One of the advantages of Samsung Electronics’s Galaxy phone range was the freedom to increase memory manually. However, this cool facility does not extend to the Galaxy S6 and S6 Edge. In the new phones expanding from a 32 to a 64 to a 128GB, a variant will be charged $100 at each unit of addition. However, it costs Samsung a mere $13 for 32GB of memory and short of $26 to add 64GB as per a current report by research firm IHS. Samsung earns a profit of $87 when a user upgrades from a 32GB to 64GB model.
Many wonder about Samsung’s motive for such an arrangement. According to Andrew Rassweiler, senior director of research and analysis at IHS Samsung has begun emulating the Apple Inc. (NASDAQ:AAPL) Apple pricing model. Interestingly the price of each corresponding storage upgrade in the iPhone is an identical $100. This is more than a mere coincidence and most likely a calculated move.
In Apple’s footsteps
Rassweiler opined that Samsung is leveraging the memory structure as another channel of improving profit margin. The Korean major is following the same market tactics that Apple Inc. (NASDAQ:AAPL) has followed right from the start. Samsung is just capitalizing on the public’s universal desire for big memory.
Example of overpricing
A similar pattern is the jump in cost from the Galaxy S6 to the S6 Edge with a curved screen. The expense of putting the curved touchscreen on the S6 Edge is a modest $25 for Samsung. However, the latter is charging an additional $100 from consumers to upgrade.
Incidentally, Samsung is always prepared to trade off better margins for fancy features. This is ostensibly to improve market share. However, Samsung retains boosting profit margins as a major priority. Samsung has an extremely diversified business to attain better margins as compared to Apple.
Right from the Galaxy S4, the cost in producing its Galaxy series phones has been rising, said Rassweiler whereas, Apple has always been able to keep costs in the low $200 range.