Why has Apple tripled its R&D spending to $10 billion?

Neil Cybart makes the case for a car.

From Cybart’s Above Avalon:

“People are focusing on the wrong thing when analyzing Apple’s path forward in the face of slowing iPhone sales. Instead of debating how much Apple will try to monetize the iPhone user base with services (not as much as consensus thinks), the company is instead planning its largest pivot yet. There are only a handful of logical explanations for Apple’s current R&D expense trajectory, and all of them result in a radically different Apple. In a few years, we are no longer going to refer to Apple as the iPhone company.” 

“Project Titan” in the chart above, in case you’re not up on the latest Apple rumors, is code for the Apple Car. Cybart, a former securities analyst turned $10/month blogger, is long past wondering if the project is real or whether it will ever see the light of day. He’s moved on to identify what he calls the The Car’s “iPhone” Moment:

“The car’s ‘iPhone moment’ will likely end up being an idea—thinking of cars as extensions of our homes—personalized rooms on wheels. While most think the way to build such a product is to simply add software to a car dashboard, the answer is actually found by rethinking the most important part of a car—the seat.”

Cybart makes a surprisingly strong case for the car seat as the white hot center of automotive disruption. He almost had me convinced.

Below: Apple’s R&D expenditures tripled between 2012 and 2016.

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7 Comments

  1. Gianfranco Pedron said:

    Neil Cybart says: “… the answer is actually found by rethinking the most important part of a car—the seat.”

    I disagree. The next big disruption in the automobile industry will be the introduction of high density, lightweight, transportable energy as well as methods for economically and efficiently converting that energy into motion and producing that form of energy.

    Everything else, such as self driving cars shaped like half used bars of soap to displays replacing windshields is simply fluff and fodder for blogger articles similar to the ideas presented in the fifties depicting cars of the future.

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    May 12, 2016
    • David Emery said:

      Hmmm… In 20 years, you may be right. But in the next 10 years, as cars move (slowly!) towards full autonomy, it’ll be the non-propulsion things that differentiate them.

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      May 12, 2016
      • Gianfranco Pedron said:

        Then again, with today’s announcement that Apple invested $1B in China’s Didi Chuxing (UBER competitor) autonomous transportation pods hailed, paid and given destination instructions by smart phones might be just the ticket for revolutionizing personal transportation.

        Imagine, thousands of Roomba-like vehicles with seats and enclosed cabins flitting about in harmony and finding their way to a recharging station when batteries run low. … who knows, maybe even picking up litter along the way.

        AND somebody makes batteries and charges for Roomba iRobot vacuum cleaners under the brand name … wait for it … Titan!

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        May 12, 2016
  2. David Drinkwater said:

    Most important, I think, for investors, is not *what* Apple is investing in, but the lag between R&D and sales/profits. I tried to find the article that Horace Dediu wrote on Asymco on the very topic, but my intellectual energy ran out before my intellectual lassitude took over (long day). There was an interesting correlation, though. It bodes well for the future.

    I’m vaguely worried that I have my R&D spend and my OpEx/CapEx spend conflated.
    (There, I may be tired, but I used some big words. Time to go get a cookie.)

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    May 12, 2016
    • David Drinkwater said:

      PS Look at the shape of that curve. It’s aimed to infinity (and beyond!).

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      May 12, 2016

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