In defense of Apple's $14 billion R&D budget

Who says Apple isn't getting a bang for its buck?

From Business Insider's Apple is now one of the biggest investors in research and development and critics are wondering what it's getting for its money ($):

  • Apple has been massively ramping up its spending on research and development in recent years.
  • It now spends nearly $15 billion a year, giving it one of the biggest corporate R&D budgets in the world.
  • Analysts and investors have begun to question that spending, because the company seems to have gotten little payoff from it so far.

Despite all the money Apple has thrown at research and development, "we've seen minimal fruits of that labor," said Dan Ives, a financial analyst who covers the company for Wedbush.

My take: Where to begin? First of all, Apple hasn't stopped shipping new stuff. See Business Insider's "notable product launch" chart below, which skips Apple's AirPods (late 2016, between Apple Music and ARKit) and assumes there are zero new products in the pipeline.

Second, compared with its peers, Apple's R&D budget is actually rather modest. Its fiscal 2017 budget (listed as 2018 in the charts below) was roughly half of Amazon's. Moreover, as a percentage of revenue it was smaller than all but Hon Hai's.

Want to see the proof?

Using Business Insider's own source—Strategy&'s The 2018 Global Innovation 1000 study—I've tracked the R&D expenditures of the biggest tech spenders over the past seven years. The first chart shows dollar spending. The second shows spending as a percentage of revenue.

Not seeing the first chart? Try here.

Not seeing the second chart? Try here.

In the last year shown, Apple spent 5.1% of its revenue on R&D while Nokia spent 21.2%. Who's not getting a bang for their buck?

Finally, the full version of the bubble chart I used for my featured image.

Click to enlarge. Go to Strategy& for an interactive version. 


  1. Fred Stein said:
    Excellent refutation, Philip. Thanks.

    Several things that BI misses:
    1) The cost of top talent, especial AI/Neural Networking, NLP, Deep Learning has askyrocketed to above $500,000. They must have this talent.
    2) Apple iterates, delays, and drops projects to get it right. Thus their returns on R&D move out in time.
    3) A corollary to Item 2) is that Apple’s revenue over the long term is much higher. Hence Apple still have amazingly low R&D to sales ratios.
    4) Apple won’t reveal all of their R&D projects.

    Apple Watch illustrates Items 2), 3) and 4). Late to the market, but dominating the category. Furthermore, the other SmartWatch makers have created a fragmented mess that assures Apple Watch as the dominant platform.

    March 10, 2019
    • Turley Muller said:
      Even more than that is this figure is distorted. Any expenditures on products before it becomes available for sale is classified as R&D. All software. R&D. Annual iPhone iPad Mac upgrades. R&D. Majority of R&D expenses stems from normal cost of doing business where you keep products current and introduce improved versions. It’s not like Apple spent 15B swinging for the fences and have little to show for it. They have $265B business. Software engineers aren’t cheap. Certainly not Apple’s. They do make a delicous product.

      A lot of thinks missing from their analysis. Including that report which doesn’t even have the right fugures.

      March 10, 2019
  2. Robert Paul Leitao said:
    Apple’s success isn’t determined by the number of different products it ships. It’s determined by the way the company’s products and services enhance the human experience. Additionally, the R&D numbers don’t include the investments Apple makes each year in the acquisition of nascent technologies and services.

    Also, in the composition of each Apple product there’s plenty of R&D included in the components acquired from suppliers. The fact that Apple doesn’t spend as high a percentage of its annual revenue on R&D as other notable tech companies isn’t an indictment. It should be celebrated as an indication of efficiency in the use of the company’s resources.

    March 10, 2019
  3. David Emery said:
    It’s not clear how the Warren proposal for Apple would impact the curation of items in the store. I see the curated Apple store as a security strength.

    I might be more favorably disposed to proposals like this if they include legal liability on the part of software vendors, both for security problems and for the general notion that “software should work as advertised.”

    March 11, 2019
  4. David Sauceda said:
    Exceptional charts PED, thank you. They certainly provided a multitude of visual orgasms to stimulate the brain.

    Amazon’s aggressive 2018 R&D spending remains intriguing (a 41% YOY increase). Despite growing, developing, and/or enhancing things like AWS, payroll, infrastructure and technologies (e.g. Alexia, Amazon Go, etc.), I wonder if content for Prime Video is the main driver for this acceleration.

    March 12, 2019

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