Moving up a storage tier on a phone or tablet costs far more than the memory involved is worth. The pricing is not describing the components; it is separating customers by willingness to pay.
Flash memory is a commodity
Storage chips are made in enormous volume by a small number of manufacturers, and their price per unit of capacity falls over time and moves with the market.
The difference in component cost between two adjacent tiers in a phone is small relative to the retail gap between those models.
That gap is therefore margin, and it is the most profitable margin in the product line because nothing else about the device changes.
Tiers sort buyers by what they will pay
Some buyers care about storage and will pay considerably more for it, while others take whatever the base model offers.
Selling one configuration would mean either losing the second group or leaving money from the first, so the range is built to capture both.
The tiers are the mechanism, and their prices reflect what each group will accept rather than what each version costs to build.
The base model anchors the advertised price
The lowest configuration exists largely to establish the price a device is advertised at, and its capacity is often set just below what most users need.
That produces a predictable upgrade at the point of purchase, where the additional cost is small relative to the total already being spent.
Trade-in offers and instalment plans further reduce the apparent difference, since a monthly figure disguises the size of the gap.
Removable storage was a constraint on this
Devices with memory card slots let buyers add capacity at commodity prices, which capped what a manufacturer could charge for its own tiers.
Removing the slot is defended on grounds of durability, performance and reliability, all of which have some merit, and it also removes the cap.
The same pattern appears wherever expansion is soldered down, and it applies to laptops and tablets as much as to phones.
Cloud storage becomes the alternative
Manufacturers offer subscription storage as the answer to a full device, which converts a one-time hardware cost into a recurring one.
The subscription usually costs less at the outset and more over the life of the device, particularly if it continues after the hardware is replaced.
Choosing between the two is really a choice between paying once at a high margin and paying continuously at a lower one, which depends on how long the device will be kept.