Apple’s Schiller talks about 16 GB on entry level devices


Via The Verge:

Gruber suggested that Apple's iOS devices should come with more storage capacity at the low end; the entry-level iPhone has included just 16GB ever since the 3GS in 2010, which is becoming increasingly hard to justify in an age of multi-gigabyte app downloads and high-resolution video recording. But Schiller argued that cloud storage is picking up the slack. "The belief is more and more as we use iCloud services for documents and our photos and videos and music," he said, "that perhaps the most price-conscious customers are able to live in an environment where they don't need gobs of local storage because these services are lightening the load."

Yeah, I'm not buying that. My assumption is that this is all about product mix and profit margins. Memory is not remotely as expensive as the upgrade cost between devices. Maybe like 5% of that upgrade cost. Apple could easily eat the $5 or whatever and make the entry model 32 GB instead of 16 GB, but likely that means not as many people would opt to upgrade to the higher end model. That means the $5 additional component cost will actually be much more when factoring in the product mix and the overall hit to profit margins. Essentially the higher end iPhone/iPad models are subsidizing the 16 GB models.

I suspect it's not about how much storage Apple thinks you need, but really the lowest advertised price Apple can do on a model design. I say this because i got a 16 GB iPad for my kids and it's ridiculously inadequate even before adding in any media that could be offloaded to the cloud.

This low-end configuration gets people in the door to either up-sell to a higher configuration or simply sell an iPhone to someone who might otherwise not buy one. In other words, that 16 GB configuration is likely what Apple feels necessary to get enough people to pay an extra $100 for an iPhone. Without that incentive, Apple would either have to reduce costs and therefor features, raise prices and hurt their positions in the market, or eat it and give up a whole bunch of money. That's not to say this is a bad strategy, but just seems silly to say things are this way because 16 GB is reasonable with the cloud.