Apple's 128GB iPad: A premium product at a premium price

Will customers stomach the price tag of the new 128GB iPad?

A day following my confident prediction that Apple would not release a 128GB iPad 4, Apple announces it .

(Credit: Apple)

Awkward, but sometimes it is fun being wrong because it gives us new things to talk about.

The one part of the announcement that most interested me was the price of this new iPad--$799 for the Wi-Fi version, and a whopping $929 for the Wi-Fi plus cellular version. Apple's system of charging for storage bumps pays off dividends with this latest iPad.

16GB of NAND flash storage costs Apple around $10. Doubling this storage to 32GB increases the NAND costs by $20. NAND storage prices are quite linear (when adding chips as opposed to increasing the density of the storage), but Apple charges an additional $100 for this, which means an extra $80 of additional revenue per sale.

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Apple dishes out 128GB iPad; available early February

The rumors were true. Apple today announced a 128GB version of the fourth-generation iPad, doubling the storage capacity of the previously highest-specification tablet.

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Things get better--for Apple, at least--with the 64GB model. Here, the storage costs increase to $40, but the company charges $200 over the price of the base 16GB model for this storage, which means an additional $160 of revenue compared to the base model.

At current NAND prices, 128GB costs approximately $80, but Apple charges a whopping $300 compared to the base 16GB model, which means an additional $220 in revenue per sale.

Is there a demand for a 128GB iPad? According to Apple , companies are "regularly utilizing large amounts of data such as 3D CAD files, X-rays, film edits, music tracks, project blueprints, training videos, and service manuals" and these users will "all benefit from having a greater choice of storage options for iPad."

The Cupertino, California-based company is clearly hoping that these buyers will pay this stratospheric premium for the extra storage. It remains to be seen whether people will actually pay the price of a decent notebook for a tablet running iOS.

Another question worth pondering: Is Apple trying to compensate for iPad cannibalizing Mac sales by introducing a higher margin tablet into the lineup?