Apple R&D spending is a fraction of other major American tech companies

Posted:
in General Discussion edited December 2015
Apple spent just 3.5 percent -- $8.1 billion -- of its 2015 revenues on research and development, proportionately far less than peers like Google and Facebook in the American tech landscape.




Qualcomm and Facebook spent 22 and 21 percent on R&D in their 2015 fiscal years, according to Bloomberg. Even Alphabet -- Google's parent company -- spent 15 percent, targeting not just Web and mobile endeavors but projects like self-driving vehicles and extending human life.

Apple did reap far more revenue than those other companies, pulling in over $233 billion, whereas even Alphabet only took in $66 billion.

Apple stretches its budget by relying heavily on advances from suppliers, said Ram Mudambi, a business school professor at Temple University in Philadelphia. The value of the company's contracts is said to encourage suppliers to put forward their own best technology.

The company's 2015 R&D budget was up from $6 billion in 2014, and $4.5 billion in 2013. Some of this presumably went into technologies like the Apple Watch and its A9-series chips, along with projects that are still extremely clandestine -- including its long-term electric car project.

Apple separately spent another $11.2 billion on capital equipment expenses, such as manufacturing tools and its new Cupertino headquarters. That number is expected to reach $15 billion in 2016. It may indeed go much higher as Apple's car approaches an anticipated 2019/2020 launch.
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Comments

  • Reply 1 of 31
    Nah. Apple spends a lot of money on R&D - much more than Facebook, about the same as Google.

    It is just that Apple makes more money than any of its competitors.
  • Reply 2 of 31
    zoetmbzoetmb Posts: 2,402member

    Wow.  First time I ever saw this site turn an Apple positive into a negative.   It's usually the other way around - criticizing competitors whenever there's any perceived Apple advantage.

     

    Apple's overall percentage may be lower, but $8 billion is still a hell of a lot of money - larger than the gross revenues of most companies.

     

    And the number itself doesn't really matter anyway - it's how efficiently it's used, whether it's being devoted to the "right" projects and what percentage of the research eventually winds up in a practical product. 

  • Reply 3 of 31
    Also keep in mind Apple seems to have a pretty narrow focus on what they want R&D for. A series processors for sure, screens all come from LG and Samsung and a few others, so they're not going to double up on R&D for screens when they don't already have the facilities to make them. (Any unique R&D would get swiped by the Asian manufacturers anyway.) They say they developed the taptic engine. How much money do you think it took to research and develop the new butterfly key? Realistically it's a great innovation but I doubt it cost nearly as much as some other things do. I think Apple spends as much as it's R&D department could hope for. They're just not burning money for no reason.
  • Reply 4 of 31
    Most of Apple's Revenues are "spent" on profits and on share buy backs. A more interesting metric would be what percent of its non sales staff is involved in R&D?
  • Reply 5 of 31
    boredumbboredumb Posts: 1,411member

    The cost of not having to "catch up" all the time...

  • Reply 6 of 31
    MacProMacPro Posts: 18,015member
    boredumb wrote: »
    The cost of not having to "catch up" all the time...

    Exactly!
  • Reply 7 of 31
    This figure would be a lot higher if the repatriation tax law wasn't broken...
  • Reply 8 of 31
    boredumb wrote: »
    The cost of not having to "catch up" all the time...

    Right! And many times when it seems like Apple is following their competitors are borrowing ideas leaked or revealed in patent filings and rushing to market with them. Apple works smart, not fast. If they want to cop an idea that they have not solved yet which is why it's not in a product, go ahead. They look at it go, yeah that was a bad idea just like we thought, but if do do this instead, we can make it work.
  • Reply 9 of 31

    It's true that Apple's spending is a "fraction" of other tech companies' spending. The fraction, however, happens to be greater than 1.

  • Reply 10 of 31
    Quote:
    Originally Posted by linkman View Post



    This figure would be a lot higher if the repatriation tax law wasn't broken...

     

    Completely wrong. R&D is a business expense and is therefore deductible, i.e. the money was never profit to begin with. In fact, there is a very popular R&D tax credit which makes R&D free in some cases.

  • Reply 11 of 31
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by jameskatt2 View Post



    Nah. Apple spends a lot of money on R&D - much more than Facebook, about the same as Google.



    It is just that Apple makes more money than any of its competitors.



    That's the thing: VERY few (none) employees get a paycheck denominated in "percentage", and vendors don't take checks like that either. Dollars are the metric and Apple spends quite a bit of those.

  • Reply 12 of 31
    And look what they're achieving with it.

    Makes one wonder where the hell the competition's R&D money is going. Coffee runs? Another loss leader? Thinking of Microsoft in particular here.
  • Reply 13 of 31
    Quote:

    Originally Posted by konqerror View Post

     

     

    Completely wrong. R&D is a business expense and is therefore deductible, i.e. the money was never profit to begin with. In fact, there is a very popular R&D tax credit which makes R&D free in some cases.


    Apple is more limited with its options on spending in the USA -- some will go to paying the bills, building that spaceship, paying dividends, fighting off lawsuits, etc. and a small portion can go to R&D. If $100 billion or so of that hoard were to be brought into the US then a much larger chunk of money would be available for R&D. While I didn't know about that being a tax credit, I'M NOT WRONG.

  • Reply 14 of 31

    It is interesting that it is down to 3.5%, in the 1990s and early 2000s it was above 5%, often closing in on 10% as I recall, but it has been drifting downwards since then.

     

    I think it is a somewhat misleading comparison to compare to Facebook and Google, since those are primarily software companies - they don't have to pay to build things so they can have 15-20% on R&D. Even Qualcomm is fabless and, I believe, licenses IP blocks. It would be interesting to see what the division between "R" and "D" is – how much is research on new ideas vs. directly developing a new product.

  • Reply 15 of 31
    Quote:
    Originally Posted by jfc1138 View Post

     



    That's the thing: VERY few (none) employees get a paycheck denominated in "percentage", and vendors don't take checks like that either. Dollars are the metric and Apple spends quite a bit of those.


     

    Can you imagine if Bloomberg or Reuters applied the same metric (percentage of revenue) to employee pay? The headline would scream about how underpaid Apple employees are, and Tim Cook would be singled out as one of the lowest paid CEOs in America.

     

    Quote:
    Originally Posted by afrodri View Post

     

    It is interesting that it is down to 3.5%, in the 1990s and early 2000s it was above 5%, often closing in on 10% as I recall, but it has been drifting downwards since then.


     

    It hasn't been drifting down in dollar terms, which is what matters. The use of percentage is misleading since it's comparing dollar spending to ever increasing revenue.

  • Reply 16 of 31
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by afrodri View Post

     

    It is interesting that it is down to 3.5%, in the 1990s and early 2000s it was above 5%, often closing in on 10% as I recall, but it has been drifting downwards since then.

     

    I think it is a somewhat misleading comparison to compare to Facebook and Google, since those are primarily software companies - they don't have to pay to build things so they can have 15-20% on R&D. Even Qualcomm is fabless and, I believe, licenses IP blocks. It would be interesting to see what the division between "R" and "D" is – how much is research on new ideas vs. directly developing a new product.




    And in the 90's Apple was on the brink of bankruptcy. Easy to have a high percentage against low earnings. Drifting down as a percentage is a good sign IMHO: otherwise if they'd been chasing the exploding earnings with the iPod, iPhone etc. they'd have been wasting R&D money for sure.

  • Reply 17 of 31
    The thing is Apple is that superior to competition it needs no excessive R&D spending.
  • Reply 18 of 31
    The U. S. Government spends only a little more than $7B on general science funding by the National Science Foundation (that funds scientific research at universities, schools, museums, etc. in all scientific disciplines except medical sciences).
  • Reply 19 of 31
    flaneurflaneur Posts: 4,506member
    Apple Insider is better than this kind of misleading non-story. Or it used to be.

    Every poster above has raised a good objection to the premise. What happened? Maybe it was the holiday. There was a lot of stupid over the weekend.
  • Reply 20 of 31
    radarthekatradarthekat Posts: 2,973moderator
    Headline should read, 'Apple R&D Spending is Far More Effective Than Other Major American Tech Companies'
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