The tablet memory mark-up scandal

by , Deputy Computing Editor Tablets 20/11/2013
True cost of tablet storage

It costs tablet manufacturers such as Apple less than £6 to add an extra 16GB of tablet memory. But they’ll charge you as much as £80 for the privilege.

Which? research has uncovered outrageous pricing mark-ups in the tablet industry. If you buy a tablet with extra space for storing your apps and files, you could pay up to £80 for a piece of extra storage that costs manufacturers less than £6 at market prices.

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The true cost of tablet memory

There can be huge differences between tablet manufacturers in what they choose to charge customers for extra storage space. If you step up from a 16GB model to a 32GB model, the difference can be anything from £40 to £80:

The charges for extra tablet memory

Most tablet manufacturers don’t produce their own Flash storage. Instead, they buy it from third-party component manufacturers. Although individual deals between suppliers and manufacturers remain secret, Flash memory is a traded commodity, and prices are tracked by market watchers such as DRAMeXchange.

According to market prices of Flash memory tracked by DRAMeXchange from August to October this year, the memory used in tablets costs on average £5.95 for a block of 16GB of storage. For large companies buying in bulk, the prices can be even lower. Apple uses a different Flash memory (MLC) to its rivals, and this traded at an average price of £5.85 for 16GB in October.

Yet despite these paltry market costs, Apple charges its customers £80 more for its 32GB iPad than for its 16GB model. That’s a profitable mark-up of at least 1,267%, based on the market price of £5.85.

Apple charges a premium that’s far above what most of its rivals add on for an extra 16GB of storage space. Amazon, for example, charges £40 more for a 32GB Kindle Fire HDX 8.9, compared to the 16GB model. Google adds a sizeable £70 if you opt for a 32GB Nexus 10 rather than a 16GB model.

Insider verdict: ‘scandalous’

These shocking figures are backed up by industry insiders who buy blocks of storage from the same supply chains used by tablet manufacturers.

Chillbast is a UK-based computer manufacturer specialising in high-end machines. It buys its Flash memory from some of the same suppliers who make the Flash storage components found in tablets. ‘16GB of Flash memory is mind-numbingly cheap now,’ says Chillblast’s Ben Miles. ‘As a general rule, for manufacturers like ourselves, Flash costs less than 40p per GB, so for companies to charge so much for an extra 16GB seems scandalous.’

And it seems there are few additional manufacturing overheads created by the addition of extra storage. ‘The difference in cost between manufacturing a product with 16GB and 32GB of memory would probably equate to less than $10,’ says Miles.

How to beat the tablet memory mark-up

Although tablet storage may be limited, there are alternative ways of boosting your storage space without paying for a pricier model. You can keep your digital files safe and accessible using cloud storage service such as Dropbox, Google Drive, SkyDrive or iTunes Match.

Some tablets have a card slot to let you insert an SD or microSD card. These can provide up to 64GB of additional storage for around £35 – much cheaper than buying extra internal storage. Most tablets won’t let you store apps on a memory card, but extra storage is hugely useful for music, videos and photos.

Tablets that let you insert a memory card include the Samsung Galaxy Tab 3, Microsoft Surface RT and Sony Xperia Tablet Z.

More on this…

32 comments

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Storage guy

You mean storage, not memory?

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st0815

You are using this term incorrectly. “Flash memory” is what the manufacturers of these chips call it, and that’s what they have always done. The terminology which has developed on xda-developers and similar sites is absurd. Similarly “ROM” is “read only memory” which is a real thing – it’s not a suitable name for a flash image.

It’s one thing if you want to cling to this idiocy, it’s another if you criticize people simply for not following you in your mistakes.

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SraNJ

You say storage, I say memory. Does it matter?

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Storage guy

What o you call memory then, storage?

Storage =/ memory.

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SraNJ

Many people use memory to mean storage. Get over yourself.

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MemoryMan

Learn to not attack those who criticize. Nobody calls storage memory, they are not interchangeable terms.

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Alex

Plenty of people call storage memory – the average consumer wants to know “how much memory does it have?” when in reality they mean storage. I dislike the conflation of the two terms just as much as you, but unfortunately you’re swimming against the tide if you think there’s any hope of getting people to use the right words.

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Leelad

RAM?

“Which” is for joe public is it not? Despite you and i have to admit I taking an elitist stance on what means what time offering IT support has taught me that even daft users can be made to understand if you spend time listening.

Modem/hard disk/box = PC case to some

What ever the masses are happy with

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Maurice

Plenty of people call a PC chassis a “hard drive” as well.
That does not make it seem any less ignorant

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roo

pastrami

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Mike

Problem is, cloud services are a pain for small files in terms of speed, plus extra charges in terms of battery and data usage may apply.

SD-cards are cheaper and rather slow in comparison to on-board storage, plus at least Google and Apple don’t use them to force you on the cloud.

Still, yes, extra storage is way to expansive, I’m glad Oppo “only” charged 30€ (25GBP) difference for 16->32gb.

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Jeremiah Jackson

Wouldn’t it be more useful to compare the cost of a single 32gb module v a single 16gb module? I imagine that for space reasons, they stick a 32gb module in place of a 16gb one, they don’t put 2x16gb modules into a 32gb tablet.

Is is the same cost? it could be more than £5.95… or even less!

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Conor

“According to market prices of Flash memory tracked by DRAMeXchange from August to October this year, the memory used in tablets costs on average £5.95 for a block of 16GB of storage”

Please tell me where I can go buy a 16GB memory stick for £5.95.

Quite simply you can’t.

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st0815

They didn’t talk about memory sticks, so why should they find you one for £5.95?
A memory stick contains a mechanical USB connector, a USB controller chip, some capacitors, a small piece of PCB and a case in addition to the flash memory chip. And then you need to add assembly, packaging, and marketing costs before you get to the consumer price.

But feel free to google for the “iBoutique 32GB” which sells for £7.99. Or look on Amazon for the “Integral 16GB Pastel Sky USB Flash Drive” for £6.49.

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rana

Or, you could realize that price and cost do not have to be tightly connected. Price should be set by what generates the most economic profit for the company. And If they can gain the more profit for their shareholders, companies should price the “benefit” of additional memory as high as possible.

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Rob

The 2 products are different and the company is pricing them at what the market can stand.
Having a low cost, low profit option is good for PR and adverts.

This type of pricing is common for many products -eg cars, TVs.

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Levi

Sure, but this only works if we the consumers consent to being abused. I don’t care if Apple maximizes their profits.

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Wurzel

Really it’s all about being savvy and getting the best deal. I bought a Sony Xperia Tablet Z because it had an SD card slot. Market forces will determine what they can (get away with) charge and I guess we can only really complain where there appears to be collusion in pricing.

I don’t buy Apple. Full stop. Because of the way the company restricts what you can buy and where, and what you can do with it (where you can buy apps, how they are restricted, how they are censored, what cut Apple takes). They treat their customers with contempt as far as I can see. But most of all, the company is structured to avoid paying tax anywhere in the world and that’s plain immoral.

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chris

£559 for the iPad Air 64GB. £639 for the 128GB version, wow. Now, ever since you have reviewed iPads and iPhones you have always said they are the best. I guess your new campaign means they aren’t if you think customers are being exploited?

There are ways to beat them at their own game. Samsung offer 50GB of Dropbox storage and if you buy the Tab 3 16GB at £279 you can up that to 32GB for £299 with a Micro SD card. SanDisk are the better ones. That is £100 cheaper than the iPad Air 16GB. To move that to 64GB a Micro SD card will set you back £33 or there about which is £327 cheaper than the 64GB iPad Air.

I think that in terms of ripping you off Apple are ahead of the game, I don’t care if you think they are the best, the best tablet is the one that suits your needs, having Apple on the back does not suit anyones needs.

Me, I have a Sony Xperia tablet Z. I opted for the 16GB version and have read you could put a 64GB SD card in but I’m more than happy with the 32GB card plus what’s on board.

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James

A couple of points on Apple (which I’m most familiar with). First, you are only looking at the 16-32GB upgrade. They charge the same fixed increment on 32-64 and 64-128.This should give a clue for what is going on here.

Apple has a couple of goals. For the consumer they want it to be easy to make purchase decisions. By not varying the price for upgrading to each category, the decision becomes easier for most customers. What can you afford for the convenience of more storage space.

The second thing is probably more important to a successful business–profit margins. Apple is looking at profit margins across the whole product line not for each tier. Clearly anyone buying a 16GB or 128GB iPad is getting the best deal and those buying a 32GB are getting the worst of it. I’m betting that the 32GB iPad is the most popular and so it has the most influence on the profit margin for the platform. In essence, buyers of the 32GB iPad are subsidizing the 16GB version.

As long as customers find the 32GB iPad desirable at the list price, this will continue.

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Grasbak

It’s easy to turn it round to make a good news story. Apple charge £479 for the 32gb version so by your logic the 16gb should cost just £6 less. But, wow, generous Apple charge a whopping £80 less! Bargain ;). Clearly I don’t totally agree with that, but I think you simplify the issue to make a good headline.

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george kenvoas

It’s just the standard marketing practice of price sensitivity.

Marginal features cost a lot more. It subsidizes the lower priced products.

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Monulie

Apple use, like many businesses these days, the McDonald’s pricing illusion. Price a lower spec item at an extortionate price, then a slightly higher spec item similar to the ‘cheaper’ one at not much more percentage wise from the lower extortionate product … result is people by the higher spec item unconscious of the margin gap paid on the lower spec item. For example, a cup of medium sized coffee (small is now not available!) at say £2.50 – what cost to the supplier, very little (water, small amount of coffee, bit of milk and a paper cup) … probably about 30 p in terms of materials used – you pay a huge margin to McDonald’s of say £2.10. Then consider the ‘large’ cup of coffee, very little extra materials costs (about 5 p), at say 30p more … result is a whopping c£2.45 margin.

The illusion is that you think you are getting more for the larger size and you miss the huge £2.10 margin on the smaller product.

If you could only buy one size of coffee at £2.50 from McDonald’s would you think twice about buying when you are not drawn to the illusion you are getting more in the larger product at very little extra cost.

Same for Apples …

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Rob

Agree with George – just like in the car industry.

Why do Which have a parallel conversation going on on this topic in “Which Conversations”

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Jim

Apples pricing is surely worse as except for cloud you have no other options. They’ve got you locked in and there’s no option but pay. Pay once for a bigger flash device or pay annually for more cloud storage. £28.00/year for 20GB (in addition to the free 5GB).

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Alex

Everything electronic is hideously more expensive than it should be here..

PS4 in the US is equal to £250, where it is £350 here.. Everything is about 40% more expensive to begin with in the UK

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John S

Guys, really sorry to say, but you are in desperate need of a lesson in electronics. What you wrote is entirely wrong and based on false assumptions.

The prices for Flash chips at DRAMeXchange are quoted in Gigabits, not Gigabytes. 2Gx8 is a 16 GigaBIT (2GB) chip.

So to get 16 GigaBYTES is actually a 128 GigaBIT chip.
That chip does not cost £5.

Actually such high density chips aren’t even quoted on the normal DRAMeXchange listings because they are not available on the general market.

Some manufacturers cut costs by using multiple chips (e.g. 2x64Gbit or 4x32Gbit), but that uses a much more power and is slower than the stuff Apple or Google put into their tablets.

I’m not saying those companies don’t add markup to the prices, but it’s nowhere near what you’re making up.

Hi John S

Thanks for getting in touch with your comments, and we can shed some more light on our research here to help clarify.

The analysts from DRAMeXchange we spoke to as part of this research advised that we use the tracked cost of NAND 64Gb 8Gx8 MLC – this is equivalent to 8GB. We used the average tracked price of this to calculate a cost of two blocks of this (i.e. 16GB total), as this was recommended to us by the analysts as the best point of comparison for the prices that are then levied by Apple and other manufacturers on their customers for an additional 16GB

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Peter

sigh, sure it’s a rip off, but they are a rip off anyway, this just makes it a bit worse. It isn’t too hard to find out that the tablet you want doesn’t allow you to add SD or micro SD cards, so look for one that does. My ASUS transformer has a 64 Gig micro SD card in the tablet itself and a 128 Gig SD card in the detachable keyboard (which also serves as a cover so you don’t get ripped off on some fancy piece of padding as well.) I recently bought another 64Gig Micro SD card – £37.05 including delivery.

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snappy

In your diagram above I believe the price increase on the Sony tablet should say £50 rather than £60 unless the error is that the two prices are not shown correctly.

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Tony Bryant

I know that Which? is on my side as a customer, however, I find this piece about memory pricing pretty poor.The tone of the article verges on the hysterical and is writen in a child like badly researched manner that relies on a completly false notion of the type of memory/storage used in tablets and marketing/pricing methodology used by all companies. Come on Which? this is what I see as a cheap shot.You can and must. do better than this!

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NukeThemAll

Agreed with Tony B and John S: this article is not up to the expected standard and is redolent of a reviewer who lacks some basic knowledge of electronics and the reality of pricing consumer items. As has been said many times, this marketing strategy applies across a wide range of consumer goods, especially cars and particularly electronics. If you want a ‘real’ subject to get annoyed about, the disparity of pound/dollar UK/US pricing would be a good start…..

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