Apple cashes in as flash memory reseller

“Apple Inc. has arguably become the most popular technology company on the planet for its family of tightly-designed, iconic products that stretch from the Mac to its iLine – the iPod, iPhone and iPad,” Dan Gallagher blogs for MarketWatch.

“A note from Bernstein Research on Friday delves into one often-overlooked aspect of Apple’s business model, which is the money that it makes by essentially reselling the flash memory that is a key component in all mobile electronic devices that store and access data,” Gallagher reports. “Specifically, Apple does not sell any stand-alone memory products, such as flash cards. The company’s product strategy is to offer a family of devices at various price points that are identical, save for their memory capacity.”

Gallagher reports, “For example, the cheapest iPad sells for $499 with 16GB of memory, while the same WiFi-only version with 32GB sells for $599 – meaning Apple sells an extra 16GB of memory for $100. For comparison’s sake, a 16GB Flash memory card can be had on for as little as $20.”

Read more in the full article here.

MacDailyNews Take: This reminds us: When it comes to Macs, friends don’t let friends buy RAM from Apple. Thank you for patronizing our sponsors, including those who carry RAM for your Macs.

[Thanks to MacDailyNews Reader “Ellis D.” for the heads up.]


    1. 16GB for an iMac is another $600 plus tax making it $649.50. I got 16GB of brand-name RAM for $100 and no tax and free shipping, and sold the 4GB that came with my new iMac for $25, making the net savings $574.50 or 3.19 hours. It only takes ten minutes to replace. There is no added risk when using brand-name memory.

      As for the price of flash memory in my iPad and iPhone, there’s not much I can do about that so I grin and bear it.

  1. The article was specific about the profit margins from up selling these devices (with non-user upgradeable flash memory installed).

    Please MDN, point me your sponsor that sells memory upgrades for the iPad, iPhone, or iPod Touch.

    1. By the way — if to talk about margins, Apple is only able to sell iPad at such low price as $499 (even cheapest “dumping kings” can not offer competitive hardware for less than $$450-475) only because the line contains $$600-800 models.

      Apple has an absolute rule that gross margin for the line of products should be over 40%. But distributing more profits to pricier models of the line allows Apple to offer really strong price point for entry level models, such as iPad 2 Wi-Fi 16 GB.

  2. My 6 month old 13″ MacBook Pro performs just fine with 4GB of RAM, but I am tempted to future proof with an upgrade from Other World Computing since prices are so low at this time. You never know when some unforeseen calamity will cause prices to skyrocket.

  3. Everyone who’s bought an iPhone or iPad is aware of the price difference associated with adding more memory ($100).

    In October IHS iSuppli provided a bill of materials for the 4S showing that the only difference between the three iPhones is their NAND flash storage costs: $19.20 per 16GB.

    Thus, it is not news that Apple generates a larger profit margin on iPhones with more storage: Another $80.80 from selling a 32GB phone (versus 16GB) and another $61.60 from selling a 64GB phone (versus 32GB).

    The insight offered by another analyst — in a story published yesterday — is that Apple’s profit margins may come under attack if competitors or changing consumer preferences reduce the markup Apple can apply to NAND flash storage. (Apparently that happened with respect to PC hard drives, and PC makers went from being extremely profitable to barely surviving.)

    1. Thomas, Apple just acquired an Israeli firm that will make it possible to increase the R/W speeds of flash, while extending its useful re-record life.

      In the future it won’t be about the amount of memory you have installed (as competitive differentiation) but the speed of the R/W and life expectancy of those chips.

      Apple controls the processor (best available without Intel tax), and in the future will control the memory (best available without OEM tax).

      All other devices will appear much slower, and OEMs will barely make a profit on them.

  4. meaning Apple sells an extra 16GB of memory for $100

    Yeah well, Apple always has gouged customers on the cost of added memory. Nothing new here, sad to say. If We The Geeks could buy an iPad without any memory then add in 64GB ourselves, we would.

  5. I need RAM for my 2011 iMac Intel i7. I got it with 4GBs cause at Apple they told me that the OTHER 8GBs from my 2010 iMac were not compatible. At CompUSA, they gave me conflicting recommendation. At Apple they would not help with that. Finally I installed 4 GB of the older RAM on my machine and is running fairly well, though I think there is a problem. I would like to raise the RAM to 16 GB so I need to buy 12 GB of memory that is for sure compatible with my Mac. Any suggestions?

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