Haha yes 1/2 TB.
Regarding cost I am making the assumption that whatever Nintendo choose as the solution, they can get it MUCH cheaper than customers can. For instance, if the +$50 SKU also had a 512GB microSD packed in it would be a moot point. But if I have to pay $60 at retail for a even 256GB that's starting to hurt because if my PS4 HDD is anything to go by I'll need two of those.
And finally, as I mentioned above, how does it affect the perspective AAA publishers and developers have of the console.
I'm not basing that $30-40 on consumer prices, I'm basing it on cost prices of similar flash modules used in phones today (commoditised components like eMMC and UFS are the kinds of things which you can expect companies like IHS to be pretty accurate on). It's quite a different thing from consumer SD cards, in any case, as Samsung's 256GB UFS module (the only one currently available)
can hit 760MB/s read speeds.
There are a couple of big differences between Switch and PS4/XBO when it comes to internal storage. The first, and most obvious of them, is that Switch won't have mandatory installs for physical games. With physical purchases still accounting for 70% of game sales, that's a huge reduction in the typical storage requirements. If we take a simple average, then someone who filled a 500GB hard-drive on PS4 would only need 150GB of space on Switch. In reality, though, it's not going to be the case that everyone will uniformly buy 30% of their purchases digitally. It's more reasonable to expect that there's a small minority who are fully digital, a much larger group who are fully physical, and then a spectrum in between who buy either physical or digital depending on convenience or cost or whatever.
For those who only buy physical games, it would be silly to charge them an extra $50 on the price of the console for a load of flash storage they'll never use (and might I remind you that this group
significantly outnumbers the group who buy all-digital.) Nintendo wants to target as wide an audience and be as competitive on price as possible with Switch, so it makes sense that they won't include expensive hardware in their base model which a large number of their customers won't use, but will rather offer a separate model for those who do need more storage. Offering a $249 32GB model
and a $299 128GB model makes a lot more sense for them than just offering the $299 128GB model.
Secondly, because Switch isn't as powerful as PS4 (let alone PS4 Pro), developers will use lower quality assets, and hence download sizes should be expected to be smaller than on other consoles. In addition, because publishers can save a small amount of money by using a smaller game card, they'll actually be incentivised to put non-trivial effort into compression, which a lot of games simply don't do now. Switch supporting HEVC could also help this. I would honestly expect that, between reduced assets and proper compression, many larger third-party games could be reduced in size by as much as half for Switch ports. You'd be amazed at how much space is taken up in many games with uncompressed audio and unnecessarily high-bitrate FMVs (or entire FMVs duplicated just for separate audio tracks).
To be honest, though, if there were anything I'd like them to focus on when it comes to storage, it's speed rather than capacity. It would only cost them a few dollars to use UFS instead of eMMC for internal storage, and use UFS cards rather than MicroSD. Combined with a fast serial interface for game cards (which they seem to be going with), they could guarantee perhaps 400MB/s reads regardless of what the game's running off, combined with perhaps 20K+ IOPS. For game devs (particularly open-world games or any games which make heavy use of asset-streaming), it could allow them to do things that simply aren't possible on games which have to be able to run off mechanical hard-drives. That's far more interesting to me than offering a little more out of the box storage.
