Apple’s Sky-Rocketing R&D Budget Hints at Big Things to Come

by Matt Klassen on May 13, 2016

apple nextIf there’s one sure sign that Apple is eyeing some revolutionary product release, it’s a sharp increase in the company’s research and development budget. Now after several years of lacklustre product releases and flagging sales, Apple’s R&D spending is estimated to top $10 billion this year, and unless Apple is blowing all of that on some silly wearables project, it suggests that the company is planning its “largest pivot yet.”

“Apple is now on track to spend more than $10 billion on R&D in 2016, up nearly 30 percent from 2015 and ahead of even my aggressive estimate,” writes Apple watcher Neil Cybart. “This is a remarkable feat considering that Apple was spending a little over $3 billion per year on R&D just four years ago.

By contrast, Apple’s R&D spending in 2007 when it released the original iPhone was a meagre $800 million, growing to just under $1.8 billion when the first iPad was introduced.

But while the increased spending is evidence that Apple may be trying something new, I for one am taking a sceptical, wait-and-see approach to all this, as truth be told Apple hasn’t been able to knock one out of the park for many years now, content for far too long with hitting mere singles and doubles.

So what might Apple be planning with such increased investment in R&D? Cybart notes three possibilities:

1) Apple’s expanded product line requires additional R&D. Simple and straightforward, Apple needs more R&D spending to simply keep pace with the growth of its product line. Invested in four major hardware categories (iPhone, iPad, Mac, and Apple Watch), such an increase in investment could just be the cost of doing business.

2) Apple plans on doing more. Also relatively simple and straightforward, Apple is planning on expanding on its current offerings, meaning more products releases, increased services, and more software upgrades.

3) Apple is looking to pivot. This most intriguing option by far, that Apple has increased its R&D spending because it’s looking to pivot into another industry, outside of its current comfort zones. Beyond hand-held consumer tech, in this case Apple would be “literally building a new company with additional capabilities and strengths.

Given the exponential increase in R&D spending, Cybart is thinks that the third option is the most likely, and that the company will pivot into one of two areas: wearables and transportation.

While many have thought recently that Apple’s car project was all but dead in recent months, Cybart thinks that there is a strong possibility the additional investment is geared directly towards entering the automotive industry.

“In reality, people are grossly underestimating the odds that Project Titan will lead to Apple actually shipping an electric car. At this point, I peg odds of Apple selling its own electric car to be at least 80 percent,” Cybart writes.

While I remain sceptical that Apple has the ability to once again revolutionize the tech market, I can, at the very least, say that this is tangible evidence that the company is poised to try, and that’s already significantly more than what we’ve seen out of Cupertino over the last few years.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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