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

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+.

Read More