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It's called market segmentation, and that by itself isn't a "scandal".

The scandal here is that they're still releasing "flagships" with 16 GB of storage, for the same price as it was 3 years ago, even though next year they should be able to offer even 64 GB of storage for the same price.

Component prices drop by about 30 percent per year, or in half every 2 years, and flash storage prices have followed that trend exactly (you can Google the iPad or iPhone build of materials from over the years, and see I'm right).

But they've also added 128 GB at the high end (also for the iPad 4 but after launch.)

This isn't about component pricing. It is about profit margins for the whole product line not each individual tier. Apple is using the drop in cost for one component to offset the increased cost of others to maintain their profit margin.

If they are motivated by the overall product line margin, why add the 128 GB model at all?

I'm pretty sure it was done in response to the first Microsoft Surface release. It was obviously possible to create the 128 GB iPad and it must have fit within Apple's profit margin structure. So I would guess it was a hedge against losing some number of sales to a high end Surface.

I consider it an embarrassment that they didn't just increase the range across the board at the same prices, making 32-64-128 the new lineup. That seemed to be the modus operandi under Steve; quietly adding a 4th price point for the 128 felt like a strange move, especially considering that they have an incentive for users to fill up the space with apps, music, movies, etc.

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