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Apple snaps up 23% of flash in fall, profits from markup

updated 04:50 pm EST, Fri January 6, 2012

Analyst says Apple uses flash to its profit edge

An investor note from Bernstein Research's Toni Sacconaghi has estimated that Apple bought 23 percent of all flash memory made in fall 2011. Going by the estimated storage for each product category and the shipment volumes, he believed that Apple had bought over 1.4 billion gigabytes' worth of NAND flash for storage in the iPad, iPhone, iPod touch, and MacBook Air. In pure parts costs, it may have spent $392 million, he said in Fortune's copy of the note.

The profit Apple got from that storage might have been as important a part of the story, Sacconaghi said. Knowing that Apple charges in increments of $100 more for each jump in capacity on iOS devices, despite the raw costs being significantly less, he estimated that Apple was making over $2.2 billion in profit just on the flash memory, or a 78 percent gross margin. The amount would be a fifth of Apple's entire profit from the fall.

The difference, and Apple's attitude towards building in flash memory, plays a large part in why Apple dominates profits in the cellphone industry, Sacconaghi said. Where Apple always builds in a large amount of storage and doesn't have removable slots, Android partners and others often build in a considerably smaller amount and leave the owner to buy the rest in a memory card.

MicroSD cards are potentially cheaper, but they leave money to be reaped by someone else. As a consequence, even high-end rival smartphones have less reason for a higher profit margin. It was surprising that "no other handset OEM has emulated this strategy," the analyst said.

He added that Apple might even be generating twice as much from its own pricing than all the flash suppliers combined. These companies, such as Samsung and Toshiba, often have much narrower margins.



By Electronista Staff
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Comments

  1. Paul Huang

    Mac Enthusiast

    Joined: Sep 1999

    +7

    no DUH!

    For decades, PCs have been waving the 'we are upgradeable' flag. That flag is now flown on all non-Apple phones.

    Apple just continues to sail on its own course and set the tiers by 'perceived' value. As the price of NAND drops from $5/GB down to 50ยข/GB, the average users have gotten used to the tiers and don't care about the _actual cost_ of the NAND chip anymore.

  1. Arne_Saknussemm

    Forum Regular

    Joined: Apr 2011

    -1

    Apple profits from you - and you are happy?

    "MicroSD cards are potentially cheaper, but they leave money to be reaped by someone else"

    Boy iTards ARE dumb!

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