When it Comes to Apple (AAPL), It's All About the Margins
Bloomberg notes that flash memory costs about 60 center per gigabyte (GB) of storage, down from $2.10 per GB in 2009. Despite the drop, Apple is charging over $4 per GB for increased memory on its iPhone.
The starting price for an iPhone 5S is $199 on two-year contract and includes 16-GB of storage. For 64-GB of storage, consumers will be looking to spend about $399 at the outset.
Apple also doesn't allow customers to swap-out memory cards, meaning the amount they purchase at the start will be the maximum available for the life of the device. Competitors like Motorola, Samsung, LG, and others allow users to upgrade or change memory cards. Online retailers sell a 64-GB memory chip for as little as $50 in some cases.
One IHS analyst noted,
Apple has never followed the trend in passing along the savings...as long as Apple can make people pay, it will stay on this track.
Apple has caught some criticism from pundit who think the company should drop the price of its iPhone to attract more customers. The iPhone 5C, which is the lower-cost version of the iPhone, still runs $700 in China without contract.
Markups don't just stop at memory; Apple sells a charger that costs about $1.50 to make for $40 in its stores. Also, MacBook Pro users can add a Radeon Pro 5870 chip to their device for $449, while a similar device for PCs runs just $200.
But, despite slipped global market share, Apple is still faring well. With margins at 37 percent (compared to 30 percent at Samsung and 18.5 percent for Dell), Apple took in 53 percent of global smartphone profits in Q213. That's with having only 13.5 percent of global smartphone market share.
Apple is up in early trading Wednesday.