Apple jumped from 32GB to 64GB when NAND process allowed them to, as they only use one NAND chip in the iPhone. I don't think a process jump has occurred to allow 128GB in a single chip yet. They could use two 64GB chips for the iPad and iPod touch though.
You're right. I forgot about the iPhone 1 NAND limitation.
With the volumes they ship, they'd be hard pressed to double the storage and not enjoy the profitability.
I guess they'd say with the cloud, you don't need as much local storage.
True. But with their component pricing power I still think this is one area that they can differentiate themselves from the competition.
There's not going to be a lot of breathing room for iPod Touch, what with $200 7-inch tablets from the competition and wherever the iPad Mini will slot, price-wise.
In terms of functionality and portability there definitely is still room for a dedicated mp3 player. Although as you say, a price drop would be useful to clarify the product positioning. Personally I'm looking for a line-up by year-end along the lines of the following:
$0 8GB/A4/512MB 3.5" iPhone 4
$99 16GB/A5/512MB 3.5" iPhone 4S
$199 32GB/A6?/1GB 4" iPhone 5
$299 64GB/A6?/1GB 4" iPhone 5
$49 4GB iPod Shuffle
$99 8GB iPod Nano
$129 16GB iPod Nano
$149 16GB/A4/512MB 3.5" iPod Touch
$249 32GB/A5/512MB 4" iPod Touch
$349 64GB/A5/512MB 4" iPod Touch
$449 128GB/A5/512MB 4" iPod Touch
$299 16GB/A5/512MB 7.85" iPad Mini
$399 32GB/A5/512MB 7.85" iPad Mini
$499 64GB/A5/512MB 7.85" iPad Mini
$499 32GB/A5X/1GB 9.7" iPad
$599 64GB/A5X/1GB 9.7" iPad
$699 128GB/A5X/1GB 9.7" iPad
(All with $130 cellular options)
Pushing the iPod Nano and iPod Touch below the psychological $100 and $150 price barriers respectively should help spark some renewed interest in those devices. The introduction of a 128GB iPod Touch model means the iPod Classic can finally be retired although they admittedly aren't price equivalent. I believe those price points and capacities for the iPod Touch work out quite well against the Kindle Fire, Kindle Fire HD, and Nexus 7.
I don't see Apple bothering to fight down in the $199 region with the iPad Mini. They can do quite well starting with 16GB of flash memory at $299 while focusing on the larger screen area and larger app store against $199/$249 7" tablets. The 8.9" Kindle Fire HD is going to be harder to argue against spec/price-wise, but the iPad Mini is expected to ship first and in more markets so Apple might just focus on brand and operational execution to hold/gain marketshare. There's been rumours Apple might refresh the 2012 iPad to incorporate the new dock connector and at the same time take advantage of a 32nm SoC shrink and display tech improvements to reduce device thickness and improve battery life. I'm thinking it's too soon for such major changes and it wouldn't leave much left to introduce in H1 2013. (I don't see Apple wanting to permanently bunch up all iPad, iPhone, and iPod releases together in Sept/Oct). However, a 64GB iPad Mini would seem to look too good when sharing the $499 price point against a 16GB Retina iPad especially given it's portability advantages being thinner and lighter. So I can see Apple bumping the storage capacity on the Retina iPad while otherwise keeping the design the same and offering $100 gift cards to recent buyers.