China Real Time ReportToday, 7:00 PM
Apple’s iPhone is typically much more expensive in China than in the U.S. According to a Chinese court, some employees at iPhone assembler Foxconn found a way to illegally profit from that spread.
A court in the central Chinese city Zhengzhou sentenced 14 people – including eight former Foxconn employees – to various sentences for hacking into the database of the Taiwanese electronics assembler to steal digital identity certificates, according to the official Legal Daily newspaper. Those certificates allowed the accused to turn iPhones purchased in the U.S. – totaling about 9,000 handsets in all — into devices that work on Chinese telecom networks, the court found.
Switching phones can be quite profitable, according to the report. The court found the group made more 3 million yuan ($468,750) in less than five months from late 2011 to early 2012, said the report.
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Foxconn confirmed the convictions but didn’t disclose additional details.
The report didn’t specify the date of the verdict or say why three years passed between the arrest of the suspects and the Legal Daily’s account this week. The report said the verdict was reached “recently.” The court didn’t respond to a request for comment, and calls to the local prosecutor weren’t answered.
The iPhone is designed and sold by Apple but made largely in China by hundreds of thousands of Chinese workers at contract manufacturers like Foxconn, leading to the occasional security issue. But the theft of the digital certificates appears to be a new angle on how to profit from the different prices between China and the U.S.
In the U.S., a base unlocked iPhone 6 costs $649, compared with a price of 5,288 yuan (about $825) in China. Chinese duties account for much of that amount, though Apple also charges more for many of its products in China, where they are seen as a status symbol. But buyers in the U.S. can purchase a phone for as little as $199 if they get one subsidized by – and locked to – a U.S. carrier like AT&T. Used phones can cost even less.
According to the report, one of the defendants was a former Foxconn employee in the southern Chinese city Shenzhen. The former employee, surnamed Wu, asked a Foxconn department director who was in on the scam to install a wireless router near both Wu’s rented apartment and an office inside the company’s factory in Zhengzhou in late 2011, according to the report.
With the help of another Foxconn employee surnamed Bo, Wu and others obtained iPhone serial number information and then hacked into the iPhone’s identity certificate server system to make changes. Another employee surnamed Ji then inserted the modified certificate information into the company’s database and activated the mobile phones purchased in the U.S.
Five months later, Foxconn found abnormal activity in its database and reported the incident to the police, the report said.
–Yang Jie, with contributions by Lorraine Luk
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http://blogs.wsj.com/chinarealtime/2015/08/27/jail-for-jailbreaking-foxconn-workers-nabbed-for-iphone-conversions/?mod=WSJBlog
