Apple should kill the 16GB iPhone, but it probably won't

Commentary: While nearly all other high-end smartphones now offer 32GB of storage by default, Apple's entry-level model starts at 16GB. And that feels less adequate with each passing month.

Sarah Tew/CNET

In just a few short days, on September 9, Apple will introduce new iPhones, and if it follows its usual playbook, they'll be called the iPhone 6S and 6S Plus -- and be available for sale in many countries around the world by the Friday after next.

As an "S" model, we can expect the 2015 iPhones to maintain the same basic design as their 2014 predecessors, while incorporating some decent changes under the hood: a faster processor (definitely), a better camera (almost certainly) and a Force Touch screen that borrows some Apple Watch tricks ( rumored).

Unfortunately, one thing that probably won't change is how much storage the entry-level iPhone 6S will have. Leaked images on 9to5mac back in July purported to show the new iPhone's logic board with a new Toshiba flash memory module that, according the site, has 16GB capacity. (While such images should always be approached with skepticism, author Mark Gurman has an excellent track record, and the images are convincing.) And more recently, 9to5mac and other Apple enthusiast sites have been citing unnamed sources saying a 16GB iPhone 6S and a 16GB iPhone 6S Plus are done deals.

In other words, it's looking more and more like a step up to a 32GB baseline isn't going to happen. And that's a problem.

The problem with 16GB

For the last several iPhone cycles, Apple has equipped the entry-level versions of its flagship phones with 16GB, charging $199 in the US with a two-year contract or "carrier financing." The price for the unlocked version -- and in many cases the real price to you and me in the end -- is $649.

Last year, when Apple moved to the iPhone 6, it did away with the 32GB version that was previously occupied the middle range of the iPhone 5/5S and earlier lines. Now you can buy the 64GB iPhone 6 for $749 (or $299 on contract) -- $100 more than the 16GB version. (Tack on another $100 if you want to go to the larger iPhone 6 Plus in any of these same capacities.) For anybody who was familiar with the limitations of owning a 16GB iPhone or iPad, that 64GB model -- or the step-up 128GB -- was the iPhone to get.

The fact is 16GB of storage space just doesn't cut it anymore. Once you shoot a bunch of pictures and videos, download a couple of graphically intensive games and a bulky app or two (Google Maps) and store some music on your phone, you start to hit the limit.

In moving to iOS 9 this fall, Apple announced it would dramatically reduce the size of its iOS updates (from around 4.6GB to 1.3GB) and trim the size of apps in general through a new feature called app thinning. But iOS 9 will still take up some space in the phone's flash storage (I have a 64GB iPhone 5S, with 54.2GB "used" and only 1.7GB "available," which means about 8GB is devoted to iOS resources).

That will help owners of existing iPhones to free up additional storage space, but 16GB is still 16GB, and you'll use it up faster than you think, particularly as file sizes for photos and video grow as their resolution increases. In fact, rumor has it the next iPhones may feature 4K video capture -- videos that offer four times the resolution of standard 1080p HD shots.

Minimal storage means maximum profits

So why not bump the entry-level iPhone up to 32GB? After all, most flagship Android smartphones -- such as the Samsung Galaxy S6 / S6 Edge , HTC One M9, LG G4 -- now start at 32GB. And some of them even still feature expandable storage.

The simple answer is profit margin.

According to IHS, an analytics firm that does teardowns and estimates bills of materials for iPads, iPhones and other products, going from 16GB to 32GB of NAND flash memory would've cost Apple around $10 in September 2014 -- so probably even less almost a year later, with prices for memory drifting downward. Yes, that's a significant sum when you consider that, according to those aforementioned teardowns/bill of materials estimates, it costs Apple around $200 to build an iPhone 6 and $215 to build an iPhone 6 Plus.

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Current iPhones don't offer a 32GB option. Apple.com screenshot by John P. Falcone/CNET

Better yet -- for Apple anyway -- it costs you $750 to buy the 64GB iPhone 6, which conservatively costs Apple about $20 more to make than the 16GB version. From a margins standpoint, the 64GB and 128GB iPhones are by far more profitable, so Apple doesn't really want you to buy a 16GB iPhone.

And the numbers show that Apple's plan to push consumers to the more expensive models is working. The average selling price for an iPhone in the final quarter of 2014 (when the iPhone 6 and 6 Plus first debuted in bulk) was $687. By comparison, the average selling price of an Android phone during the same period was less than half -- just $254. That's the primary reason Apple is the most valuable company in the world even as Android phone manufacturers struggle to make a profit.

It's time for a change

With numbers like that, I get it. This whole 16GB thing is working for Apple in a big way. The company is printing money, and many consumers are all too happy to pay the extra $100 or $200 to step up to the more capacious models.

It's even easier now that the carriers in the US are largely transitioning to a post-contract world, and letting you spread payments across a 24-month period. In that scenario, the jump from a 16GB iPhone to a 64GB model costs you just $4 more. Skip a latte or two each month, and the upgrade "pays for itself."

So, it could be argued that there's "no good reason" to buy the entry-level 16GB iPhone.

And yet people do. They just can't resist buying the cheapest of anything, even if it isn't in their best interest. In some cases, it may be businesses that are purchasing several units for their employees and want to save money while limiting what their employees can do with the phone (it's for business not personal use, so you shouldn't be playing games or shooting videos of your kids).

And, to be sure, the low-capacity phones are important in developing nations, where products are even more price-sensitive. Consider the iPhone 5C , currently Apple's entry-level $450 phone (it's supposedly going away soon, with the 5S replacing it as the entry-level model). The 2013 product got the requisite $100 price drop when the newer iPhone 6 line was released last September, but -- for the newly more affordable 2014 model that's still being sold -- Apple chopped the internal storage from 16GB to an even paltrier 8GB. That's barely enough to fit the operating system, at least pre-iOS 9.

There's also the argument that local storage is less important now that everything is online. That's where Apple Senior Vice President Phil Schiller is coming from when, defending the existence of 16GB iOS devices on The Talk Show, a podcast hosted by noted Apple pundit John Gruber. He says that the hope is that cloud services like iCloud and Apple Music will enable the most price-conscious customer to "live in an environment where they don't need gobs of local storage..." (Go to 52:00 mark of the video to see Schiller's full response to Gruber's 16GB iPhone question).

I'd be fine with that if Apple Music and iCloud storage beyond 5GB were free. But they aren't. So the equation gets even more cynical. You're selling a cure for a disease you created yourself. And that's just not right.

But that probably won't stop Apple from giving us new 16GB iPhones on September 9.

Editors' note: This article was originally published on July 12, 2015 under the headline, "Apple, please kill the 16GB iPhone." It has been updated to reflect the current news and rumors surrounding the release of the next iPhones.

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