Why Is Apple Killing The 16 GB iPhone?

Posted in iPhone News by admin. Published February 15th, 2015

Why Is Apple Killing The 16 GB iPhone?

With the announcement that Apple is lifting the size limit of application bundles from 2 GB to 4 GB, developers will be eager to ship more multimedia, more graphics, more video, and more content, in their applications (especially game developers). As Apple gives with one hand, it takes away with the other. Anyone buying a handset with even half an eye to the future should be ignoring the 16 GB base models in the iPhone and iPad ranges, and going straight to the 64 GB version as a minimum.

Although Apple’s iOS developers are working to bring down the size of the basic iOS installation size, it still takes up more than a quarter of the storage on a 16 GB iPhone. With the A-list games and key apps able to increase in size over the next year (and they will), along with video content from the iTunes store, HD video recording, slo-mo high-framerate clips, and HDR imagery, the storage on the 16 GB models is looking perilously prehistoric.

Apple, slowly but surely, is killing off the viability of its 16 GB iOS devices. The curious twist to this murder is that the more Apple squeezes 16 GB, the more profitable the company becomes.

By keeping the 16 GB as the lowest priced unit, Apple can maintain a relatively competitive entry price (currently $649 SIM free, or $199 with a US network contract) and advertise this as the starting price, but in effect everyone is forced to consider the 64 GB model because of the limitations of 16 GB. That adds $100 to the ticket price, and the extra memory costs are nowhere close to $100.

Apple’s monster quarter numbers including a rise in both the average price of a handset sold alongside the increase in profit and revenue. If the 16 GB / 64 GB / 128 GB models were broken out, I’ve no doubt that the middle tier sales would be far higher than previous years with a more linear 16 GB / 32 GB / 64 GB split.

The question I come back to is this. In the next round of iPhone launches (presumably the iPhone 6S and iPhone 6S Plus in September 2015), could I see Apple ditching the 16 GB model, and bring the entry-level device in at 32 GB?


Apple iPhone 5c (image: Apple.com)

From a pure user perspective Tim Cook should be bumping up the base model to 32 GB. Lumbering those who opt for the lower tier model with the painful experience of 16 GB should not be in Apple’s customer-focused playbook. Yet the iPhone 5C, initially introduced with a 16 GB unit at the end of 2013, saw an 8 GB unit arrive in 2014 and the 16 GB unit phased out. If you want real pain as a power users, the iPhone 5C is all you need… and it is still on sale..

There is a hard-edged part of me that thinks Apple will retain the 16 GB model precisely because it is painful. Without a little bit of pain at 16 GB, there is no incentive to move up to the next storage level (and boost Apple’s revenue and profits). By creating an experience that is good enough, but has tiny issues, there is just enough grit to suggest that 64 GB is a good idea. You can’t create that grit with a 32 GB iPhone.

Apple is killing the 16 GB iPhone, but not in the marketplace. It is killing it with software advances, improved hardware, and sacrificing it to drive more users higher up the portfolio, boosting its gross revenues and margins with the 64 GB models. Arguably the 16 GB model still ‘works’ but the discomfort and awkwardness of the small storage footprint pushing people higher is more valuable to Apple than moving to a 32 GB model which the vast majority of new users would be happy with.

[Thanks: http://www.forbes.com]

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