iPhone Storage is 'Absolutely the Most Profitable iPhone Feature' says Analyst

Discussion in 'MacRumors.com News Discussion' started by MacRumors, Sep 24, 2018.

  1. MacRumors macrumors bot


    Apr 12, 2001

    A new report out this morning by Bloomberg's Mark Gurman and Ian King takes a look into Apple's pricing strategy for the storage capacities on the iPhone XS and iPhone XS Max. Specifically, Bloomberg says that the biggest upsell for the iPhone XS and XS Max is the new 512GB storage option, which will help Apple make $241 more per iPhone than the 64GB option.


    512GB is the highest storage capacity that Apple has yet to release on an iPhone, and the company charges customers a lot more for NAND storage chips than it pays suppliers. IHS Markit analyst Wayne Lam explains that storage costs Apple about 25 cents per gigabyte, and the company charges customers about 78 cents per gigabyte. Because of this, Lam says that storage "is absolutely the most profitable iPhone feature."

    In research compiled by Bloomberg, the 64GB iPhone XS cost Apple $23.68 for the NAND storage specifically, the 256GB cost $66.24, and the 512GB cost $132.48. In terms of revenue, the 512GB storage option is estimated to make Apple $241 more per iPhone than the 64GB tier, an increase from $107 between the highest and lowest storage tiers in last year's iPhone X.

    According to data from InSpectrum Tech, the market price of NAND flash memory is half of what it was a year ago, but Apple's storage tiers for the iPhone have not reflected these savings.
    With more storage, users can save more photos, videos, documents, music, movies, podcasts, books, and more on their iPhones, without having to worry about deleting old items for more space. Of course, Apple also offers iCloud storage at $0.99/month for 50GB, $2.99/month for 200GB, and $9.99/month for 2TB. This means that if a 512GB iPhone XS or XS Max user wants to back up most of the content on their device, they will need to opt for the $9.99/month option.

    In terms of the prices for these new iPhones, which begin at $750 for the not-yet-released iPhone XR and increase to $1,449 for the 512GB iPhone XS Max, Apple CEO Tim Cook has said that the company is aiming to "serve everyone." In an interview with Nikkei, he explained that "if you provide a lot of innovation and a lot of value, there is a segment of people who are willing to pay for it," referring to the steeper prices of this year's iPhone XS and XS Max.

    Article Link: iPhone Storage is 'Absolutely the Most Profitable iPhone Feature' says Analyst
  2. nwcs macrumors 68000


    Sep 21, 2009
    From the desk of the “None of us are surprised by this news” department... Margins are put into lots of different components and storage space is the easiest place to stick in a higher margin.
  3. surf2snow1 macrumors regular

    Feb 26, 2008
    Agreed. Spend a couple bucks more, add $100 to the price. No surprise here.
  4. levitynyc, Sep 24, 2018
    Last edited: Sep 24, 2018

    levitynyc macrumors 65816

    Aug 19, 2006
    They should start at 128GB, but there’s a ton of profit in charging an extra $150 for the 256GB model.

    64GB in a $1000 device is embarrassing.
  5. FFR macrumors 601


    Nov 4, 2007
    Apple is the only company using nvme based storage on a mobile phone.

    It is going to be more expensive then everyone else using ufs.

    Not really surprising news.
  6. Sandstorm macrumors 6502a


    Sep 27, 2011
    Riga, Latvia
    People want the most Innovative storage possible and 'It's Not Cheap to Do That'

    / Tim "greed is good" Cook
  7. joueboy macrumors 68000

    Jul 3, 2008
  8. DevNull0 macrumors 68020

    Jan 6, 2015
    Well this means we can give up on ever getting an SD slot.

    It truly amazes me there are so many people here who will brag about how great Apple is *because of* their high profits, when the reality is other companies simply aren't as eager to gimp their products in pursuit of the short term bottom line.

    Timmy's Apple simply can't comprehend what came so naturally to Jobs, that long term customer loyalty trumps short term price gouging. Apple truly is the new Microsoft and it's only a matter of time before someone comes along and disrupts them.
  9. Rogifan macrumors Core


    Nov 14, 2011
    Everyone knows Apple makes a killing off of storage pricing. Was Mark Gurman born yesterday?
  10. G5isAlive macrumors 6502a

    Aug 28, 2003
    cue righteous indignation outcries of "price gorging." I know I am shocked Apple wants to make a profit. Who knew?
  11. nottooshabby macrumors 6502

    Jul 12, 2008
    It's an extra $150 for the 256GB model. The $700 off deals were looking tempting till I realized I have more than 64GB in use on my 128GB iPhone 7, so moving up to 256GB would add $150x2 to the price.
  12. D.T. macrumors G3


    Sep 15, 2011
    Vilano Beach, FL
    I know there will be decries against the evil corporate entity of Apple, but at the end of the day, if I choose to spend my money with them, and get the results I desire - i.e., a device with a terrific ownership experience, solid support, where I'm able to conduct business remotely, capture life with my beautiful family, get educated, be entertained, enjoy communicating, <insert_various_smartphone_features> - I don't care about their profit margin.

  13. tridley68 macrumors 6502a


    Aug 28, 2014
    Looking forward to when they finally release a 1 tera bite I phone.
  14. thisisnotmyname macrumors 68000


    Oct 22, 2014
    known but velocity indeterminate
    It seems like there's a math error here.
  15. nwcs macrumors 68000


    Sep 21, 2009
    That was obvious since the iPhone 3GS.
  16. StellarVixen macrumors 68000


    Mar 1, 2018
    NAND prices are falling, and Apple prices the storage for its devices more than ever.

    Yeah, make it rain.
  17. 69Mustang macrumors 604


    Jan 7, 2014
    In between a rock and a hard place
    No this isn't surprising news. But not for the reason you're alluding to here. The type of storage Apple uses has nothing to do with the topic. This story is about the profit increase on storage relative to last year. $134 vs $107. It compares apples to apples... or Apple to Apple.:D
  18. G5isAlive macrumors 6502a

    Aug 28, 2003
    So many replies. An SD slot was NEVER in the future for iPhones. Wasn't in the past when there were less concerns about 'water proofing' why would anyone think it would be in the future?

    As for Saint Steve, many forget just how expensive the original 128 K Mac was and virtually every one of his Macs that followed... or the outcry of how expensive the original iPod was, or heck the iPhone even. No... Saint Steve's motto was 'build it and they will pay." Tim is simply following in the tradition, though arguably the products are not as revolutionary. People don't know Microsoft if they think Apple is the new Microsoft. Remember the Zoom?
  19. DevNull0 macrumors 68020

    Jan 6, 2015
    I'd actually be willing to pay for iCloud of Apple didn't gimp that into useless crap as well. For one thing, why is there no way to prevent it from using certain connections to sync? At job sites, my only internet source is my iPhone which gets 5 gig/month of data and overage fees are $20/gig. If some major sync happens on that connection it could cost $500 for a minor sync in a few minutes.

    And also, why can I only use it to back up areas of my macbook, and allow it to choose to auto-delete files when I exceed the capacity of my macbook? That's completely useless. If I could have a cloud folder accessible on all my devices that simply lived in the cloud and didn't auto-delete local copies of anything, that would be fantastic.
  20. Razeus macrumors 603

    Jul 11, 2008
    I don't mind. I'm going to get the 512GB BUT stop paying for iCloud storage. So it all works out.

    Frankly, though, 128GB should be standard minimum.
  21. dalidrama macrumors newbie

    Jun 16, 2010
    It's the hardware version of video game DLC. Want an iPhone for only $1,000? Oh right, it comes with only 64GB and youll need to spend more money to get that minimum storage you need. Same with their desktops. Want a computer for cheap? Oh right, it comes with 8GB ram. Oh, and you can't insert upgrades by yourself anymore and need to pay us an additional $400 to get it up to snuff.
  22. Blackstick macrumors 6502a


    Aug 11, 2014
    Sunny South Florida
    Since iCloud handles my photos/video with optimize storage, the 64GB iPhone X has been plenty of storage for my needs. If I took a lot of 4K video or wanted 50 high-end games at a time, I might feel differently.
  23. loveandhavefun macrumors member


    Mar 7, 2014
    This is where competitors compete well with Apple. Stick it to them by offering 512GB and microSD support. These storage tiers are Apples life support.
  24. Blackstick macrumors 6502a


    Aug 11, 2014
    Sunny South Florida
    If you ever thought an SD slot was in consideration, you don't understand their iPhone priorities... not saying I agree it should be missing, but they were never going to add this any more than they'd add a removable battery to iPhones.
  25. DevNull0 macrumors 68020

    Jan 6, 2015
    I was actually around to buy and use computers when the original Mac came out. Compared to the rest of the market at the time, the price was really not that out of line even compared to non-Apple solutions. People don't get just how expensive computers used to be. My first Hard Drive controller was $600, and it was a full length card completely covered with chips. The 20 megabyte RLL hard drive I attached to it was $900. So what exactly to you mean by many forget how expensive it was, I remember those days well.

    And actually I hated the the clunky GUI of the mac so much that after my Apple IIe, my next computer was a PC compatible. I didn't buy my first Mac until a g3 wallstreet around 1999. But the Apple tax was never really more than about 30% compared to a comparable non-Apple computer.

    Now for an nice 15" laptop with 16 gig of ram and decent storage, the Apple tax is around 400%.

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