Why Is Apple Spending Only 2 Percent of Its Money on Research and Development?

Illustration for article titled Why Is Apple Spending Only 2 Percent of Its Money on Research and Development?

Apple is filthy rich. It sold four million phones in three days. It's worth more than Exxon. It's got a staggering stockpile of cash, just sitting around. So why does it spend merely 2.2 percent of revenue on cooking concepts?


ZDNet reports Apple's R&D funding is miles behind competitors like Google and Microsoft, who doled out 14 and 13 percent of their revenues to internal labs, respectively. So why the gap? Apple's 2.2 percent marks a ten year low. Even with a commanding presence in the smartphone game, and complete dominance among tablets, why wouldn't Apple spend more on ideas?

There's more here than it seems. First, Apple's R&D spending is actually increasing—it's just that its massive cash-raking is outpacing its research as a portion of the whole.

Second, Apple's a very different company compared to a Google or Microsoft. It makes a variety of computers, yeah, along with MP3 players, phones, tablets, and requisite software. But that pales compared to Google, which cooks up so many experimental features that it has to kill off the failed ones in droves. Microsoft, to serve its sprawling software wing and vanguard videogame business, has a prominent and decidedly separate R&D operation—Microsoft Research—which chews through cash like cheesepuffs working on everything from speech technology to quantum computing to funding Jaron Lanier's latest trippy ideas.

And there's a cultural difference there. Google has its employees locked into pet projects, yeah, but earmarked a bunch of money for its Labs. Microsoft has Research—experimentation is segmented away from the rest of the show. But Apple's engineers function as a sort of dispersed R&D lab, beyond whatever dedicated operation they run.


Still, it makes me wonder: if they can accomplish this much with so little, what if they were to spend Microsoft money on wild new things? [ZDNet]


Photo by Al Fenn/LIFE

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How much R&D do you need to slap a good interface on existing technology? Steve Jobs has said as much. Use existing technology and then add the 5% proprietary magic to tie it together.

Not to mention Apple only has 4-5 notable products.

Mac Pro (Most Components by Intel, Nvidia, etc.)

Macbook (Most components by Intel, Nvidia, etc.)

iPhone (Most components by Imagination Technologies, ARM, Samsung etc...)

iPad (Most components by Imagination Technologies, ARM, Samsung etc...)

OSX (Mostly BSD/UNIX).

Google has to build almost everything from the ground up. There are no search engine components they can put together to build a search giant.

Microsoft has a hundred thousand million different products. WP7, Xbox, Azure, Office, Windows, .NET, SQL, Peripherals, Visual Studio, Surface, Kinect, DirectX, Bing etc...

Apple usually only enters a market once the substantial problems have been solved. They waited until wireless networks were fast enough to deliver web over a smartphone and capacitive touch screens were affordable. They had 10 years of trial and error on the part of their competitors to draw from.