What you need to know
- Apple is spending more than ever on research and development.
- R&D account for 7.9% for its revenue this part quarter.
- Apple is now on pace to spend $16 billion in R&D in 2019 as it preps for life after iPhone dominance.
Apple is spending more than ever on research and development. According to a CNBC report, Apple dropped $4.2 billion on R&D during the third business quarter of 2019, accounting for 7.9% of its revenue, the highest percentage since 2003.
The rising cost isn't out of the ordinary for most big tech companies, but it is for Apple who usually keeps the overall R&D number down. Microsoft and Google, for example, spent 13.4% and 15.7% of their revenue on R&D respectively. But as Apple moves to a future that relies less and less on the iPhone, it must spend money to find ways to offset declining revenue.
During the third quarter, iPhone revenue fell 12%, continuing an ongoing slide. Luckily, services and wearables picked up the slack. However, Apple wants to continue balancing its product and service offering and for that, it is spending more on R&D than ever and it has already stated that will continue moving forward.
Here's what Apple CFO Luca Maestri had to say on R&D spending during the Q3 earnings call:
We want to improve the user experience and differentiate our products and services in the marketplace. So, we will continue to do that. There are some types of investments, of course, that are very strategic for us and they will have long-term implications.
Apple is now on pace to spend $16 billion on R&D in 2019.
Part of that was the recent Intel purchase and the continuing development of services like Apple Music and Apple TV+. Look for Apple to invest even more on its product lineup as it tries to establish new hit products for years to come.