Apple R&D consumption increases, meets & # 39; Tim Cook doctrine & # 39;
Apple CEO Tim Cook delivers the keynote address during the Apple Worldwide Developer Conference (WWDC) in 2019 June 3, 2019 in San Jose, California.
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Apple spent $ 4.2 billion on research and development in the quarter ended June, the highest quarterly amount it has ever spent on research and development, according to the quarterly earnings report.
Apple's R&D bill came to 7.9% of total revenue, the highest percentage since 2003, when Apple continued to focus on iPod and Mac. Apple is spending more than $ 1[ads1]6 billion on research and development in 2019.
R&D spending is coming because Apple's cash cow, iPhone, has seen sales. iPhone sales last quarter were down 12% from the same period last year. So Apple invests in core technologies that can power devices that haven't been built – but open technology development and exploration cost a price.
Historically, Apple has been a success behind other top tech companies in terms of user as a percentage of sales, and it still is. In June quarter, Microsoft spent 13.4% of R&D sales, and Google spent 15.7% of R&D sales.
Analysts have noticed Apple's rising R&D costs. On Q3 earnings, an Apple CFO analyst asked Luca Maestri if the company expects to continue to spend a growing amount on investment, and he said the trend will continue.
"We want to improve the user experience and differentiate our products and services in the market. So we will continue to do so," Maestri said. "Of course, there are some types of investments that are very strategic to us, and they will have long-term implications."
Maestri picked up Apple's recent $ 1 billion purchase on Intel's modem division, which came with 2,000 employees, its largest acquisition ever from an employee integration standpoint. (It spent $ 3 billion to buy Beats in 2014, but that company had fewer employees.)
"You've seen the announcement we made about the Intel acquisition. Very important strategic for us. It requires advance investment, of course," Continued Maestri.
Apple declined to comment beyond the accounts and Maestri's comments.
Tim Cook Doctrine Requires Money
Apple CEO Tim Cook explained the Intel acquisition with a phrase known as "Tim Cookery" among Apple observers.
Apple has a "long-term strategy for owning and controlling the primary technologies behind the products we make," he said.
Primary technologies require a lot of investment.
Apple is now developing the processor on its iPhones, for example, rather than buying chips from companies like Qualcomm. This requires skilled engineers and specialized equipment, often rented or purchased in competing markets, such as Silicon Valley or Israel.
The strategy may work. Apple also developed its own Bluetooth wireless chip, which was one of the key technologies behind the company's AirPods, which is now a big part of Apple's growth engine, portable devices.
"And we have the portable area that does very well. We stuck with it when others might not and really put a lot of energy into this and a lot of R&D and are in a very good position today," Cook said on call.
Apple does not discuss upcoming products. But it probably also spends a lot on technologies that can take years to hit the market.
Apple's "Project Titan" reportedly works on self-driving car technologies, and has hired execs from Tesla and other companies. The automotive engineers and facilities are not cheap.
Apple has also invested heavily in augmented reality, a technology that uses sophisticated cameras and computers to place digital objects in the real world. Apple currently offers a set of developer tools to help you create AR apps for iPhones, but Apple has posted many positions for "technology development" jobs that suggest they are staffed for a bigger turn in the market, something Cook previously said will "deep." Analysts and media outlets say the company is working on a set of AR glasses for consumers.
Maestri said last week that Apple was comfortable with operating expenses, which include sales and marketing in addition to R&D, and compared what Apple uses favorably with its competitors.
Another comparison: Apple's R&D spending is still a fraction of what it spends on stock repurchases. Apple said it spent $ 17 billion to buy 88 million Apple shares during the quarter, over four times what they spent on R&D.
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