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 Forum: iPhone

Popular Stories

iPhone 17 Plus Feature

iPhone 17 Lineup Specs Detail Display Upgrade and New High-End Model

Monday July 22, 2024 4:33 am PDT by
Key details about the overall specifications of the iPhone 17 lineup have been shared by the leaker known as "Ice Universe," clarifying several important aspects of next year's devices. Reports in recent months have converged in agreement that Apple will discontinue the "Plus" iPhone model in 2025 while introducing an all-new iPhone 17 "Slim" model as an even more high-end option sitting...
iPhone SE 4 Vertical Camera Feature

iPhone SE 4 Rumored to Use Same Rear Chassis as iPhone 16

Friday July 19, 2024 7:16 am PDT by
Apple will adopt the same rear chassis manufacturing process for the iPhone SE 4 that it is using for the upcoming standard iPhone 16, claims a new rumor coming out of China. According to the Weibo-based leaker "Fixed Focus Digital," the backplate manufacturing process for the iPhone SE 4 is "exactly the same" as the standard model in Apple's upcoming iPhone 16 lineup, which is expected to...
Apple TV Plus Feature 2 Magenta and Blue

Apple TV+ Curbs Costs After Expensive Projects Fail to Capture Viewers

Monday July 22, 2024 5:11 am PDT by
Apple is scaling back its Hollywood spending after investing over $20 billion in original programming with limited success, Bloomberg reports. This shift comes after the streaming service, which launched in 2019, struggled to capture a significant share of the market, accounting for only 0.2% of TV viewership in the U.S., compared to Netflix's 8%. Despite heavy investment, critical acclaim,...
iPhone 16 Pro Sizes Feature

iPhone 16 Series Is Just Two Months Away: Everything We Know

Monday July 15, 2024 4:44 am PDT by
Apple typically releases its new iPhone series around mid-September, which means we are about two months out from the launch of the iPhone 16. Like the iPhone 15 series, this year's lineup is expected to stick with four models – iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max – although there are plenty of design differences and new features to take into account. To bring ...
iPhone 17 Plus Feature Purple

These 5 Features Will Make the iPhone 17 the Biggest Update in Years

Monday July 22, 2024 4:02 pm PDT by
The upcoming iPhone 16 models that we're expecting to see in September are going to be quite similar to the iPhone 15 models, but rumors suggest that Apple is making big changes in 2025. We've been hearing hints of an all-new device in the iPhone lineup, and it may be the most expensive iPhone Apple has offered to date. New 'Slim' Design Rumors have taken to referring to the new iPhone 17...
iPhone SE 4 Thumb 1

iPhone SE 4 Rumored to Launch Early Next Year With OLED Display, 48MP Camera, and More

Monday July 22, 2024 7:22 am PDT by
The fourth-generation iPhone SE will offer a series of major upgrades over the current model, the leaker known as "Ice Universe" claims. The information was listed in a post on Weibo, which also detailed the specifications of the iPhone 17 lineup. As previously rumored, the fourth-generation iPhone SE is expected to feature Face ID and USB-C, marking a major upgrade from current and previous ...
bsod

Microsoft Blames European Commission for Major Worldwide Outage

Monday July 22, 2024 11:55 am PDT by
Last Friday, a major CrowdStrike outage impacted PCs running Microsoft Windows, causing worldwide issues affecting airlines, retailers, banks, hospitals, rail networks, and more. Computers were stuck in continuous recovery loops, rendering them unusable. The failure was caused by an update to the CrowdStrike Falcon antivirus software that auto-installed on Windows 10 PCs, but Mac and Linux...

Top Rated Comments

levitynyc Avatar
76 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
76 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
76 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
76 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
76 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
76 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)