iPhone Buyers Pay Up for More Storage
Apple’s iPhone business has enjoyed enviable operating margins for many years. One critical factor contributing to its profitability is storage upgrades. Apple charges between $50 and $200 for each incremental increase in storage capacity over a base level. The component cost to Apple is a fraction of that.
Increased reliance on the cloud for storage and streaming (rather than stored) media consumption should lessen consumer demand for increased phone storage. Despite this, iPhone buyers increasingly are paying for upgrades from base storage.
For the past two years, more than half of iPhone buyers upgraded from the base storage level available for a given model (Chart 1). The share of buyers upgrading from base storage has increased significantly in the past five years, from 38% in 2018.