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Apple by the gigabyte: What does $100 buy?

By
Philip Elmer-DeWitt
Philip Elmer-DeWitt
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By
Philip Elmer-DeWitt
Philip Elmer-DeWitt
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February 7, 2008, 7:55 AM ET

Apple’s (AAPL) price charts are a thing of marketing beauty: logical, symmetrical, easy to take in at a glance.

Take, for example, the latest Apple Store chart for the iPod touch:



Pretty, huh?

On second glance, however, there seems to be something wrong here. Why does a $100 bump in price buy you 8 GB of memory in the the first instance, but an extra 16 GB in the second? Look at the new iPhone prices:



Again, $100 for 8 GB of extra memory.

Why does Apple charge $12.50 per gigabyte in all models except the 32 GB iPod touch, where it’s $6.25 per gig?

Simple retail economics, you say. The more units you buy, the less each unit costs.

OK, then answer me this: Why does Apple charge $999 for the 64 GB solid-state drive in the MacBook Air? If you do the math, that’s $15.60 per gig of NAND Flash memory, more than double what Apple charges for the same stuff in the new iPod touch. No doubt Samsung charges Apple more for the new and relatively rare 64 GB form factor, but not that much more.

The RAM pricing anomaly becomes even more surprising when you start asking what that extra $999 buys you.

The answer is not very much, according to an in-depth review that Ars Technica posted yesterday. In side-by-side benchmarks comparing hard-disk-drive (HDD) and solid-state-drive (SSD) models of the MacBook Air, Jacqui Cheng reports that while the SSD booted up 12 seconds faster was a bit quicker in random disk tests, it actually performed worse in sequential disk tests and general writing to the disk. And it got beaten across the board by the MacBook and MacBookPro. See, for example, the application test reproduced below:



For the full Ars Technica “No Spin” review, see here.

Steve Jobs, of course, is a marketing genius. If he charges more for less, it’s probably because he knows his customers and knows that he can get it. And if it turns out he’s wrong, you can bet he’ll change those price charts in a heartbeat.

About the Author
By Philip Elmer-DeWitt
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