How Much Could an iPhone 4 Recall Cost Apple?

The highly unlikely probability of a recall on all faulty iPhone 4 devices was the talk of everyone tech yesterday. Apple’s stocks fell in reaction to Consumer Reports’ non-recommendation of the iPhone 4, threads on Apple’s forums referencing the article just seemed to vanish, and as the day progressed, more articles discussing a iPhone recall began surfacing.

We all know it’s more than likely not going to happen. Lately, Apple has been on the defense about any sort of iPhone issue, essentially telling customers that the issues are user-produced. Nothing could ever be wrong with Apple’s perfect product, after all. Even analysts are crucially skeptical of a pending recall. Besides, full recalls are typically only triggered by valid safety concerns; bad antenna issues or proximity sensor faults are hardly safety concerns. But what if it really DID happen? What if Apple had to eat its words and pony up the big bucks to re-buff its ever-so-slightly tarnished reputation?

According to Bernstein Research analyst Toni Sacconaghi, a full product recall of the iPhone 4 would cost as much as $250 per phone. Throw in an estimated 6 million units either sold or currently being shipped overseas, and Apple would rack up a bill as high as $1.5 billion.

That, of course, is only if a full recall was issued; the chances of even a partial recall (warranty exchange from defective units) are slim, but not being counted out either.

image courtesy Engadget

Let’s take a look at some possible options or scenarios that could play out for Apple.

Full recall: We now know that at max the full recall would cost $1.5 billion. However, with it only affecting certain units, not everyone would feel a need or desire to send theirs back in just to wait for a replacement. After all, only 25% of users are being affected, according to reports. The real cost would thus likely be much lower than the max, even with a full product recall.

Partial recall: This would be ideal for anyone who fears their iPhone unit is defective due to antenna problems. This style would result in even lower costs than the last scenario just played out, simply because iPhone owners either use a case, hold their iPhone a different way, or just don’t have a recurring problem with their antenna. Sacconaghi mentioned that in-store hardware fixes of the units would cost $75 per phone, or roughly $500 million for Apple.

Free or discounted cases: Since Apple officially endorsed cases as the best way to ensure better antenna signal, it would only be proper for the company to offer some sort of discount or even just throw in a case for the trouble. Apple’s bumpers likely cost the company $1 to make per unit, which would trim a possible iPhone recall down to a $6 million cost at most. But you have to factor in the millions of iPhone users that don’t use a case and don’t want to use a case, antenna problems be darned. What can Apple do in that kind of situation? Would Apple say, “tough luck”?

My impression is that if Apple were to announce some sort of recall, they should go somewhere in the middle without going terribly extreme on either side. It’s not too fun to admit defeat in front of millions of loyal customers that buy every product you make, but it’s also bad to completely shroud yourself in secrecy and go hush-hush about future plans. Going down the middle would help the company save the most face. Not too much, not too little. And either way, too late.

It’s hard to believe that Apple of all companies is faced with this type of dilemma.It’ll be interesting to see how it all plays out over the next couple months.

Should Apple recall the iPhone 4? And if so, what kind of recall would be best?

via AppleInsider

Author: Brad Molen

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