I'm always a bit bemused when I see cell phones for sale, including on Ozbargain, where the 64GB model is $120 dearer than a 32GB model. How on earth can cell phone makers justify these extravagant charges? One can't help feeling that there would be a market opportunity for some maker to charge a reasonable amount and sweep the market. Maybe the Chinese will?
Why Do Cell Phone Makers Charge So Much for Memory?
Gershom on 26/04/2016 - 12:01
Comments
Agreed. You can buy a modern spec android phone with 64Gb and an SD slot for under $200.
There is no excuse for the costs to get extra memory in closed systems.It's called "what the market will bear". Sellers are out to maximise profit, not adhere to some idea of "fairness". Corollary: if you're not "mainstream" either way expect to pay more per unit value. The remedy is in the standard explanation, competition.
Supply & demand - they do it because they can
One can't help feeling that there would be a market opportunity for some maker to charge a reasonable amount and sweep the market.
There is, it's called microSD cards… Samsung realised that they were a wanted feature when they ditched it in the S6
Yes. Actually they might be brought undone by Android marshmallow, given that it treats sd memory and internal memory exactly the same. It removes the reason for buying anything more that 8 or 16 GB base model as long as there is an SD slot. Works a treat on my Mrs's Moto G 3rd Gen.
Funny, it doesn't seem to be working in a lot of other places.
Bonus: it makes your SD card unable to be replaced in the phone without formatting your internal storage. And your microSD cannot be used in any other devices until you format it as well.
Not very convenient for me.
given that it treats sd memory and internal memory exactly the same.
Keep in mind that built-in memory is much faster than an SD card, so if you did adopt a microSD card for your internal storage, your phone will be slower.
Anandtech benchmarked the internal speed of the Galaxy S7 at 233MB/s read, 61MB/s write. If you plug in a cheap microSD card you'll only get ~80MB/s read and 10-20MB/s write.
How on earth can cell phone makers justify these extravagant charges?
You seem to be under the impression there's a royal commission to be had here, how about don't buy the product instead?
The reason no one is charging a "reasonable" amount and taking over the market like you can see in your imagination is margins are razor thin for phone hardware. There are no "extravagant" charges.
Some people believe 16GB phones make almost no profit or even are sold at a loss in order to create a small margin of profit in 32 and 64GB phones.
margins are razor thin
Are you kidding? Have you seen how much margin Apple are making.
Only apple and Samsung.
see the stats at
http://fortune.com/2016/02/14/apple-mobile-profit-2015/Apple: 91% profit
Samsung: 14% profit
Microsoft: - 3% profit (LOSS)
Blackberry: No profit
HTC, Lenovo and Sony - %1 profit (LOSS)
LG, TCL and Huawei - No profitI don't think there is much margin to be had for a Nexus 5x for example, $300 US dollars for a phone, bill of materials and logistics maybe $125, minus selling fees, comissions and taxes, and actual profit might only be around 50% of the cost of the device.
Consider that a person only replaces their phone every 2 to 2.5 years on average, and you can see why a mere $150 profit per device is not exactly going to be lucrative.
Interestingly Sony does not make money on smartphones (they never did) but instead in Japan they seem to have a big investment in life insurance. Last decade they made around $9 billion on insurance alone.
I don't think there is much margin to be had for a Nexus 5x for example
That's certainly true, but then Google never entered the market for the purpose of making a profit from cell phones. They had a much smarter plan in mind, as evidenced by the sale of Motorola to Lenovo once Google achieved its objective. Samsung seem to be happy with the high value low margin part of the business. Having said that, it's hard to see why margins are low for them when you see the price of S6 and S7s.
Having said that, it's hard to see why margins are low for them when you see the price of S6 and S7s.
Apart from Apple and Samsung, who else has high margins, and are making a large profit from mobile phones?
Also you're forgetting the layers of entities involved in selling a Samsung phone to you, and the declining sales price after a few months.
Profit share on there don't really equal to cost of the components or profit margin on each phone sold.
Profit margin on the phone is different from amount of profit generated because of surplus inventory and overhead costs. So I don't think you can say, MS has a low profit margin on individual phones from their profit, because it may as well be that they didn't sell enough to even cover up the fixed cost.One of the things that Apple is really good at is inventory management, in fact I think Tim Cook's achievement during Steve Jobs time was inventory management.
Another thing is, Samsung produces a lot of models, flagships would have more profit margin. It's hard to see how much profit margin Samsung has on their flagship because Samsung's sales is more mid to low range phones whereas Apple don't have mid to low range phones.
Also, it's kind of not surprising for conglomerates to invest the profit into other industry, Samsung for example has invested a lot of the profit they've made into medical research sector.
… and Huawei - No profit.
No tears before bedtime over Huawei's business strategy, in the overall, or results. Sound and doing nicely:
Deals posted on OzBargain no doubt acknowledged somewhere in KPMG report as key-driver of success in consumer sales and brand awareness :)
And why are Apple users (fanatics) so blind as to pay way too much for inferior tech, each new model iPhone has already been out done by the last model Samsung, Sony and HTC.
Because even with "inferior tech" the iPhone still out performs top-end Android smartphones. The beauty of iPhone is that the software is designed around what the hardware is packing so it can be optimised to the full degree where Android phones come in all shapes and sizes and are not optimized and need to keep on beefing up their tech.
ROTFLMAO
That's what that nice man at the Apple store said, isn't it?
From Apple quarterly reports. Not a razor in sight.
Apple Historical Gross Profit Margin (Quarterly) Data
Data for this Date Range
June 30, 2015 39.68%
March 31, 2015 40.78%
Dec. 31, 2014 39.87%
Sept. 30, 2014 38.01%Are you asking about Apple devices, or "cell phone makers" in general? You're only looking at the outliers with Apple.
I agree the markup is high but there is a misconception that just because you can buy a 64gb MicroSD card for $23 it's just a matter of plugging that into the phone. There's a lot more to it than that.
For one, the memory in the phone is of much higher quality. It needs to sustain higher rates of reads and writes for the life of the phone running 24/7. It is much more akin to a desktop SSD.
Also two memory types means two different products. It's a small difference yes but you still need to account for the R&D, the certification costs and maintaining of stock of two different products in distribution.
Why spoil a perfectly good whinge with some rational thought :)
I don't believe there's much R&D involved in deciding to put 16GB of this memory here and 32GB of the same memory there.
Yeah you're wrong, phones are a complex thing. You need to take into account a host of factors when you introduce a new component into an electronic product.
Is there a demand?
If so which market?
Can the suppliers meet production demands?
How does it affect the other components?
Does it affect battery life?
How does it affect the current market?
Will it impact the sale of future phones???It's not just a matter of having some factory worker in China install memory from the 64gb bucket instead of the 32gb bucket.
It's just a matter of having some factory robot in China install memory from the 64gb bucket instead of the 32gb bucket.
Fixed.
Most of the reasons you listed are marketing driven, not technical.
Nobody is arguing Apple won't make more money charging $200 for an extra 64Gb of storage, but the reason is financial, not some spurious "it's too complex".
amnesia?
Over at xda a member has moded his nexus from 32gb to 64.
Had to purchase a $35 64gb emmc chip but the big problem was to make the hardware seee 64gb rather than 32 and once that was done well he had 64gb or 57 gb after os install.
P.T. Barnum principle: There's a sucker born every minute! ;)
S Jobs principle: "There's a sucker born every second"
This started with iPhones, and has only ever been a way to segment the market.
You're right, the 64GB phone doesn't actually cost more than a few dollars extra to make than the 32GB. But manufacturers hate the fact that rich people can afford to pay more for things, but won't unless they have to. They want to find a way to charge them more by making two versions of their product, and crippling the cheaper one just a touch - but not badly enough to turn away the majority of the market (who can only afford the cheaper price).
It's called "Capturing the Consumer Surplus". See here:
http://www.joelonsoftware.com/articles/CamelsandRubberDuckie…
Apple loser
No problems sticking a 64gb card in my $50 4G android.
Because they can, and it's easy money for them.