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July 2, 2007

Thanks for the memory: What's it all about, Apple? 'Cause we know it's not the money — right?


What with all the excitement going down about the iPhone it only occurred to me just now that there's something rather fanboy-unfriendly about the pricing structure.

Consider that the 4GB version is $499 and the 8GB costs $599.

Okay, so Apple's charging $100 for an additional 4GB of flash memory.

But even I can find a 4GB flash memory chip by the world's most reputable maker (top) that costs $35 — retail.

8GB retail is $117.

So the difference — again, in retail prices – between 4 and 8 is $82.

Yet Apple's charging $100 for that increment.

But consider — Apple's not paying retail but, rather, getting their chips at a much lower price: certainly no more than half retail, probably closer to 25% of what you and I pay.

So the cost to Apple for those chips is around $9 for 4GB and $30 for 8GB.

Do the math.

Putting an 8GB chip in the iPhone instead of a 4GB costs Apple an extra $21.

If you did the equivalent, sliding in a 4GB SD card (assuming, of course that Apple had put in an SD card slot) it would cost an additional $35 to upgrade to an 8GB iPhone.

Apple's $100 price increment to get the 8GB iPhone results in $80 of free and clear pure profit for Apple — sweet, eh?


No wonder there's no SD card slot on the device.

July 2, 2007 at 10:01 AM | Permalink


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Gross margins for the iPhone = %55

Posted by: Hubert | Jul 3, 2007 12:37:41 PM

If they're paying around $9 for 4GB then I bet they'll just fit two 4GB chips to the 8GB model - even greater savings...

Posted by: Skipweasel | Jul 2, 2007 5:27:48 PM

But people will pay for the upgrade and that's what matters. After all, Apple charges $200 extra just to have a black Macbook vs the white one. A can of spray paint costs only $2... hmmm.

Posted by: chris | Jul 2, 2007 12:47:48 PM

Good catch indeed... Viva el capitalism!!

Posted by: Xof | Jul 2, 2007 11:17:56 AM

Actually, this seems to follow a long Apple tradition. If you look at the cost of memory upgrades to the MacBooks, for example, you can buy the same memory from third-party suppliers for less than half the cost of what Apple charges.

Posted by: Paul Biba | Jul 2, 2007 11:05:19 AM

A TRULY good point.

Looking at the iPod nano: The 2gig version is 149 and the 4gig is 199. The 8gig is 249.

So a 50 buck difference across the board per chunk of flash memory. Of course if the retail diff is 82 and Apple is only charging 50 for it here ... why gouge the iphone at ALL? They know that they'll sell them. Even if they give 17,000 away.

Good catch on the discrepancy.

Posted by: Adam P. Knave | Jul 2, 2007 10:37:21 AM

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