| Hey y'all. Two fraudsters were just sentenced to jail for trying to bilk thousands of new iPhones from Apple's repair specialists. But first... Three things you need to know today: • Meta introduced an AI video generator to rival OpenAI and Google
• Chinese chip stocks gained $13 billion on bets around Beijing stimulus
• Demand for AI servers fueled record revenue for iPhone maker Hon Hai Last week, a US district court judge sentenced Haotian Sun and Pengfei Xue, two Chinese nationals in their mid-30s, to more than four years of prison each for participating in a complicated scheme to defraud Apple Inc. According to prosecutors, Sun, Xue and other conspirators attempted to submit some 6,000 counterfeit iPhones to Apple for repair in hopes they'd get replaced with genuine versions under its warranty coverage. The plot sheds light on the hidden complexities of Apple's repair program. The company has long faced criticism from environmental advocates who argue the device maker has made refurbishment processes arbitrarily difficult and expensive in order to sustain new iPhone sales. At the same time, Apple — which has supported some right-to-repair efforts lately and has said it's investing seriously to reduce its carbon footprint — has had to grapple with all kinds of surprising scams as it considers greener approaches. Sun and Xue's scheme occurred from 2017 to 2019 around Washington, DC. One aspect of it involved buying broken used iPhones in bulk from resellers and then fixing them to exchange with Apple. Apple's products came with a one-year warranty that covered manufacturing defects, such as a faulty battery or camera. What the warranty didn't cover, however, is accidental damage, like if a user cracks an iPhone screen or spills coffee into its mic and speaker. To game the system, Sun and Xue went about substituting wrecked bits with third-party generics. For example, they'd replace a smashed screen with a fresh knockoff display, and take the faulty iPhone to an Apple store or an authorized service provider. There, an employee would look over the dead iPhone and, not realizing non-genuine components had been swapped, would replace it with a brand-new iPhone under warranty, at times on the spot. Court records show that in January 2018 alone, Sun submitted 719 iPhones for repair; 646 of them were replaced, worth $387,600. Apple caught on when specialists who received the returned shipments spotted internal tampering. The company eventually traced the devices back to Sun, Xue and their accomplices. An Apple investigator testified at trial that, when reviewing a questionable iPhone for non-Apple parts, she uses a microscope or magnifying glass to inspect for phony displays, batteries and enclosures. She even studies packaging discrepancies: "I know everything, even down to the font on the stickers and the print on the boxes," she said. A company spokesperson did not get back to me on queries around the case and its repair policies. I spent a lot of time reporting on a similar Apple con earlier this year. Insiders told me Apple's warranty program used to be very generous to protect its brand. During an era when exploding Galaxy phones sparked a reputational crisis for rival Samsung Electronics Co., Apple wanted to keep its customers happy and its circulating devices pristine with replaced (rather than repaired) iPhones. Apple often sent older returned iPhones to recyclers for scrap, wary of contributing to a secondary market that might disrupt revenue from its newer models. Even this operation was vulnerable to theft: Workers at one e-waste vendor were accused of stealing at least 99,975 Apple devices due for destruction, and instead had them fixed and resold to unsuspecting customers overseas. Since then, Apple has more closely scrutinized warranty returns and has been forced to change its recycling and repair approaches, partly due to public pressure and partly due to changing consumer appetites. The secondary smartphone market is exploding as more people are keen on paying less for an upgrade, and Apple has had to adapt. To protect its interests, though, Apple has greatly expanded the use of a controversial practice called "parts pairing," which essentially uses software to link specific components inside the iPhone itself, be they batteries or displays or camera modules, to make sure the device is only embedded with Apple-approved parts. Independent shops claim parts pairing makes their repairs unnecessarily costly and onerous. Then again, the practice also makes repairs much harder to fake.—Austin Carr Royal Philips NV CEO Roy Jakobs took the reins of the century-old Dutch company in October 2022 as it was reeling from one of the biggest product recalls in the history of the medical-technology sector. After cutting jobs and overhauling management, his turnaround program has started to regain customer and investor confidence, helping propel the company's stock more than 40% higher this year. Meta is testing a new "Local" tab on Facebook to raise content for users based on their location. Tencent and Ubisoft's founding Guillemot family are considering options including a potential buyout of the troubled French video game developer. Global investors are hoarding cash in Taiwan in preparation for renewed bets on chipmaking for AI. Nikon's shares surged in Tokyo on Monday after Luxottica announced it bought a significant stake. | 
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