Yes and No!
In one of my earlier jobs, I sold a lot of 256MB and 512 MB RAM phones, which usually came with 512 or 1GB internal memory and as we know most of it is hogged already by Google and the manufacturer.
But those customers dont have much to do with internal device memory at all, thats why they buy those phones. All they want is a touch screen and a means to watch video and to some extent access WA and FB. For these chaps, internal memory is not at all a problem.
Those for whom the internal memory is a problem, they upgrade!
So in effect, device storage is not a problem!