28 Comments

Summary:

For a company that manages to debut a new product line every few years that seizes the public’s attention worldwide, it is rather amazing to see how little Apple spends on research and development as a percentage of its sales compared to its peers.

Pink Piggy Bank

Updated. For a company that manages to debut a new product line every few years that seizes the public’s attention worldwide, it is rather amazing to see how little it spends on research and development compared to its peers.

Update: On Monday Apple number cruncher extraordinaire Horace Dediu at Asymco put together some charts showing how Apple’s R&D spending trends. While Apple spent $758 million on R&D during the first fiscal quarter of 2012, it’s a very tiny sliver of the company’s overall sales, which were $46.3 billion. What’s most interesting to me is how Apple’s R&D spending as a percentage of overall sales ranks among the industry heavyweights. While $758 million is a lot of money, it’s lags behind the $2.3 billion Microsoft spent on research and development during the same quarter, and Google’s $1.3 billion.

Here’s a chart showing how Apple ranks among its tech industry peers:

Credit: Asymco

Apple sits right below Hewlett-Packard and just above Dell — two companies that haven’t produced anything truly interesting in the consumer realm in years. And it is far below the often innovation-challenged behemoths Microsoft, Nokia, RIM and others.

The takeaway is this: Bloated bureaucracies spend a lot of money on innovation and occasionally make something new and interesting. Steve Jobs’ insistence on maintaining a startup mentality within Apple (even with 30,000+ corporate employees) and the company’s ability to only focus on a few things at a time mean Apple can spend less and get much more for its investment.

Thumbnail image courtesy of Flickr user kenteegardin

  1. Or…2.8% equals a whole lot more money for Apple than it does for anyone else.

    A more relevant question would be the real dollar amounts.

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    1. You’re right, this is not totally clear without the real numbers. I’ve updated the post to include the actual dollar amounts for the most recent quarter.

      Also note that the 2.8 percent the chart refers to is a percentage averaged over 5 years.

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  2. You say that it can spend less but it’d be interesting to see what this chart would look like in terms of actually money spent. I suspect that would shoot Apple much further up the chart.

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    1. Yes, if you click through to the full article on Asymco’s site you can see more about the company’s absolute R&D spending.

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    2. True, since
      1. They earn that much.
      2. They don’t really innovate nowadays. For example, iOS 5.

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      1. http://www.patentlyapple.com/

        DISAGREE – seriously. Spend about an hour on the site, you’ll change your mind.

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      2. Steffen Jobbs Monday, January 30, 2012

        Yes, I’m sure that an Android fanboi would say that Google is doing all the innovating with Ice Cream Sandwich and Google+. WTF. iOS 5 is kicking the crap out of ICS in terms of stability and ease of use.

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  3. I think that this is not because Apple spends so little money on R&D, but because they make so much on sales that the proportion of sales:R&D is much higher and more skewed. The percentages are very interesting, but I’d like to see what it would look like when you consider the amount of R&D money and not the ratio of sales to R&D money.

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    1. Well that was the point of the article, ROI (return of investment). This is usually always measured in percentages. It is trying to demonstrate which companies get the most for what they spend.

      If you specify the actual amount, then it would be meaningless without also knowing how much they made. A percentage tells you this without the need of either.

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  4. The takeaway is this: they rely on their manufacturing partners to innovate in the hardware. And they buy other companies to innovate in software (pssst: they didn’t invent Siri). It has absolutely nothing to do with “bloated bureaucracies”. Anyone that thinks Apple isn’t just as bloated as their competitors is living in a pipe dream.

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  5. The chart is misleading and you seem to have fallen for it. Please understand that 2.8% of Apple’s sales can be much higher than 13% of Nokia’s sales.

    Furthermore, it does not tell us that Apple’s strategy is the right one. R&D pays of in long run and hence it is quite possible that Apple lose out to its competitors if it under-invests in R&D.

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  6. A big factor in Apple’s ability to maximize its return on R&D is they have far fewer products than their competitors. At any given time, they only introduce one new phone – they may have 3 or 4 on the market, but all but one of those are older models. Tablets? one new one, one old one. Desktop computers? Two. Laptops? a couple variations on each of 2 basic models. Compare that with other mobile device and computer mfrs, they can spend more on each product, but less overall.

    I cannot understand why HTC, Samsung, and Motorola (and the company that used to be Nokia) have as many model phones as they do. Well, I can think of one reason. Because they are so desperate for carriers to sell their phones, they will let the carriers define them. As a result, they have to develop way too many different phones. They are seduced by the gross margins that the subsidies, financed by carriers’ illegal bundling of service and equipment creates, enable, but it ultimately does not yield higher profits, as they must constantly develop new models to keep their carrier “partners” happy (all while ignoring the fact that the carriers play the manufacturers against each other for their own benefit). One more reason why bundling should be stopped. Sorry for the tangent.

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  7. Agreed with every commentor below. Percents mean absoluely nothing here (to show how ‘little’ Apple spends on R&D) except that Apple products are hugely successful. Real numbers tell a lot more.

    Sometimes I agree with the news organizations that amateur blogs are a joke for real or accurate news. :/

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  8. Besides actual numbers vs. percentage.
    Don’t know if anybody has done any research how much new data any given organization can handle. Would be interesting to know how size and organization structure impact data handling. But there most likely is a limit, just like any given person has a limit. I believe some organizations produce data without learning anything.

    In other words if Apple has found the sweet spot where adding more data will only result into limited knowledge accumulation from there on, good for them. Doesn’t mater if the data is acquired or created internally,as long as it can processed in a meaningful (knowledge) way. As long as it is not discarded without learning from it.

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  9. isnt HP about to revolutionize computer memory? – money well spent

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  10. a camel is a horse built by committee (do you see that microsoft)

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