Apple's strategic move on storage pricing: Much better for larger capacities

Apple's iOS storage prices just went up due to higher NAND flash costs. But even with that, Apple's iOS storage prices are much better than they were 18 months ago -- and more favorable for larger capacities. We can expect even better pricing in 2018. Here's why.
Written by Robin Harris, Contributor

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When I last mentioned Apple SSD prices, they maxed out at $2 per gigabyte. Apple's prices (per gigabyte) also tended to rise as capacity rose.

For example, under the pricing announced on June 5, 2017 at Apple's Worldwide Developers Conference, the first 192GB increment to the base configuration, costs $0.52 per gigabyte. The next increment, 448GB, costs $0.67 per gigabyte. Then, a couple of weeks ago, Apple quietly raised iPad Pro prices for the 256GB and 512GB models by $50 each.

Read also: Apple iPad Pro Review: A superb tablet waiting for its time to shine

Flat pricing

Now Apple's storage prices are constant across capacity. Under the new pricing that was not announced -- simply inserted into the Apple Store -- a couple of weeks ago, that first 192GB now costs $0.78 per gigabyte. The added 448GB costs also costs $0.78 per gigabyte.

In fact, MacBook Pro flash increments are also $0.78 per gigabyte. So iOS has parity with the Mac in storage pricing as well.

Removing the price disincentive for larger capacities is a smart move for Apple. You want customers to have as useful and personal a product as possible, and it's storage that makes your iPad your iPad.

Apple must be very confident of its flash supply to do this. And a driver for its part of the winning bid for Toshiba's flash business.

What's going on?

NAND flash storage prices have risen dramatically -- ≈50 percent -- over the last year. With the continued growth in smartphone sales, and the move to larger storage capacities in each phone -- new iPhones have gone from 16GB to 64GB -- the demand for flash is immense.

Toshiba's new fab will come on line next year, which will relieve supply constraints. And Apple's march to lower costs should resume.

Don't weep for the vendors. The spot price for MLC flash chips is around $0.11 per gigabyte, so this is a profitable segment for everyone.

The Storage Bits take

Storage has always been a high-margin part of the computer business. Customers focus on other areas, especially applications, and storage is the tax that you pay to get the performance you want.

Apple is no exception. The good news is that Apple is a serious investor in improved flash storage technology, such as its Anobit buy in late 2011, or its large upfront payments that enable vendors to build more capacity.

Apple has been both a driver of and a beneficiary of the NAND flash revolution of the last 10 years. They've dropped prices by over half in the last couple of years, making its products more competitive.

Yet the semiconductor industry has a long history of boom-and-but cycles, which has become a growing concern with the rising cost of fabs. Few companies can afford to invest $8 billion in an unprofitable plant. As one of the world's largest consumers and innovators with flash, Apple can help keep all flash plants humming.

Courteous comments welcome, of course.

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