greasing the wheels of overseas business partner relationships.

“For as long as I’ve been travelling, there are certain luxury goods that do well in certain places,” says CEO Kyle Wiens of iFixit, a distributor of spare parts and provider of free repair advice.

“You should be able to take anything from the US, smuggle it in with your luggage and sell for 10 percent over what you paid, because you’re bypassing import duties and taxes,” Wiens says.

Some high demand items, such as the iPhone, can be sold at well over 10 percent of cost. According toBloomberg Businessweek, an iPhone 5s with 16GB that costs US$700 in the US can be resold for US$1196 in Brazil, US$1012 in Greece, US$998 in Italy. A gold iPhone 5s with 32GB that costs US$815 in the US goes for US$1130 in Italy. It’s quite a big markup considering paltry blue-collar wages of locals in these countries.

Buy anything with your iPhone

Americans also trade iPhones for services, such as housekeeping and maybe even SCUBA diving. Wiens, who travels the world researching the flow of material goods, was on a diving trip in Cabo San Lucas, Mexico, when the boat’s captain proposed a trade: sell him iPhones from the US at retail cost in exchange for a few SCUBA trips on Wiens’ next visit.

Wiens does sell a few iPhones at US retail cost to his business partners in China whenever he goes, as a goodwill gesture. It’s not always iPhones, either. On his last trip to South Africa, he was asked to bring Leatherman Wave tools, which sell for around US$100 in the US and US$200 over there.

Apple iPhones are some of the best US luxury items to trade due to the relatively high probability that the iPhone is legit. Apple comes out with a new iPhone only once a year, and so most potential iPhone buyers have read about the latest model and its new features. With lesser-known phones, such as LG phones, people aren’t as familiar with models and update cycles. Knowledgeable buyers are harder to trick, whereas confusion in the marketplace makes knock-offs easier to peddle.

“With iPhones, you also have a shrink-wrapped box that’s pretty much as good as cash, because people can identify and trust the packaging,” Wiens says. “It’s easy to tell that it’s not a counterfeit.”

iPhones are big China, knock-offs abound

Of course, this isn’t to say that knock-offs don’t exist, especially in China, the copycat capital of the world. With any product that has a high black market resale value, copycats will ply their trade with vigour. Last year, China was awash with really bad iPhone knock-offs and even fake Apple stores.

When Apple comes out with a new iPhone, lines form around the corner, and many people in those lines are being paid US$50 to buy two iPhones to be smuggled into China where they’re marked up by several hundred dollars. Such high demand has created a sort of pirates’ haven. Some shopping malls in China have floors of vendors selling fake iPhones, smuggled iPhones, unauthorised electronic parts and repair services.

Nevertheless, iPhones are fast becoming a hot commodity around the world, even in countries such as Cuba, where Raul Castro lifted a prohibition on Cubans having mobile phones in their own names in 2008. Black market iPhone repair services have cropped up, as well as the number of iPhones, according to SFGate.

In an ironic twist, it’s easy to imagine smuggled US iPhones being traded for Cuban cigars.

by Tom Kaneshige, CIO (US)

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