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

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.

iphone xs storage tiers
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.

“Storage is one of their levers to create more revenue and is absolutely the most profitable iPhone feature,” says Wayne Lam, an analyst at researcher IHS Markit Ltd. Adding more isn’t much work for Apple, because it just means swapping a chip, he adds, “whereas when you increase the screen size, you have to completely re-engineer the phone.”

The 78¢-per-gig charge hasn’t budged since last year. Of course, Apple uses contracts to lock in the price of such components as Nand flash, so it may not be benefiting yet from recent price declines. So far, though, storage costs customers more on an iPhone than on, say, a Samsung Note 9. Samsung Electronics Co. charges 65¢ a gig to move from the 128GB Note 9 phone to the 512GB model.

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.

Related Roundup: iPhone XS

Top Rated Comments

levitynyc Avatar
29 months ago
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.
Score: 73 Votes (Like | Disagree)
DevNull0 Avatar
29 months ago
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.
Score: 42 Votes (Like | Disagree)
nwcs Avatar
29 months ago
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.
Score: 28 Votes (Like | Disagree)
Sandstorm Avatar
29 months ago
People want the most Innovative storage possible and 'It's Not Cheap to Do That'

/ Tim "greed is good" Cook
Score: 25 Votes (Like | Disagree)
69Mustang Avatar
29 months ago

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.

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
Score: 11 Votes (Like | Disagree)
D.T. Avatar
29 months ago
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.

¯\_(ツ)_/¯
Score: 10 Votes (Like | Disagree)

Top Stories

apple briefcase

AppleCare Memo Hints at Potential Hardware Announcement Next Tuesday

Thursday December 3, 2020 9:12 am PST by
Following a busy fall season in which Apple hosted three events in as many months, the company may have one more product announcement in store this year. In an internal memo this week, obtained by MacRumors from a reliable source, Apple informed service providers that it has AppleCare-related changes planned for Tuesday, December 8 at approximately 5:30 a.m. Pacific Time. Specifically, Apple ...
apple top apps games 2020

Apple Shares Top 20 Most Downloaded Games and Apps of 2020

Tuesday December 1, 2020 9:38 pm PST by
Alongside picks for the top iPhone, iPad, and Mac apps and games of the year, Apple today shared charts featuring the Top Games of 2020 and the Top Apps of 2020, revealing the most popular free and paid apps and games during the year. Among Us! was the top free game of 2020, followed by Call of Duty: Mobile, Roblox, and Subway Surfers. Ink Inc. Tattoo Drawing was the number four free app,...
homepod mini amazon echo size

$99 Speaker Showdown: HomePod Mini vs. Amazon Echo and Google Nest Audio

Wednesday December 2, 2020 3:12 pm PST by
Apple recently released the HomePod mini, a new $99 version of the original HomePod that's smaller, cuter, and, most importantly, competitively priced. At $99, the HomePod mini can better compete with affordable smart speakers from companies like Google and Amazon. Subscribe to the MacRumors YouTube channel for more videos. The HomePod mini has been praised for its high-quality sound at its...
iphone8guide b

iOS 14.2 Quietly Added FaceTime 1080p Support to iPhone 8 and Later Models

Wednesday December 2, 2020 3:21 am PST by
Back in early November, Apple released iOS 14.2 and announced with it a slew of new features for iPhones, but one thing it didn't mention was the apparent addition of support for 1080p FaceTime calls on iPhone 8 and later devices. The little-known fact was discovered by MacMagazine, which found that Apple quietly updated the specs pages for devices like iPhone XR shortly after the release of ...
16 inch MBP Mini Led

Kuo: Two Redesigned MacBook Pros in 2021 and New MacBook Air in 2022, All With Apple Silicon and Mini-LED Displays

Wednesday December 2, 2020 5:46 am PST by
Apple plans to release two redesigned MacBook Pros in 2021 and a new MacBook Air in 2022, all with mini-LED displays and Apple Silicon chips, according to TFI Securities analyst Ming-Chi Kuo. In a research note to investors, seen by MacRumors, Kuo explained that two new MacBook Pro models equipped with an all-new form factor design are expected to launch in 2021, and a new "affordable"...
iOS 14

Apple Releases Third Betas of iOS 14.3 and iPadOS 14.3 to Developers [Update: Public Beta Available]

Wednesday December 2, 2020 10:04 am PST by
Apple today seeded the third betas of upcoming iOS 14.3 and iPadOS 14.3 updates to developers for testing purposes, two weeks after releasing the second betas and a month after the launch of iOS and iPadOS 14.2. iOS and iPadOS 14.3 can be downloaded through the Apple Developer Center or over the air after the proper developer profile has been installed. The iOS 14.3 update brings the...
best apps of 2020

Wakeout! Named Apple's Best App of 2020, While Zoom Earns the Title for Best iPad App

Tuesday December 1, 2020 9:26 pm PST by
Apple today shared its App Store Best of 2020 winners, highlighting its picks for the top iOS, iPadOS, and macOS apps and games released over the course of the year. Apple's iPhone App of the Year award went to Wakeout!, which is a family friendly exercise and movement app that encourages people to complete easy exercises while at home. Apple's iPad App of the Year was Zoom, which soared in...
wristcam design

$299 'Wristcam' Adds a Pair of Cameras to Your Apple Watch

Thursday December 3, 2020 9:32 am PST by
The Apple Watch has never included a camera, likely due to battery life and space concerns. A new Apple Watch product aims to address that lack by introducing a wrist-worn camera that works with the Apple Watch. The Apple-certified Wristcam attaches to the Apple Watch in the form of a band that adds a rather large camera set to the top of the Apple Watch. It's quite thick and bulky, but can...
iphone 12 5g

Multiple iPhone 12 Users Report Sudden Drops in 5G and LTE Cellular Coverage

Thursday December 3, 2020 1:18 am PST by
Since Apple launched the iPhone 12 in October, an increasing number of users of the new smartphone have been reporting persistent drops in cellular coverage. Multiple reports of dropped 5G and LTE connectivity have appeared on Reddit, on Apple's support forums, and on the MacRumors forums, with many people suffering issues when walking or in transit and some seeing the same problem when...
magsafe duo charger

MagSafe Duo Charger for iPhone 12 and Apple Watch Now Available for Purchase

Tuesday December 1, 2020 4:15 pm PST by
Apple today began selling the MagSafe Duo Charger that was announced alongside the new iPhone 12 models back in October. Priced at $129, the MagSafe Duo offers a MagSafe charging puck for the iPhone 12, 12 Pro, 12 Pro Max, and 12 mini, along with an Apple Watch charger. Though the accessory was announced in October and was listed as coming soon, it was not clear when it would launch. Orders...