Above Avalon’s Neil Cybart has released an analysis of Apple’s research and development (R&D) spending trends for the past few years.
Cybart notes that Apple is on track to spend a total of $14 billion on R&D in fiscal 2018, which nearly doubles the amount that they spent four years ago. He also notes that the total for 2018 would be greater than the company’s R&D spending from 1998 to 2011 combined.
My theory on the dramatic rise in Apple R&D expenditures is that management is becoming more ambitious. Apple’s future is found in new industries. Just as Apple moved from desktops/laptops to personal music players, smartphones, and watches, the company will need to enter new industries to remain relevant. This is not a company that is holding onto the iPhone as tight as possible for fear of change. Apple management is investigating new ideas and processes in order to support future moves into new industries.
This explains Apple’s ongoing interest in transportation and Project Titan, an area that Apple has pretty much no expertise in. We have Apple building an entertainment arm from scratch despite having no experience developing scripted content. In each case, Apple has had to rely on outside hires and significant cash outlays to build core competencies.
The increase in R&D signals that Apple is now pursuing more areas, like autonomous vehicle technology, a video streaming service, and augmented reality. Another reason for the increase seems to come from the growing amount of competition in both hardware and software.