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It is possible to fix a water damaged iPod Touch®, although it can depend on how wet the device got and how long it was submerged. It should not be turned on immediately after the incident in which it was soaked. Generally, the key to repairing a water damaged iTouch is letting it dry out thoroughly before turning it back on.
If you have a water damaged iTouch because it was exposed to rain, chances are good for fixing it. Even a dip in a pool or hot tub does not necessarily mean the iTouch is ruined. The worst-case scenario is an iTouch that has gone through a washing machine cycle — this type of full immersion for a prolonged period of time typically does not bode well for the device.
The first rule of thumb is to leave the iTouch switched off. Do not try to turn it on until it is completely dry, because turning it on can cause the water to short the system out. A good way to dry out a water damaged iTouch is by using natural sunlight or heat lamps, in increments of time no longer than five minutes. It can also be placed in a container with uncooked rice for at least 24 hours. The grains will draw the moisture out and absorb excess water. A riskier method is to open the iTouch by popping apart the side seam using a box cutter or a similar tool. The inside components can then be blotted using a static-free cloth. It should then be left open to dry on its own.
Before attempting to dry the device out, all extras such as cases, chargers, or headphones should be removed. Do not try to dry out a water damaged iTouch by putting it in the oven or using a blow dryer, as these heat sources are too intense. It can take 12 or more hours for the water in the device to evaporate completely. A good test is to shake it lightly to hear if any water is still inside.
Apple® may repair a water damaged iTouch for a fee, but may also reserve the right not to attempt to fix it, if they feel the device is irreparable. Water damage is not covered under the warranty, so this kind of repair will not be free. All Apple® hand-held devices come with a water damage indicator that will tell employees if the piece was wet, so claiming that the iTouch shorted on its own will probably not work.