Michal Marek There is really huge money in Silicon Valley, and quite a large part of it goes to science and research. Google's parent company Alphabet is investing in the development of autonomous vehicles, life-extending pills and robots with animal faces, Facebook is making great strides in the field of virtual reality and artificial intelligence, developing drones with the ability to expand the Internet in developing countries, and Microsoft has invested heavily in holographic glasses and advanced translation software. IBM's investment in the development of Watson artificial intelligence cannot be glossed over either.
Apple, on the other hand, is very careful with its resources, and its spending on science and research is almost negligible compared to its revenues. Tim Cook's company invested just 2015 percent ($3,5 billion) of its $8,1 billion in revenue into development in fiscal 233. This makes Apple the company that, in relative terms, invests the least in development of all major American companies. For comparison, it is good to note that Facebook invested 21 percent of turnover ($2,6 billion), chip manufacturer Qualcomm a percentage point more ($5,6 billion), and Alphabet Holding 15 percent ($9,2 billion) in research.
In the area where Apple operates, most companies believe that if they do not invest a significant portion of their income in further development, they will naturally be overtaken by the competition. But in Cupertino, they never held this philosophy, and already in 1998 Steve Jobs said that "innovation has nothing to do with how many dollars you have for science and research". On a related note, Apple's co-founder liked to point out that when the Mac was introduced, IBM was spending hundreds of times more on research than Apple.
Under Tim Cook, Apple relies heavily on its suppliers, who, in the fight for giant orders for Apple, compete to offer Cook's company. Equipping the future iPhone with its own chip, display or camera flash is a vision that is extremely motivating. Last year, Apple sold 230 million iPhones and pledged to spend a whopping $29,5 billion on components such as chips, displays and camera lenses over the next twelve months, up $5 billion from last year .
"Vendors are fighting each other to win a contract from Apple, and part of that fight is spending more on science and research," says Ram Mudambi of Temple University in Philadelphia, who studies the success of companies with low R&D spending.
However, Apple is aware that it is not possible to rely only on suppliers, and during the last three years it has significantly increased its development expenses. In 2015, such expenses amounted to the already mentioned 8,1 billion dollars. The year before, it was only 6 billion dollars, and in 2013 even only 4,5 billion dollars. One of the largest amounts of research has gone into the development of semiconductors, which is reflected in the A9/A9X chip embedded in the iPhone 6s and iPad Pro. This chip is the fastest that the current market offers.
Apple's relative restraint in the area of larger investments is also evidenced by advertising expenditures. Even in this area, Apple is remarkably frugal. Over the last four quarters, Apple spent $3,5 billion on marketing, while Google spent $8,8 billion in a quarter less.
Tim Swift, a professor at Philadelphia's other University of St. Joseph's, notes that money spent on research is wasted if the product never leaves the lab. "Apple products are accompanied by some of the most effective and sophisticated marketing we've ever seen. This is the second reason why Apple is the most productive company in terms of research expenditure.”
Well, I don't know, the article, including the title, sounds a bit pessimistic (in terms of investment in research), but it seems to me that Apple is in second place... that's not so bad. I think absolute numbers are much more telling than relative numbers. Otherwise, for a better comparison, it would probably be appropriate to compare the relative values as well - in the case of Apple, the percentages of profit are given, and in the others, percentages of turnover. It is thought-provoking that Apple itself invests about 20 times more in research than the entire Czech Republic (according to the budget of the Ministry of Education and Culture).
Percentages of turnover (=revenue) are given for all companies. Profit is not mentioned anywhere in the article.
Sorry, not a profit, but a reception... If you interpret the turn as a reception (which is consistently taken as a bad thing, because there is a "gross" yield), then ok.
would you mind also mentioning the reasons for this behavior in combination with tax optimization? Apple pays almost nothing or nothing in taxes thanks to its headquarters in Ireland, but at the same time no one is :) so the profit remains all the profit. (this one is interesting for stock holders)
Other firms may increase costs in order to reduce the tax base. It is an opportunity to launder money a little, but of course few companies reveal the cards about the cost structure, let alone the details of such a sensitive area as R&D.
Jobs said it exactly. You can throw 10 billion into developing useless nonsense and it won't get you anything. On the other hand, you invest 1 billion in a meaningful thing that will increase your sales and make you a fortune. Autonomous cars? Maybe in 30 years. Virtual reality? Mass availability zero zero nothing. Holographic glasses? A thing for a few enthusiasts. But Touch Force, for example, is something that will make you spend 25 crowns on a new mobile phone. And researching Touch force costs a fraction of what developing virtual reality shit costs. Pouring money into the research of unmarketable nonsense is not art. Being a visionary and understanding what is worth investing in is a kumšt. The question is whether Apple's current leadership will continue to be visionary enough.
"But Touch Force, for example, is something that will make you spend 25 crowns on a new mobile phone."
The world has changed, ... :oD
You're right, Touch Force is a major profit generator. But I personally see much more sense in development focused on virtual reality or autonomous cars. Not all meaningful things have to be mass matters.
Agreement. Touch Force didn't appeal to me, I'm rather looking forward to real technological innovations. Steve is gone, Apple goes back to sleep.
It's just about how you want to see the thing. If you want to see her pink, like now, then see her that way. Someone else has a much more realistic view of it. If the above theory were valid, then we all always ride in a horse-drawn wagon and call each other through two cans connected by a string. Thanks to development, we are moving forward. Everything is marketing. If you find a large enough herd of potential buyers, you will sell anything. Jobs is just another Horst Fuchs. A typical example is the Retina panel. Something new? Not Vunec. The panel that everyone else had, and at some point even better. For Apple, it was only a trade name at the time without a panel. But he managed to sell it as a top feature of his product, just as Horst did with NASA technology. What was Jobs like? A genius businessman who only found naive clients, just like Horst. Why would he invest in development anyway? He would be stupid and he wasn't. He was just not a technical visionary, as he is clumsily attributed, but a business one.