Apple has launched an investigation into allegations that Foxconn employees, including managerial staff, have conspired to manufacture iPhone models using defective parts and sell the rip-off units to the black market. An anonymous tipster reportedly called the attention of Apple CEO Tim Cook on the matter.
Cook ordered the company's Business Assurance & Audit team to lead the probe on the fraud, which was exposed thanks to an unnamed whistleblower. BGR said Apple discovered the scheme that is believed to have been in operations for roughly two years and has already amassed an estimated profit of $43 million.
However, Foxconn, Apple's top manufacturing partner, appeared to be downplaying the controversy with the Taiwanese company claiming that the fraud ring is an isolated incident.
Foxconn's Terry Gou has reportedly stated that it would be hard to monitor a massive operation that involves about one million employees. Gou, who recently retired as company chairman, seemed to concede that "unreasonable things may happen to one or two workers."
In a related report, The Daily Mail said the illegal operation was to have been mostly conducted in Zhengzhou, China, where Foxconn's biggest manufacturing facility is located. Workers at the plant supposedly pilfered flawed iPhone parts, already marked for destruction, that was assembled into a completed device.
These units, obviously unauthorized by Apple, then found their way to black markets. Up to 300,000 units were believed to have been sold by the operators, and the knock-off devices were passed off as the cheaper version of the iPhone 8, iPhone 8 Plus, and the iPhone X, the report added.
Citing local reports in Taiwan, WCCFTech said the fraud ring was carried out with a Taiwan-based businessman working closely with active Foxconn workers, some of them identified as occupying high positions in the manufacturing firm.
"A Taiwanese businessman has purportedly worked with a group of management staff at Foxconn's Zhengzhou facility to obtain and assemble flawed iPhone parts, which are then sold under the guise of iPhone products manufactured at the Chinese production base," the report said.
Upon the instigation of Cook, Foxconn has ordered an internal inquiry on the allegations, but the Apple contract has mostly elected to keep its silence on the matter.
The incident is not the first that saw people finding ways to generate profits banking on the enormous popularity of Apple's flagship smartphone. BGR noted of successful attempts to dupe Apple by claiming warranties on fake units that were sourced from China and bought to Apple Stores for repairs and outright replacement, which reportedly cost the tech giant up to a million dollars in losses.
