Apple profits surge as consumers choose pricier iPhone storage options

Posted:
in iPhone

Amidst plateauing iPhone sales, Apple's enhanced storage upgrade options have emerged as a significant profit driver.

A red iPhone with a dual-camera system resting on a wooden surface, slightly overhanging the edge.
Apple profits surge as consumers choose pricier iPhone storage options



Apple has long leveraged the strategy of encouraging iPhone users to opt for higher storage variants, significantly increasing the device's price. The approach has proved crucial in offsetting the otherwise stagnating revenues from iPhone sales.

Upgraded storage options do come with a higher price tag, ranging from an additional 10% to 50% of the base model's price. The value they offer can be significant, depending on the owner's use case.

RAM and Flash storage are commodities, and Apple has historically done very well buying stock while the price was good. So, the actual cost of these storage components is relatively small compared to the substantial revenue they generate.

As a result, storage upgrades are a pivotal aspect of the company's profitability strategy, according to new research from Consumer Intelligence Research Partners (CIRP).

The proportion of customers opting for increased storage is telling -- 44% of iPhone buyers choose to upgrade their storage capacity instead of sticking with the base model. The trend can be attributed to the increasing demand for larger storage capacities due to the growing size of apps and media files, and the desire to future-proof their devices.

The upgrades can extend up to 1 TB for the high-end iPhone 15 Pro and Pro Max models.

Customers purchasing newer and more premium models, such as those in the iPhone 15 series introduced in September 2023, are more likely to opt for additional storage. Over half of the buyers of these latest models upgrade their storage, compared to less than 40% for the year-old iPhone 14 models and even lower for the iPhone 13 and 12 models.

Bar chart showing percentages of consumer choices for different product models ranging from 28% to 54%.
iPhone storage upgrades for the year ending March 2024



While many businesses focus primarily on top-line sales, Apple's strategy emphasizes the importance of gross margins, which typically enjoy high gross margins.

Apple continues to expand its service business to include these high-margin sales. The additional cost of storage upgrades is significantly lower than the price premium charged, resulting in higher gross margins for Apple.

The shift towards higher storage models is a consumer-driven market shift. Apple's ability to tap into consumer desires to future-proof their devices, amplified by the increasing size of apps and media files and the growing functionality of smartphones.

Despite broader industry challenges, Apple's focused enhancements in its product offerings continue to resonate with users. However, the strategy of encouraging storage upgrades may face challenges in the future, such as the potential for consumers to become more conscious of their spending.



Read on AppleInsider

Comments

  • Reply 1 of 8
    TravisVTravisV Posts: 14member
    I have tried to avoid increasing my storage with Apple for that reason. Their hardware is pricey enough so I back most of my stuff up locally rather than have it stored on Apple servers since as we have seen not all are created equal. Dropbox comes to mind when I think about that, getting hacked twice in two years. I do have stuff on Apple and OneDrive but not stuff I would trust being accessed by Big Brother.
    williamlondonwatto_cobra
  • Reply 2 of 8
    kmareikmarei Posts: 196member
    this is bitter sweet
    higher memory now means more profits now
    but it means these owners will stay with this iphone for a lot longer since they have tons of storage
    so wont be upgrading to a higher capacity anytime soon
    entropysFileMakerFellerwatto_cobra
  • Reply 3 of 8
    entropysentropys Posts: 4,222member
    It is t lost on me that the IPP base price went up AUD$200 for the jump from 128GB to 256GB.
    FileMakerFellerwilliamlondon
  • Reply 4 of 8
    eightzeroeightzero Posts: 3,097member
    I bought more storage on my iPhone so I can load my entire music library I've collected over many years. Paid for itself in not needing to subscribe to Apple Music or iTunes Match.
    FileMakerFellerwatto_cobra
  • Reply 5 of 8
    M68000M68000 Posts: 789member
    If memory serves (pun intended) i seem to remember a recent article about how 128gb on an iphone is a lot of memory and correct for most customers.  ????  And now this article.  Lol.  

    Would love to know sales figures of the 1tb iPhones. But,  we know Apple does not share that information,  top secret stuff.  256gb is probably the sweet spot right now.  
    muthuk_vanalingamwatto_cobraradarthekat
  • Reply 6 of 8

    While many businesses focus primarily on top-line sales, Apple's strategy emphasizes the importance of gross margins, which typically enjoy high gross margins.

    While the grammar here is below my expected standards for a professional publication, the point being made is worth emphasising: by concentrating on improving gross margins, Apple's business has strategic stability - from a financial perspective it doesn't matter to the company exactly what an individual purchaser is spending money on. This diversification of income streams makes Apple resilient to shifts in consumer sentiment.
    watto_cobraradarthekat
  • Reply 7 of 8
    danoxdanox Posts: 3,105member
    The cheapest iPhone has always been a bottom seller for Apple, but the Wall Street/tech analyst people always insist Apple make something cheap why? Because that's all they know/learned in business school.
    watto_cobrajony0
  • Reply 8 of 8
    M68000M68000 Posts: 789member
    danox said:
    The cheapest iPhone has always been a bottom seller for Apple, but the Wall Street/tech analyst people always insist Apple make something cheap why? Because that's all they know/learned in business school.
    Plenty of companies buy the cheapest iphones for staff,  which is a lot of phones.
    watto_cobrawilliamlondon
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