The Myth of iPhone Resale Value February 22, 2015

According to independent and most likely skewed studies in the past, iPhone tends to have higher resale values. However, if you are looking to purchasing, and Keeping your next smart phone, this resale price could be a poor indicator of how much the phone is worth keeping.

The goal of this article is not to participate in the eternal debate between Apple and Android devices, but rather to examine the economics, and life cycle of smart phones.

To save you some reading time, let's cut to the point - an iPhone does not retain its value. A year from now on, your newly purchased phone will become inadequate. In two years, when you dust off the phone and put it in use, you may find it inoperable.

If we find a phone that we are happy with now, why do we demand more of it later on? Preserving the relationship with our phones turns out to be particularly difficult, if at all possible, with the iPhones, for both technical and social economical reasons.

Light Material vs. Durability

Each generation of the iPhone is lighter per unit size. It's nice that we don't have to lift a dumbbell while talking, but this obsession with weight reduction must stop. The aluminum casing on an iPhone 5 is so delicate that it's easily scratched. Apple traded durability for subjectively a better look, and the cost is dear: the iPhone 5 power switch is notoriously unreliable because this tiny piece of soft metal simply can't take much beating. The "bendgate" with iPhone 6 is again rooted from the same material issue. For a phone that lasts, shiny metal may not be the best casing choice.

Non-replaceable Battery

The average life span of a phone battery is 2 years. When iPhone sealed in its battery by design, it has also sealed the expectancy of the phone as a whole.

Picture a diamond ring except that instead of a diamond, it's a piece of steak on the ring. A piece of jewelery is worth keeping because it doesn't deteriorate or depreciate. A piece of steak should be consumed right away because it is perishable. When a battery is infused with a phone, the phone itself becomes a perishable item.

Software Upgrade Cycle

By definition, a lasting phone is a piece of hardware that keeps working. Apple has made it very clear that you cannot truly own a phone through its software upgrade cycle. Each release is optimized for the latest hardware, effectively, and speculatively intentionally making previous devices obsolete. This may not be a bad thing if you want to always stay "ahead of the curve" by possessing the latest and greatest. There are even arguments against Android phones for not always picking up the latest OS.

There is a fundamental difference between an iOS upgrade and an Android upgrade. In both environments, each major OS release brings significant enhancements. For an Android user, these changes are optional. Devices are upgraded by choice. The code execution environment in iOS is far more restrictive. Apple proudly calls this a security feature. As a result, an iPhone app does not have as much control as an Android app. An iOS update often means new access, or, sometimes, new restrictions. One example is the browser app. Every browser app HAS to use iPhone's stock rendering engine. Before iOS 8, only Safari had the faster Nitro JavaScript engine while the other browsers such as Chrome are given access to only the slower engine. In this case, an OS upgrade is much more justified.

Unfortunately an updated iOS often has side effects. Both cell and WiFi handling were destabilized in previous updates. This is equivalent to upgrading the interior of a car, just to cripple the engine and steering.

The Economics of Consumer Electronics

The premise of our analysis is that one may want to keep his phone for a reasonable amount of time. We also measure the value retention of a device by its longevity. The criteria is simple: put the phone away for 3 years; then switch it on; can you still put it to work the same way it was used before?

The mindset of a today's consumer, however, is very different. Why would you want to keep a phone that long? Apple has done a good job making us look at electronics as fashionable items rather than tools. Their software upgrade cycle further ensures that "Out of Fashion" and "Out of Use" mean the same thing. Combined with the cloud storage offering, there is just one less reason to keep your phone.

A good phone is worth keeping if it can always be the same, and be used the same way. An iPhone cannot be the same because of the embedded battery. It cannot be used the same way either because each OS upgrade tells us users that "This changed, Everything, Again".

Then again, it doesn't matter if the phone becomes useless in a year or sooner. After all, that steak ring is a bold fashion statement. Wear it to a party and it'll be a hit!

For a moment let's take fashion out of the equation. What is a phone to a business? It is a communication tool; it is a workhorse. A stable phone, in turn, enables its user, an employee, to communicate and work effectively and consistently. Many organizations prefer the iPhone because of its limited customization options. One worker could pick up the other worker's company iPhone and expect more or less the same user interaction. This consistency, or uniformity rather, lasts a short period of time. It is more important to have one phone perform consistently, and be the same as itself over time.

As a software company that prides itself on making reliable and sustainable systems, we highly recommend you avoid using an iPhone as a business phone. Our software updates offer more feature without demanding more hardware resource. This means you can put all the "obsolete" devices to use. But if these phones are crippled by OS updates or contain dead batteries, that's a whole different story.