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A look at Apple's R&D expenditures from 1995-2013
- twoodfin 13y agoI am not an expert, but it's my understanding that what is R&D vs. "only" engineering is largely an accounting question. I don't think Microsoft is spending all of that $10B on MSR, for example. As a metric I don't think it provides much insight.
- antr 13y agoyou are spot on with that thought. accounting for r&d is pretty much an accounting/financial call. rather than accounting for costs, you capitalise that cost/capex as an asset, which can later be amortised in x years. i'm guessing that given that apple generates billions in profits, it would rather account much of its r&d as an operating expense, reducing the immediate tax bill.
- devfeed 13y agoMSR is only "R" (and that too only a subset of the total research that happens throughout the company - the stuff that can be classified as "basic science"/longer-term), the "D" happens all over the company in the various departments.
- Guvante 13y agoThe article feels a little shallow on the analysis side. For instance I would expect this oddity to be caused by the fact that they aren't a traditional hardware manufacturer (they don't have any fabs and outsource their production) nor are they a traditional software manufacturer (their software focus pales in comparison to Google or Microsoft). Since developing silicon and software are two of the biggest drivers in the industry and Apple doesn't focus on either, it makes sense they have a low R&D budget.
- josefresco 13y ago"they don't have any fabs" Isn't this not true anymore? I thought Apple brought chip production "in house" as well as other specific hardware related to their iOS products.
- nilsimsa 13y agoThey brought some chip design in house. Chip production is quite expensive that only a few companies do it in house.
- dba7dba 13y agoI know this is a hearsay but at the height of the apple/samsung law suit I was following a story and one of the commenters claimed Apple's chip R&D was being done in a borrowed facility at a Samsung owned chip factory in Austin, TX. Intrinsity based in Austin had been doing work with samsung and since Intrinsity was bought out by Apple, I think there's some chance it's true. No way I can verify if it's true it'd be pretty funny...
- donavanm 13y agoIntrinsity did design, not process. They did some design work for Samsung around the A8/Snapdragon days. Shortly after that Apple acquired Intrinsity and brought them in house ala PA Semi.
- revelation 13y agoChip fabs are extremely expensive. You basically need to invest $5B+ every two years just to stay up-to-date on technology, and then the same amount or more to do the necessary research and build the thing in the first place. (Reference in point: history of Globalfoundries)
- dragontamer 13y agoYou are correct. Apple just spent billions of dollars buying up a fab lab. However, it will be years before this investment sees any practical use at Apple. http://semiaccurate.com/2013/07/12/apple-has-their-own-fab/ http://semiaccurate.com/2013/07/12/apple-has-their-own-fab/
- scdc 13y agoDon't Apple's A7 and other chips count as "developing silicon"? And you don't see Apple focusing on "developing software"?
- cromwellian 13y agoYes, but it is abstract development that relies on lower level discoveries. It's like designing a medical treatment that relies on anti-biotics, if no new antibiotics are discovered, and the old ones become less valuable, then new treatments hault. The A7 is a marvelous chip, but the reason these super smartphones exist is silicon manufacturing prowess. If we could not make these chips smaller and less power hungry, the mobile revolution would not have happened. Apple stood on the shoulders of giants who went before them in this regard. Intel, IBM, TSMC, et al, plow a lot of money into advancing silicon manufacturing further. Lots of other companies plow billions into tools to support this sector. In some ways, taking in huge margins on silicon upstream (while the downstream players are squeezed to minimize their margins), without plowing money back into the system, could be seen as somewhat parasitical. I used to work at IBM Research, and one of the things I used to love doing was reading IBM Systems Journal. Research, like on scanning electron microscopes, measuring quantized magnetic flux in superconducting circuits, new kinds of giant magneto resistive effects, it was all very exciting to know that right down the hall, stuff I'd normally read about in Scientific American, Nature, or other places was being done. IBM T.J. Watson Research was given relative autonomy when I was there, they could spend money without have to justify it as being linked to a product, and I think that was very valuable for long term development. The new players in Silicon Valley don't seem to have the same commitment to basic R&D, long term R&D. Everything has to be linked to something shiny that can be sold in 2-3 years.
- stephencanon 13y agoApple is indirectly plowing billions of dollars into that research via their contracts with Intel and the foundries. If the margins on those contracts aren’t sufficient to provide for further research, that’s on the head of the supplier’s pricing teams, not Apple.
- iaskwhy 13y agoThis could be interesting to analyse but those charts are not really the best, mainly the pie chart. Maybe the best way to look at research costs is to compare it to the other costs of the company (maybe with the exception of those related to the cost of building the products). I'm in no way an analyst so I might be way off on this recommendation though.
- cromwellian 13y agoNot surprising, since most of the core R&D needed happens in the supply chain -- the fabs, the screen manufacturers, the battery makers, sensors, etc. If the iWatch for example, uses new curved battery tech or curved screen, that will have arisen mostly from the R&D done by their partners. With the acquisition of PA Semi, Apple does seem to be doing basic chip R&D now. But the industry as a whole would be no where without most of the traditional semiconductor manufacturers doing R&D to keep Moore's law going. I do think it is sad that Apple, with $100+ billion in cash sitting in the bank, isn't spending more on basic research. IBM, HP, Bell Labs, Xerox, et al delivered a lot of serendipitous discoveries by spending money on stuff with no immediate product focus or return. Apple is sucking up the lion share of the mobile revolution's profits, but I think a bigger fraction of that could be channeled back into basic R&D as a whole.
- skyebook 13y agoI agree generally that there can always be more. The big difference to me is that in putting the product first, Apple is ensuring that they'll remain in a position to continue doing this. The trend is in the right direction though, their revenue for 2013 increased less than 10%[1] but their R&D expenditures have (based on a pretty coarse chart) gone up around 20%. [1] http://www.wikinvest.com/stock/Apple_(AAPL)/Data/Total_Revenues http://www.wikinvest.com/stock/Apple_(AAPL)/Data/Total_Reven...
- joezydeco 13y ago..and Microsoft, Atari, Sun, et al sunk billions of dollars into "research" groups with very little to show for it other than a bunch of concept videos and the resumes of the researchers. It's a double-edged sword.
- cromwellian 13y agoThat's the nature of R&D. There are 100 failures for every 1 success, because often, the usefulness of basic research is unknown. Modern cryptography is based on advances in number theory and abstract algebra. None of the mathematicians over the last 2 centuries who contributed to those advancements foresaw the applications. Modern GPS satellites are dependent upon general and special relativity. Einstein never foresaw it. Much of the military industrial spending that funded the creation of Silicon Valley was not specifically targeted at creating the industries that followed. The whole point of basic R&D is you don't know the economic outcome. It is a quest for knowledge. It may create the next disruptive technology or industry, or, it may not, and just be a another curiosity to be studied by academics. It's a double edged sword, but why should we want swords with only one edge (short term economic success)? Microsoft R&D funds for example, like IBM, mathematic researchers. These people are not working on products or applications, they're working on proving theorems. I don't fault Microsoft for "wasteful" spending. Research and Development is a genetic algorithm for searching the fitness frontier of knowledge space. A whole lot of organisms, or ideas, have to die, before local optima can be broken out of to find the next peak.
- colinbartlett 13y agoPie chart: The world's worst way to display time-series data. http://o.aolcdn.com/hss/storage/adam/2c59e6862a532820a9854bd3e7517688/Apple%20R&D%20Piechart.png http://o.aolcdn.com/hss/storage/adam/2c59e6862a532820a9854bd...
- pohl 13y agoIt's natural to ask: "Of all R&D expenditures, what percentage came from each year?"
- sheetjs 13y agoA time-series series (cumulative sum) would also answer the question, and could actually be plotted on the same chart as the original series. On a side note, time series is not a great phrase for the original data set ("time sequence" would have made more sense, since the numbers shown are not cumulative)
- chockablock 13y agoYes, a cumulative sum would have done a much better job than that pie chart at illustrating their point (from the text: "Apple over the last four years spent more on R&D than it did during the preceding 15 years combined") Also note that 'time series' is a well-defined and widely-used term that exactly describes the dataset presented here (http://en.wikipedia.org/wiki/Time_series http://en.wikipedia.org/wiki/Time_series).
- deleted 13y ago[deleted]
- datawander 13y agoBut if that is displayed as a line chart, that clearly displays the year-over-year differences. So if someone wants to ask "what is the overall trend of spending over the past five years?" that is nearly impossible with the pie chart. Pie charts are by far one of the worst forms of graphs ever devised and should be killed off as a concept for good, as in, please remove this from Excel.
- umsm 13y agohttp://o.aolcdn.com/hss/storage/adam/3924d8cabc4e8469af6fa91259881564/R&D%20global%202013.jpg http://o.aolcdn.com/hss/storage/adam/3924d8cabc4e8469af6fa91... One question: Why is VW's R&D spending so high? It's BILLIONS more than other car manufacturers.
- chebum 13y agoThey build cars in many segments. Tesla build one model, while VW has 27 models (from their german website) + commercial vehicles. Also, they own several brands like Audi, Bentley and some others. Most of them has a wide model range.
- james4k 13y agoYeah, take a look: https://en.wikipedia.org/wiki/Volkswagen_Group#Subsidiaries_and_marques https://en.wikipedia.org/wiki/Volkswagen_Group#Subsidiaries_... Bugatti and Lamborghini are fun to note, though probably insignificant against VW's entire R&D budget.
- cweiss 13y agoI noticed that as well - One wonders what % of that expenditure is on improving R&D processes to lower costs, assuming that most of that cost is on non-renewable hardware modeling (hurling one-off test cars at brick walls and such). Also, is racing considered part of the R&D budget?
- grannyg00se 13y agoPerhaps they spend slightly less than others, but what interests me is that there is an exponential growth of R&D spending over the last five years with no real innovation (in my opinion, since the iPhone). And Microsoft has been spending consistently around 15% of their revenue on R&D. For what? Higher pixel density and an OS with tiles that can be swiped on touch screens? Is R&D really that low ROI? We're talking about tens of billions of dollars here.
- amenghra 13y agoIn a lot of cases, you won't notice the result of every dollar spent on R&D (until much later on, when the technology becomes mainstream). For e.g. siri: might just seem like voice-to-text to you, but there's probably a ton of stuff happening in the backend in the fields of ai, scalability, personalization of the results, etc. Some of this stuff might have been known problems with known solutions, other things might have been applied research.
- wmf 13y agoRemember that Apple is releasing a new product category in 2014; the R&D for that has been paid over the last few years.
- mempko 13y agoThe best chart shows percent of sales. Shows how lazy they got the last couple of years ;-)
- ArbitraryLimits 13y agoNormalize to show percent of revenue and then we'll talk. A time series of $$$ allocated to R&D is basically going to show when the company's growing and when it's shrinking, the same way a heat map of who clicks on furry porn is basically going to show population density. I realize there's a chart of $$$ allocated to R&D as a percentage of sales but that's not quite right either.