Apple shocked the world a week ago when it revealed that it’s ready to sell you a phone that has a three-year-old design but packs current top-shelf hardware for a fraction of what you expected it to cost. The 16GB iPhone SE is a steal at $399, but there is a fine print attached to this statement. It’s a steal only if you can make 16GB of storage work; the 64GB model costs another $100.
Based on the iPhone SE’s price — and taking into account the fact that Apple already sells 256GB iPad Pro models, and that some rumors say the same storage tier is coming to iPhone — I said a few days ago that Apple might make the iPhone 7 seem even cheaper than predecessor with a simple trick. Rather than selling it in 16/64/128GB versions, Apple could go for a 32/128/256GB or 64/128/256GB storage setup.
At the time, the former proposal made more sense, offering Apple a storage model in line with the iPad Pro. But what if the entry-level iPhone 7 ships with 64GB of memory and costs the same $650 you pay now for a 16GB iPhone 6s?
Would Apple do it? We can’t predict Apple’s decision on this front, but it’s more than clear that 16GB of storage doesn’t cut it anymore for most users. So why does Apple still sell 16GB iPhones? We’ve told you a number of times but now a new report backs us up yet again — Business Insider says that each time you pay $100 more for the 64GB iPhone 6s, Apple makes an extra $88 in profit.
In other words, making that entry-level option unusable for most people encourages upgrades and raises iPhone margins.
HIS Technology analyst Wayne Lam told the site that the 64GB model costs Apple just $12 more than the 16GB model. Apple doesn’t disclose these details to the press, and it always argued in public that build of materials (BOM) estimates posted online are rarely accurate.
Lam said that Apple’s cost could change over the duration of the iPhone’s life as storage prices fluctuate. But if it’s that affordable for Apple to produce 64GB memory modules compared to 16GB ones, then seeing the 64GB iPhone become the cheapest new flagship phone from Apple store might be more than just a wild dream.
So far, rumors covering the unreleased iPhone 7 have not shared details about the phone’s storage. It’s likely that Apple is taking its time to figure out what the best storage mix would be to still make plenty of money. The company has to consider iPhone ASPs and it has to sell as many iPhones as possible in the quarters after launch. That’s why getting the right iPhone storage recipe is crucial for the company, even if that means angering users in the process.