What’s behind Apple’s markups for iPhone, iPad storage space?

“While all those new iPhone sales send Apple’ profit forecasts sailing past previous estimates, one big reason isn’t getting much attention: The company charges four times the going rate for extra file-storage space,” Adam Satariano and Ian King report for Businessweek.

“As with previous models, Apple is asking for an additional $100 to double the storage memory on the iPhone 5s and 5c, and $200 to quadruple it to 64 gigabytes on the 5s,” Satariano and King report. “While the cost of smartphone memory has fallen 71 percent in the last four years—to about 60¢ per gigabyte, according to researcher IHS iSuppli—“Apple has never followed the trend in passing along the savings,” says IHS analyst Michael Yang. Apple spokeswoman Natalie Kerris declined to comment… The only way to enhance storage on an iPhone is to buy a new device. That’s a big inconvenience for customers who can’t afford to shell out for a brand-new device. Jessica Boudevin, a writer in Los Angeles with an 8GB iPhone 4, says she’s ‘constantly deleting’ photos, videos, and other files to make room for new ones.”

Satariano and King report, “Apple enjoys a profit margin of about 50 percent on the iPhone, according to Brian Marshall, a senior managing director at researcher ISI Group. Its memory premium extends to the iPad—a 128GB version of the tablet costs $799, $300 more than a 16GB model… Marshall estimates that the mobile memory markup accounted for about one-fourth of Apple’s profit last quarter; Gene Munster of Piper Jaffray puts it at around two-fifths.”

Read more in the full article here.

55 Comments

          1. It is not supply and demand; it is purely demand. Unfortunately, people are stupid enough to overpay for an underdeveloped product, so we will not soon see reasonable pricing on many products.

      1. You right. It’s not supply and demand. It’s perceived value. The value of memory is much higher than the cost of memory. This article is rediculous to incinerate that Apple should lower the price of its devices simply because component cost are lower.

        Jessica now knows the value of additional memory and will be more likely to not go for the entry level (free with contract) model. Maybe a 16GB 5S is in her future.

        1. I agree. The iPhone and iPad use flash memory which is still up there in cost. 60 to 1.00 per GB. as far as laptops, Mac mini’s, iMac’s and Mac Pro’s, I always order them with the minimum amount of RAM and upgrade the memory myself. My primary go to for memory is Other World Computing. They make it easy to pick the right type of chip and have excellent installation video’s for all the different Mac models. I refuse to offer putting memory into the 21.5″ iMac though. You just about need to disassemble the whole damn thing to get to the memory slots. I tell my clients to either opt for the 27″ or get the wanted amount of RAM at time of purchase.

    1. It’s just demand. There are no alternative sources for memory on an iPhone (not that there should be), so Apple has a monopoly. Your can’t have a supply-demand curve with a single supplier. So it’s just demand. You want more memory, they demand more money.

      1. Of course you can have a supply and demand curve. Naturally, that “curve” is a special one, being that of a monopolistic market, but one can still graph that market. As a matter of fact, graphing that market is how the supplier knows what his market will bear, price wise.

        1. At what point in time has Apple ever offered any memory expansion on their mobile devices other than double the base for $100, double again for another $100? Not much of a curve.

          Worse, they’ve gone to soldered-in memory on their other computers, so no options (or competition) there, either. Apple recognizes marginal profitability opportunities when they see them. The path they tread is not supply vs demand, it is cost vs hostility from people who know the cost is pennies and the price is hundreds of dollars.

            1. Memory replacement on the iMac (21.5-inch, Late 2012) and iMac (21.5-inch, Late 2013) is not user-removable and must be done by an Apple Retail Store or Apple Authorized Service Provider. (Source: Apple)

              I was going from memory (so to speak) and clearly confused on this topic. Even the replacements on the 21.5 iMac are not soldered, it’s the glued in display that makes accessing the memory impossible.

    2. Many people would call it price gouging. “Supply and demand” is the phrase preferred by those who have no ethical objection to overcharging just because you can.

  1. You can get a 64GB Micro SD card for $29.
    What I’d give for the extra space… on both my Iphone and Ipad, but Apple is in business to make money.
    I hope they can keep the Mystique up… That is what they are truly selling. The phone couldn’t be a LITTLE bit thinker with a little more battery and a little more Storage? As I’ve personally wanted, the Iphone Pro is needed. Nobody gave a crap when the IPAD retinal came out and was a little thicker than the 2… if there is added benefit.

    1. I’ve never been a fan of phones using the sd card as the main storage due to the slower speeds compared to flash memory on the phone. I do want apple to to a storage bump where 32 is the standard, 64 is the second level and 128 is the third

    1. You mean the discount Apple offers on it’s lower-storage devices?

      Two ways to look at it: they’re over-charging for the larger storage version, or perhaps they’re under-charging for the low-storage version.

      1. LOL! You are joking right? Apple are going to make a loss by under charging on a lower storage device? Which are without a doubt their biggest sellers. Have you no shame?!

  2. Jessica Boudevin needs to find a better job if she can’t come up with the $100 to get a new 5C that’ll double her storage. If she’s that broke, she probably shouldn’t have a smartphone in the first place.

    1. Exactly what I was thinking!
      Why hasn’t she replaced her aging almost 4 year (?) old iPhone with a newer model? Oh- but then she wouldn’t have any fodder to write her article…

    1. Actually that not completely accurate. I see on eBay the 64gig models going for close to if not the same as 32gb models. Example, I was shopping for a iPhone 5 after the 5s announcement and watched a lot of auctions for both models. I even saw a 32gb go for more than a similar condition 64gb.

  3. Greed, pure and simple. They could have started off the iPhone range from 32GB instead of the measly 16GB they’re currently offering. But they prefer milking their compliant customers of every red cent because they can get away with it.

      1. Many aren’t. A friend just switched to an Android S4, because it had a microSD slot. He now has an 80GB phone.

        If Apple isn’t going to provide an SD slot, it might as well increase the base memory included. Whether MOST people will use it or not is beside the point. It is perceived value and would be throwing a [somewhat meager] bone to its customers.

        1. 9 million iPhones sold over the weekend makes the memory arguments Moot.

          The argument may hold water if Apples iPhones didn’t sell, and the demand didn’t exist, let’s not forget about individuals camping out and the desire of purchasing a well made device, that is worth every cent spent on it, and it also keeps it’s value over time so the re-sale value is high even after 2 years.

          Want more proof it doesn’t matter –

          Read the article on the Serge of Samsung Phones being sold when the iPhone 5s was announced, fixed memory in the iPhone, and again it’s a non issue.

          Only a small amount of complainers argue this pointless issue on memory, But the SALES Number’s of Apples Phones Prove Them ALL WRONG.

          Done.

  4. It’s called subscription-based computing.

    Apologists, please feel free to offer rationalizations why Apple would gouge customers in a manner that 30 years ago it specifically rejected. This kind of extortion is exactly what the iconic “1984” Apple advertisement railed against.

    Apple stopped promoting that users enjoy the autonomy of a Mac as the digital hub when it realized that local storage on a Mac could be substituted by server rental fees for recurring monthly profit. iTunes is a fantastic a-la-carte distribution channel. But Apple’s relentless push of “cloud computing” has infected it, and iOS, and even the Mac. It is tasteless to integrate subscription services into the OS of computing devices without the user to be able to delete it. Not just disable it, but truly remove it.

    Why? Because any company or individual with even modest resources can host their own data without Big Brother. For any important work, why would any sane person go back to terminal computing, especially in the highly restrictive manner Apple offers it? Chasing after Google Docs is not a happy future, it is just one more step closer to “1984”.

    The dirty secret of the cloud is that it’s not cost effective for the user, even if you have perfect internet connections at all times and are willing to also pay for the highest bandwidth internet in order to zip your data back and forth to Big Brother.

    1. Umm.. Mike, you do know that iCloud services are optional? I have had an iPhone since 2008, and have not used cloud storage once. This article, and the discussion which follows is about the physical storage on the hardware itself, not about cloud storage.

      1. iCloud is optional, yes, but it is also omnipresent at the OS level.
        Optional features should be implemented at the application level and uninstallable by the end user. iCloud reeks of the now debunked MS claim that Internet Explorer could not be removed from the OS.

        Why are so many Apple users accepting of Apple’s corral while simultaneously maligning the identical strategy pursued by MS?

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