The 16GB iPhone 6/Plus models will save Apple $3 billion in 2015

“Apple’s decision to keep the entry-level storage tier at 16GB for the iPhone 6 and 6 Plus, despite doubling the other capacities to 64GB and 128GB, continues to raise eyebrows,” Neil Cybart writes for Above Avalon. “By not doubling the entry-level storage tier to 32GB, I estimate Apple will save $3 billion of profit in 2015.”

I suspect Apple’s bigger concern was the long-term balance between customer’s storages needs and maintaining the iPhone’s aspirational brand,” Cybart writes. “Apple’s near-term motive behind keeping the 16GB capacity option is pretty clear: get people to buy the 64GB option. From Apple’s point of view, consumers would benefit as Apple didn’t raise the price of the middle-tier or upper-tier iPhone storage options, despite doubling storage to 64GB and 128GB, respectively.”

“I suspect the issue is a bit more complicated and involves setting precedence for future iPhone revisions,” Cybart writes. “I estimate that doubling the iPhone’s lowest storage capacity tier from 16GB to 32GB would lower Apple’s profit by $3 billion.

Read more in the full article – recommended – here.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

12 Comments

  1. Save them $3 billion, but then how many devices will be out there over the next 3+ years where people stop buying apps because their phone memory is used up? How do you calculate the lost revenue of that? or people that are cross-shopping with Android/Windows and decide against the iPhone due to the lower memory at that price point? It’s a delicate balance, and I think they made the choice more for the up-sell. I know I would have considered the smallest storage tier had it been 32gb.

  2. They could save another $2 billon by going with 8GB.

    Just because you can save money, does not mean you should do it. It just makes you look like a scrooge. However I believe the motive for going with 16GB was not to save $3 Billion, but to sell more 64GB phones.

    Irony, it seems that it didn’t work out that way. They kept selling more and more 16GB phones, because people want to pay as little as possible for a iPhone 6.

    If they offered a $99 iPhone 6 with 8GB, they would sell even more iPhones. That’s for 2015 though. 🙂

    1. I know more of my friends have opted for the 64gb that previously only brought the 16gb. The reason was they did not see the 32gb (16gb more) worth the $100 more. The 64gb at a $100 more is much more compelling. The 64gb phone has high margin so any shift in sales is a win for Apple.

  3. Keeping a 16Gb, 32Gb or a 8Gb iPhone on the shelfs is pretty ridiculous.. it sounds downright silly when you have iPads with 16Gb. They should downright scrap those models. and cut costs of the iPhones to make it affordable for a larger customer base.

    1. I don’t think it’s that ridiculous. Apple will make out like a bandit when it’s offering those 16GB iPhone 6’s for the $99 contract next year. It’s going to seem like a great bargain for the cheapsters. Not everyone is going to load their smartphones with apps. That 16GB iPhone 6 next year is going to be a great entry point for consumers wanting to use Apple Pay.

      I’m certain Apple plans pricing with a definite purpose. I’m sure they’re building and pricing iPhones with more than just one year in mind. Apple is always passing down it’s current smartphones from year to year and that’s a huge benefit because it doesn’t involve any new production or retooling at the low end. That’s their high-quality and affordable iPhone for a larger customer base. No corners are being cut on quality, just memory capacity.

    2. When you don’t understand something, everything seems ridiculous. Did you know that Apple has something called iCloud? If used properly, you don’t need much onboard memory and can store a bunch of apps on your phone that keep their data in the cloud.

      The iCloud is a new paradigm and seems to take some people longer to figure out than others.

      1. Yeah… try putting apps in the iCloud. Lots of game apps are massive. Also, for the iPad, few pay and extra $130 for cellular (and pay monthly for Data) so iCloud isn’t that useful. When you’re at home, you can always backup photos and whatnot to the cloud.

        Recently, on a Vacation, I took 7 GB of photos/video. Completely filled up a 16GB iPhone. Good thing I had REMOVED ALL photos previous to the trip. You should have to fiddle with the iTunes settings to do that. What makes it worse is that you can’t REMOVE photos if they’re synced via iTunes.

  4. And how much MORE profit would they have made, had they ONLY sold the 128 GB start with?

    There were a lot of people (me included) who postponed buying the phone as 16 GB was the only option. Availability of the 16 was good as the 64 and 128 were in short supply (read: “no supply”).

    I know I gladly would have paid the extra price for a 128 instead of a 64, whereas the 16 was never an option.

  5. The low memory models could be a brilliant move if Apple can create a way for a 8/16 GB owner to “trade up”. Cheap will bring them into the ecosystem, the trade deal will keep them forever. The two deals will end up costing more than if the owner had simply made the correct choice to begin with; however, there is a huge demographic that will spend more in the long run if it appears they are saving at each step of the way. That’s why car dealers always ask “what do you want your payment to be?” rather than “how much will you pay for this car?”

  6. I’m guessing the author assumes a few things: The number of 16GB version manufactured will not be reduced, most if not all 16GB units will be sold and not remain on the shelf reflecting user preference for higher memory units, memory will not become cheaper. For those around me that select iPhones as their smartphone, I know of not one that has ever gone with the lowest memory tier for any version of the iPhone. I suspect the true ‘savings’ Apple will see is if the 16GB version is the only one available at the $99 price point in a year or two.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.