Apple is Reselling NAND Flash Memory to You at Nearly 10x What It Pays

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Posted January 6, 2012 at 5:54pm by Shalom Levytam

Last quarter Apple bought 23% of the world's NAND flash and it's reselling it to customers at nearly 10 times what it paid, reports Bernstein Research's Toni Sacconaghi.

Apple charges customers $100 to upgrade from a 16GB iPhone 4S to the 32GB model. That memory is purchased by Apple at a heavily discounted price of $0.67 per gigabyte or a total of $10.72 for 16GB. That's a big markup.

FORTUNE reports that Sacconaghi's note to clients is entitled "Apple: The NAND Gravy Train". In the note he wonders why Apple's competitors aren't doing the same thing.

Apple earned an estimated $2.2B+ in operating profits in CQ411 – at 78% gross margins – purely from upselling consumers to products with more NAND storage beyond Apple's base configuration models. Moreover, a majority of these profits came from iPhones yet no other handset OEM has emulated this strategy...

Ironically, Apple earns nearly twice as much from reselling NAND than all the NAND suppliers combined, with NAND resale responsible for 20% of Apple's total operating profits last quarter, at an annual run-rate of $10B+.

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Apple is Reselling NAND Flash Memory to You at Nearly 10x What It Pays

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v_pro - January 7, 2012 at 3:53am

because their competitor used sd card :| like the galaxy s II it used 16gb internal and uk most ppl would buy sd card and put it in their device to make it 32gb :|

bando - January 6, 2012 at 9:42pm

That's why I don't mind screw apple whenever I can. Thank You shttti apple. price for iPhone components: iphone speaker = 160$-300$ iphone back glass =160$-300$ iphone microphone = 160$-300$ iphone button = 160$-300$ and so on... all of this cost penys!!! profit 1500-2500% And if You by mistake open the phone the You are refused the spare part so the You pay 600-900$ for home button!!!!!!!!!!

DigiHead - January 6, 2012 at 7:13pm

So what? Happy to pay anyway! Cos' products are good and working good - it worth every penny!

Hector - January 7, 2012 at 4:01am

Sarcasm tag needed? Or just stupid? I have 50GB on box cloud service for FREE!

DigiHead - January 7, 2012 at 9:57am

You can have dog shit on a street for FREE too! I rather prefer to eat some nice cake, which obviously costs money!

Andrew - January 6, 2012 at 6:56pm

Because apple is in the software business... First and foremost. Then they design the mashine to run the OS. PC, phone, tv... It's the same structure. People pay the Apple tax for a great OS then Apple sells them the only hardware that runs it. That's why no other company does it. They work opposite.. They make hardware to run the same OS as everybody else... Duh

Notch - January 7, 2012 at 8:37pm

Wrong. Apple is hardware company. Always has been. They developed their OS to help sell their hardware. Not the other way around. Read about it, this is by their own admission.