iPhone Upgrades: Are They Worth It?

Analysts say the giant tech company sells increased storage at a nearly 10-fold increase.

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    NEWSLETTERS

    With the Friday release of Apple's iPhone 5, users are facing a quandary: to upgrade or not to upgrade? Senior analyst Wayne Lam says each 16 gigabytes of memory costs Apple about $10, but consumers pay closer to $100 for each upgrade -- a 10-fold increase. Ana Garcia reports for the NBC4 News at 5 p.m. on Sept. 21, 2012.

    The iPhone 5 hit the shelves Friday and eager Apple fans – some of whom slept on sidewalks and camped out for days in advance of the release – were faced with a quandary: Do they stick with the phone’s basic storage capacity of 16 gigabytes or pay for an upgrade?

    The extra storage is cheap for Apple, but not so cheap for consumers.

    Engineers at research firm IHS in El Segundo literally take products apart to study their components and what they cost.

    Senior analyst Wayne Lam told NBC4 that each 16 gigabytes of memory costs Apple about $10, but consumers pay closer to $100 for each upgrade – a 10-fold increase.

    With a two year contract, an iPhone with 16 gigabytes costs $199. An upgrade to 32 gigabytes is $299, and if you double that to 64 gigabytes plan on paying $399.

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    "They make sure that they can get these components at the best price possible," Lam said.

    "Overall, the economics of it make it very attractive for Apple to sell you higher storage-density iPhones."

    Selling phones with more memory may be good for Apple, but it may be more than some consumers need.

    For iPhone users who just want a handful of applications and don’t have an extensive music or video library, 16 gigabytes is probably sufficient.

    To get an idea of how much memory is required, one gigabyte can store two to three hundreds songs. Videos take up even more space.