As iPhone sales continue to stagnate, Apple continues to invest heavily in its research and development divisions.
According to a new report from CNBC, Apple’s R&D bill came out to 7.9% of its total revenue, the highest percentage since 2003, when Apple was still focusing on iPods and Macs. This number is still considerably lower, however, than the likes of Microsoft and Google which spent 13.4% and 15.7% of their revenue on R&D in the same quarter. Apple is on pace to spend over $16 billion USD on research and development in 2019.
During the Cupertino company’s Q3 earnings call, Apple CFO Luca Maestri made it clear that the company would continue to increase its spending on R&D.
“We want to improve the user experience and differentiate our products and services in the marketplace. So, we will continue to do that,” Maestri said. “There are some types of investments, of course, that are very strategic for us and they will have long-term implications.”
Apple’s increased R&D spending comes as the company’s historical cash cow, the iPhone, has seen drastic sales slumps – Apple’s iPhone revenue was down a whopping 12 percent from the same period last year. To combat this drop in sales, Apple hopes to invest in core technologies that may power future Apple devices, however “open-ended technology development comes at a cost,” reads the report.
The company’s push into researching and funding this open-ended technology development is evident in the recent purchase of Intel’s model business for $1 billion USD — one of the company’s largest acquisitions ever. This acquisition reflects what the report calls the “Tim Cook Doctrine” — the company’s “long-term strategy of owning and controlling the primary technologies behind the products that we make,” the CEO explained.
As Apple moves further into services, the Cupertino company plans on launching its video streaming service, Apple TV+, later this year.