Though Apple (AAPL +0.01%) isn't known for getting into the "spec wars" that so many of its competitors in the Android world engage in, Apple still needs to advance the specifications of its phones every year.
While many of Apple's competitors will focus on marketable "checkbox" features like more processor cores, higher frequency, more memory, and so on, Apple generally equips its devices with the right hardware for the underlying software.
Additionally, Apple has the luxury of fine-tuning its operating system to better utilize hardware resources. This means more intense upfront research and development costs, but with the kinds of volumes that Apple drives, those costs can be amortized pretty nicely over millions of units.
That being said, a recent leak of the upcoming iPhone's motherboard suggests that Apple may be cutting it a bit close with one key specification.
1 gigabyte of RAM -- again?
The upcoming iPhone 6 will allegedly pack just 1 gigabyte of memory. To put this into perspective, the Samsung (NASDAQOTH: SSNLF) Galaxy S5 and Galaxy Alpha phones pack 2 gigabytes of memory, the LG G3 crams in either 2 or 3 gigabytes of memory depending on the model, and the HTC One M8 sports 2 gigabytes.
Now, one could probably rightfully argue that Apple has invested significantly in iOS's memory management routines to make this a non-issue. Further, one could potentially argue that iOS is simply more efficient with its memory usage than is Android.
Finally, it could be argued that some Android devices allow users to run multiple applications side-by-side while iOS does not, which keeps memory requirements for iOS devices relatively lower.
These arguments may be well-and-good, and -- given my personal experience with a 1 gigabyte-equipped iPhone 5s -- the iPhone 6 will probably run iOS 8 and all iOS applications very smoothly.
However, over the long-haul, some data-intensive applications such as games may bump into memory limits, impacting the longevity of the device.
It's all fun and games until somebody runs out of memory
Mobile gaming has become quite popular, particularly as the capabilities of mobile devices have improved dramatically. According to AnandTech, high end mobile devices from early/mid 2013 offered graphics performance roughly comparable to "mid to high-end [PC] GPUs from 2006."
Given that mobile graphics has advanced significantly from that time, and given that the iPhone 6 is very likely to implement a substantially faster graphics processor than what was found in the iPhone 5s, mobile games will only become richer in quality.
Now, the interesting thing here is that Apple not only adopts the latest-and-greatest graphics hardware, but a test that Tom's Hardware performed on various mobile devices proved quite interesting.
In particular, in running the GFXBench 3.0 "driver overhead test" (which essentially measures the quality of the software that allows applications to talk to the graphics hardware), Apple's iPhone 5s outran its competition -- scoring nearly twice what the next best device did.
It's very clear that Apple takes mobile graphics and gaming very seriously. However, though it probably won't be too much of a problem during 2015, having "only" 1 gigabyte of memory could eventually constrain the image quality of the games that will run smoothly on the device. Game assets like 3D models and textures need to be stored somewhere as a game runs, and that place is memory.
However, as an investor, it makes perfect business sense for Apple to keep iPhone memory sizes as small as possible.
DRAM prices pose a problem
The obvious reason that Apple likely wants to minimize the amount of memory that it puts on the next iPhone is that DRAM isn't exactly cheap. According to IHS Technology, the 1 gigabyte of LPDDR3 found inside of the iPhone 5s costs about $11.
While DRAM prices have varied over time, assume for the sake of argument that 1 gigabyte of LPDDR3 runs Apple about $11. If Apple were to simply include another gigabyte of memory to the iPhone, then this would increase the cost of goods sold per iPhone by, unsurprisingly, $11.
If one considers that Apple has allegedly, according to The Wall Street Journal, ordered the production of 70-80 million next-generation iPhones, then this works out to between $770-880 million in additional cost.
Until DRAM prices start showing signs of coming down, Apple is probably going to do everything that it can to avoid upgrading to more memory. That is, unless Apple can get paid for it (so a larger, more expensive iPhone might come with more memory).
An excuse to upgrade?
Further, from a business perspective, if Apple can hold off on upgrading to more memory in the iPhone 6, then this gives customers yet-another reason to upgrade their phones down the line.
It's in Apple's best interests to keep people wanting next generation phones, and if the move to 2 gigabytes of memory (or more) can fundamentally unlock functionality that isn't available on a 1 gigabyte (or less) device, then that's a win for Apple -- assuming, of course, its competition doesn't exploit this potential "weakness."
Foolish bottom line
At the end of the day, Apple is a business and a rather good one at that. It will do what it must in order to maximize profits for its shareholders. Though Apple will take some flak for including "only" 1 gigabyte of memory, said flak would be nothing compared to the gross-margin drop and resulting investor fury that would follow if Apple made a product decision that wiped away nearly $1 billion in gross profit.
