RBC Capital‘s chip analyst Doug Freedman had an interesting observation about Apple’s gross margins as it relates to the NAND flash memory chips in the iPhone 5.
We were surprised to see Apple continue to charge $100 for each incremental 16GB of NAND, given that AMZN is charging $50 (Kindle Fire HD 7” and Kindle Fire HD 9” LTE) to $70 (Kindle Fire HD 9” WiFi) for each 16GB of NAND. We estimate that Apple is able to procure NAND flash for ~$0.42 per GB (at market prices or better), while reselling for $6.25 per GB (calculated as $100 for each 16GB of step-up). This implies a favorable 93% gross margin on NAND.
Apple has been upcharging an additional 16GB for $100 for quite some time now. Yep, Apple certainly enjoys its healthy margins.