As a result of massive expansion of Apple’s product lineup, the company’s spending on research and development is continuously growing. During the fiscal year 2012, which ended September 28, 2012, the company spent $3.4 billion on R&D, a massive 39% increase from the previous fiscal year.
Even though Apple is not known for massive spending on fundamental research, its R&D budget nearly doubled in the last two years as a result of broadening product lineup as well as increasing complexity of new software and hardware projects. Back in fiscal 2010 the company spent $1.782 billion (3% of net sales) on research and development, in FY2011 the R&D budget increased to $2.429 billion (2% of net sales) and in FY2012 it grew to $3.381 billion (2% of net sales), according to the company’s Form 10K statement. Another reason for increased spending is Apple’s attempt to create unique products that will be sold at significant price premium.
“[Apple] continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, [Apple] expects to make further investments in R&D to remain competitive,” a statement by Apple reads.
Apple believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications, and related services. To maintain that position, Apple must make significant investments into research and development. In contrast, many of Apple’s competitors seek to compete primarily through aggressive pricing and very low cost structures, “and emulating” the company’s products.
“[Apple’s] research and development spending is focused on investing in new hardware and software products, and in further developing its existing products, including iPhone, iPad, Mac, and iPod hardware; iOS and OS X operating systems; and a variety of application software and online services,” another statement by Apple reads.
Starting from 2007, Apple considerably broadened its product lineup with iPad media tablet, iPhone smartphone, Apple TV, iPod touch portable digital media player and numerous supporting products and technologies that enable premium user experience. Starting the year 2010, the company started to design its own system-on-chip solutions for its products, which naturally increased the headcount of R&D personnel, but allowed Apple to further differentiate itself from the others. With the almost inevitable launch of Apple HDTV range in the coming years, Apple’s spending further increases and likely gets more fundamental as the company has to explore things like natural user interfaces (NUIs) beyond Siri and other fundamental technologies.