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How Old and Scratched Cellphones Get Turned Into Cash

Ever wonder what happens when you trade in that old iPhone online for a hundred bucks or so? It's a surprisingly human process.
Boxes of used devices await unpacking at a NextWorth processing warehouse.
Boxes of used devices await unpacking at a NextWorth processing warehouse.Courtesy of NextWorth

Thousands of workers crowd warehouses, bent over an unending stream of mobile phones, checking for flaws before sending them on to eager customers. Is it a factory town in China? Nope — just the surprisingly human process that takes place when you send in your old phone for a spot of cash.

Burgeoning international demand and fierce competition in the U.S. mean phone turnover is at an all-time high, and as a result, it has gotten increasingly easy over the last few years to turn a drawer full of old mobiles into a modestly fatter wallet. A smartphone in decent condition can net you anywhere from $50 to $250.

But did you ever wonder what actually happens after you send off that old, cracked iPhone 3G?

NBC News talked with two of the guys who run NextWorth, one of the many trade-in services available to consumers. If you thought phone trade-ins were a niche industry, think again.

"We probably process 100,000 units a week," explained Jeff Trachsel, chief marketing officer for the Billerica, Massachusetts-based company. And it's growing fast: Bernstein Research recently estimated the total trade-in market could top 250 million units per year by 2018 — quadruple the current amount.

"There are big warehouses, I don't know how many square feet, but they're massive," he continued. "And there are just huge lines of inspectors."

A warehouse worker at her station, checking a phone's condition and entering it into the computer.Courtesy of NextWorth

Why so many workers? Automatic processes simply can't be trusted. A person can quickly and reliably go down a checklist for every phone, seeing whether it powers on by hitting the button, examining all sides for marks or flaws. But it's not a subjective process: They must check the lengths of scratches and the exact location of cracks, and all that data gets collated by the system.

That means a lot of manpower is required even for an average 100,000-device week — and not all weeks are average. An iPhone launch, for instance, can increase trade-in volume by 10 times as people who have been holding out all send in their old gear at once.

It's a very 21st-century situation: Instead of grabbing a shift waiting tables at a local cafe or doing odd jobs, people looking for a bit of part-time work might put in a few weeks eyeballing old iPhones. And in case you were wondering, all this processing is done within the U.S., somewhere in Kentucky or Texas, though NextWorth declined to get any more specific than that.

So once the phone has made it through the gauntlet of inspectors, where does it go?

Charlie Gallo, vice president of sales and operations at NextWorth, explained how no device is wasted or just tossed in the dumpster.

If a device is in good working shape, it joins others in its category: like-new iPhone, used-looking budget Android, corporate Blackberry. NextWorth and the others have dozens of groups and designations.

Dozens of phones await inspection at one worker's station, while some charge so they can be tested for power problems and display flaws.Courtesy of NextWorth

If it has fixable problems — a cracked screen, for instance, or scratched backplate — it can be remedied. Then they're bundled up and sold, not one by one, but in hundreds and thousands to retailers and carriers all over the world.

"A lot of what we do is sell wholesale, and that generally goes overseas," said Gallo. "The less developed the country, the older models they'll take. Africa will take 3G iPhones right now, and China's taking everything. The international market seems almost unlimited."

So rest assured: Your old phone, assuming it more or less works, will probably make someone happy thousands of miles away.

Of course, some phones are simply too broken, or too old, to warrant repair or sale. These go to recyclers — but don't worry, they're not just dropped into a dumpster.

"Anything any recycling company picks up from us, they have to give us a certificate of destruction," said Gallo. After all, you don't get far these days if customers find out your company is sending tons of old phones to the likes of Bangladeshi e-waste dumps. Besides, there are valuable materials and components in there that can be salvaged and resold in bulk.

The trade-in business is a big one, all right, but when it comes to high tech, it's one of the most grounded. Whether you're an early adopter turning in last year's gear, a kid in Uruguay getting his first smartphone, or just someone looking to make rent with some part-time work, there's a fair chance you'll be crossing paths with one of these companies.