Apple purchases the NAND Flash memory used in iPhone devices at highly discounted rates from NAND suppliers. And the rate at which Apple sells it to iPhone users, when they want to upgrade from default memory size to a 32-GB model, is ten times the price at which Apple originally buys it. This brings in hefty profits for Apple merely from reselling the NAND flash memory in iPhone devices.
According to a latest report released by Bernstein Research, Apple purchases the NAN flash at a rate of about $0.67 per GB. This is insanely cheap, compared to the price at which Apple sells the memory to iPhone users: $100 for a $16 GB upgrade!! This pretty much means that Apple, by merely upgrading iPhone users’ devices from the default 16-GB model to 32-GB model makes up to ten times on just one component of the device, the NAND flash memory.
As a result, Apple has been able to earn about $2.2 billion as profits just by upgrading the iPhone devices from a low-memory model to a high-memory model. And this profit is just that of the fourth quarter of 2011. The interesting part is that NAND suppliers, who actually manufacture NAND Flash memory, earn much less than Apple by selling the memory. Apple earns about twice the profits, by selling the memory, than the profits of all NAND suppliers combined.
The research further expresses surprise that so far, no other smartphone vendor has tried cashing on this opportunity. Google’s Android phones come with a default 32GB mostly and have the additional option of adding an SD card to extend memory. This is definitely very convenient and affordable for users but at the same time, Samsung loses a honey-pot in terms of profits. From a consumer perspective, Google’s model is definitely lot better since the profit margins of Apple on NAND Flash memory do not at all seem fair.
Image courtesy Brett Jordan.