“Silicon Valley is aglow from so-called moonshots. Google’s parent company, Alphabet, is building autonomous vehicles, life-extending drugs, and animal-look-alike robots,” Adam Satariano reports for Bloomberg Businessweek. “Facebook is developing Internet-beaming drones and virtual-reality headsets, while Microsoft has unveiled hologram glasses and is chasing breakthroughs in translation software. IBM’s AI software, Watson, will take on all comers in chess.”
“Compared with its resources, Apple has remained relatively quiet. It spent just 3.5 percent ($8.1 billion) of its $233 billion in revenue in fiscal 2015 on research and development, a lower percentage than every other large U.S. technology company, data compiled by Bloomberg show,” Satariano reports. “By contrast, Facebook spent about 21 percent ($2.6 billion) on R&D, chipmaker Qualcomm 22 percent ($5.6 billion), and Alphabet 15 percent ($9.2 billion).”
“Apple’s success belies the conventional wisdom that a leading tech company must reinvest a sizable chunk of its sales in R&D or risk being overtaken,” Satariano reports. “Apple has never subscribed to that philosophy. Steve Jobs said in 1998 that “innovation has nothing to do with how many R&D dollars you have.” He liked to point out that when the Mac was introduced, IBM was spending about 100 times more than Apple on research.”
Read more in the full article here.
MacDailyNews Take: It’s not how much you spend, it’s how well you spend.
People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things. — Steve Jobs
As long time R&D inventor and tech researcher, I can tell you that MANAGING R&D is the critical component. When you get too much going, with scatterbrained management, you get three results: wasted money, bad products, lots of project cancellations/failures.
I am not sure anyone can properly manage 8 Billion in R&D spending.
Remember when Apple *did* spend a large proportion of revenue on R&D?
PReP, CyberDog, Pink, Pippin, OpenDoc, etc.
Not only can you end up with losers when you say yes, you’ll hurt morale when you eventually have to kill the projects.
CyberDog was great and has never been equaled in its attempt to blur the lines between the various internet protocols. It allowed the user to really focus on projects rather than functions.
There has been nothing since that has come anywhere close to its capabilities.
It seems to me that apart from Qualcomm, many companies valuation goes up even if their revenue doesn’t. Look at Amazon, Alphabet, Facebook and Microsoft. Their revenues and profits haven’t moved that much but their valuations have soared while Apple’s has dropped. I think big investors get all excited about a company’s future when they hear about all these future tech projects and then they start pumping money into those companies believe those companies to have some huge future advantage.
Besides, we all know how Apple is always being called the company with decreasing innovation. There must be some reason for that. There has to be some reason why Apple’s valuation continues to fall relative to its increased revenue. Also, why does Apple seem to be the only company that’s considered doomed every single quarter or being called the one-trick pony iPhone company. Honestly, I think Apple needs to throw around some future tech to get investors excited about Apple’s future. Nothing else seems to be working.
I’m not saying Apple’s way doesn’t make sense. I’m only saying Wall Street seems to believe high R&D spending makes a company’s future brighter and that’s what seems to increase a company’s valuation.
While spending a good percentage of sales on R&D, as HP used to do before they expanded to what they became in the computer industry, they used to talk about their R&D programs and expenditures. When they were mostly an electronics test isntrument manufacturer, they spent bout 10% of their sales on R&D. They made the point that their product line changed so that in three years, all their products would be new models from three years ago, plus new product lines. That was a very good thing, and they made the best complete product lines of any other competitor. But they were a fairly small company.
We see that with Apple’s competitors mentioned in the businessweek article. If Apple spent 10% of their sales last year on just R&D, that would have been about $23 billion, and I can’t even think how Apple could spend that much.
Well in total 8.1 billion they are much below what Google spend and above everyone else. Apple may be big but its product portfolio is pretty lean especially until recently. The fact is Apple does tend to focus most on a few very considered areas around still a relatively small number of products compared to Google or Microsoft for example, who tend to have a scattergun approach in the hope that something works out. Sony failed big time on that approach and the problem is that management becomes a serious problem when you try it. Spending money on research for the sake of it, or impressing investors really is NOT a great policy.
The author of the Bloomberg article seems to think that a third party developed Apple’s A9 and A9X processors and the SoC chips that are in the iPhone and iPad Pro. He discounts Apple’s own in house R&D. . . trying to persuade the investing public that Apple merely does better what other companies could do equally as well if only they’d adopt Apple’s R&D management methods and also persuade these third-party suppliers to offer their best off-the-shelf developments to them as well. His argument really makes no sense by the time he finishes it.