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Apple’s R&D investment grows by $2,655 million, this is what it tells us about its future

After the presentation of financial results with bittersweet news for analysts and a significant drop in the share price, Apple has published its annual results. Focusing on fiscal year 2018 (October 2017 to September 2018), we can now see how Apple’s R&D investment has evolved .


Apple’s R&D investment grows by $2,655 million, this is what it tells us about its future
Apple’s R&D investment grows by $2,655 million, this is what it tells us about its future

The most significant change is that has grown by $2,655 million . The biggest jump in its history. Let’s take a look at its implications.

Apple R&D in 2018: that’s how it’s changed

When you compare Apple’s R&D growth with previous years, it is clear that this year, 2018, just closed, has been a very important year. Let’s see how the general picture of the last 18 years looks like:

In this graph you can see the evolution of the first years, just coinciding with the development of the original iPod and iPhone . But in the last five years, the growth has been gigantic. The trend measured as a percentage year on year tends to be downward, but on a much larger basis.

If we look exclusively at the growth (year N – year N-1), we would obtain this graph. The year 2018 has meant a growth of 2,655 million over 2017 , the biggest increase in the history of the company. And it is quite a lot, since the previous record was held in 2015 with just over 2,000 million dollars.

At AppleYes, records again: Apple’s financial results in its last fiscal quarter of 2018

A second reading of this data makes us wonder what happened in 2016 and 2017 . In 2016, revenues fell significantly, dragging with them the profits, to recover slightly in 2017. Investment in R&D is usually linked to these variables, which is why growth in R&D suffered (even if it remained positive).

These are the five areas where Apple invests its R&D

Not only does Apple’s R&D investment not stop, but continues to grow at an impressive rate . At this point, we should ask ourselves what Cupertino’s company might be investing that money in:

  1. New generations of existing products: the most obvious bet. The latest iPhone and iPad Pro incorporate Face ID, a substantial improvement in the way Apple devices are protected and unlocked. The new screens of these devices with smaller frames as well as the use of recycled materials are not cheap initiatives.
  2. Vertical Integration of Key Components: Increasingly, we are seeing news that Apple is taking control and developing certain components of its products that were previously in the hands of external suppliers. The GPU in iOS devices is one of the latest examples.
  3. Exploration of new products: probably the most risky of all. Unlike other companies, Apple explores new products and insider categories. Most of these tests do not result in new products, although we sometimes see traces of them in the form of patents. The products that currently have the most paperwork to see the light are augmented reality glasses and the Project Titan.
  4. Machinery and processes: the least striking of all the proposals, but of great importance. Apple also explores new ways to build its products on a large scale and with the quality it needs, which implies investing in new tools that meet that objective.
  5. R&D centers around the world: with little noise, Apple has opened new research centers around the globe. In particular, there are facilities in Israel, Indonesia, India, China, Japan, Germany, France, Italy, the United Kingdom, Sweden, Ireland and, of course, the United States.

Injecting more budget into all these incentives is very risky. R&D is not something that can be turned on and off at will, but requires a constant effort to be worthwhile. That’s why the regular increase of this section of Apple’s operating expenses is a sign that the company hopes to be able to maintain them in the future.

At AppleThe long road of Imagination Technologies and the Apple GPU

In other words, it’s proof that you’re confident enough that your income and benefits are insured to some degree.

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