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[Forbes] Samsung struggles to keep up with Apple’s juicy profit margins

April 16, 2015

 

Samsung is hoping to reverse its dimming smartphone fortunes with two new phones set for release in 20 countries. (AP Photo/Eric Risberg)

Samsung is hoping to reverse its dimming smartphone fortunes with two new phones set for release in 20 countries. (AP Photo/Eric Risberg)

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One of the nice selling points of Samsung’s Galaxy phones used to be the option of expanding memory manually. But with the Galaxy S6 and S6 Edge, Samsung sealed all that off. Jumping from a 32 to a 64 to a 128GB version of the new phones will cost an additional $100 at each increment. But it only costs Samsung $13 for 32GB of memory and less than $26 to add 64GB, according to a recent report by research firm IHS. That’s an extra $87 in profit when going up from a 32GB to 64GB model.

Why is Samsung doing this? It’s a very good way to start emulating Apple pricing model, said Andrew Rassweiler, senior director of research and analysis at IHS. The price of each storage upgrade is an additional $100 in the iPhone too.

“Samsung is using the memory structure as another way of boosting profit margin with something Apple has done since the beginning,” said Rassweiler in a phone call. “Samsung realizes and recognizes how well it works for Apple. They probably think, ‘lots of people want to start with a large amount of base memory. Let’s just do that.’ ”

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