RBC: Apple iPhone 5’s amazing 93% margin on NAND flash

“RBC Capital‘s chip analyst Doug Freedman this afternoon reflects upon the ‘tear-down’ findings of ifixit.com and chipworks.com pertaining to the iPhone 5, which went on sale three weeks ago (counting pre-orders),” Tiernan Ray reports for Barron’s.

Ray reports, “Freedman offers the following stunning assessment of Apple’s markup on NAND flash memory: ‘We were surprised to see Apple continue to charge $100 for each incremental 16GB of NAND, given that AMZN is charging $50 (Kindle Fire HD 7” and Kindle Fire HD 9” LTE) to $70 (Kindle Fire HD 9” WiFi) for each 16GB of NAND. We estimate that Apple is able to procure NAND flash for ~$0.42 per GB (at market prices or better), while reselling for $6.25 per GB (calculated as $100 for each 16GB of step-up). This implies a favorable 93% gross margin on NAND.'”

Read more in the full article here.

25 Comments

  1. They obviously can’t count. The 32GB is $100 more and has twice the storage, but the 64GB is only $100 more than the 32GB and it ALSO has twice the storage.

    Idiots

    1. I love my iDevices but think Apple could take it a bit easier with the $100 price jumps solely based on twice the storage. If we had 32, 64, and 128 GB devices, I could see $50 and $100 jumps for the 2 larger sizes.

    1. If price gouging is capitalism at it’s best, we better wake up quick!

      Honestly, Apple has been doing this for years, the difference was that in the past, you could buy from Apple with min ram and buy some crucial or wherever for a much better price and upgrade yourself. Same with hard drives. What we used to work around, we are now stuck with, since it is all hard-wired in. It’s lame..

    1. I disagree. Apple always sells quite a lot of “high-end” models, be they Macs or iOS devices, because these tend to have a longer useful life.
      True enough, Apple has always greatly overcharged for additional RAM (which, for Macs was more or less acceptable, because replacing Apple’s basic RAM with 3rd party RAM would leave you with a useless RAM module — for iOS devices the situation is different, because RAM is not user-replaceable).

      IMHO, Apple should use these exhorbitant gains from RAM to subsidize the entry price for iPhones/iPads.

      p.s. prolly@Lordthree: no need to use local dialect on a global discussion board.

  2. Apple isn’t pricing NAND flash at 93% margins. They’re pricing the iPad at $100 increments. The 16GB iPad at $499 has below average margins for Apple, which means the 64GB iPad at $699 has above average margins for Apple. The price differential may seem to be related to the amount of storage, but that’s like the tail wagging the dog. Apple is pricing at reliable and sustainable price points. It just so happens that the amount of storage is the differentiating factor, but it’s not like you can buy one model and swap out the storage, so Apple is not charging 93% margins on flash..

  3. By not increasing base flash storage on the iPhone & iPad models this past upgrade cycle, I thought Apple missed the boat on an easy – and now we can see, cost effective – way to keep up/surpass their competitors, as well as better differentiate their own product line up.

    Think about it: the free iP4 is 8GB only, the $99 iP4S is 16GB only, and the $199 iP5 starts at 32GB and goes up from … oops. No, that would be 16GB, just like the iP4S AND just like most of their competitors. How rockin’ would a 32GB iP5 at $199 have been (not to mention a 64GB and a holy-crap-128GB as well)? I’ll bet that alone would have silenced at least some of the critics who didn’t feel like Apple did enough with the iP5.

    And I think the iPad is in even more need of storage increases than the phone. Not necessarily because of competition – the iPad is surely more dominant against its competitors than the iPhone is – but because of the nature of the device. Video takes up a lot of space, and the iPad begs to be used to watch it (and now even create it, what with the camera upgrade).

    Plus, if there really is going to be an iPad Mini, starting it at 16GB with the ‘Maxi’ beginning at 32GB would again allow for greater price differentiation between the products.

    The only thing that held me back from getting an iP5 was the cost – same amount of storage, same price as last time. I realize the phone itself is an upgrade, but my iP4 still rocks. The only thing I’m jonzing for is more storage for all the apps & pictures & audio recordings. I may just go for a refurb iP4S at 32GB & save a few bucks that way.

    1. honestly the 4S is a perfectly capable phone. In some ways the 5 is a step sideways, most notably the screen size. I just got a 5, and my perfect phone is still a 3.5″ screen. If they could’ve made the 5 with a 3.5″ screen, I would recommend it without hesitation.
      Everyone is dumping their 4/4S on ebay these days, so you should be able to get one for a fairly good price.
      Even with iOS 6, the 4S still flies – no lags, stutters, jumps, etc. You won’t notice a difference in performance compared to a 5 (yes, apps open marginally slower but this isn’t noticed in day to day use unless you have a stopwatch).

    1. I guess you expect them to obtain the memory at cost and install it for free and warehouse it for free and distribute it for free and have their engineers design it for free. It costs money to make things and that includes more than the costs of the components. Some items will have less margins and others can be priced to subsidize those lower margin items. Over all, the margins Apple makes are reasonable for the industry.

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