Apple in the market is closely tied to the company’s innovation strategy, with consistently substantial budget allocations over the years.
Competition is increasing in the technology sector, but Apple maintains its lead by constantly releasing new products and innovative services that align with its loyal customer base.
Data collected and calculated by Finbold on December 8 shows that between 2018 and 2022, Apple spent a total of about $97.37 billion on research and development (R&D). Within five years, Apple’s spending on this segment increased by 84.33%, from $14.24 billion in 2018 to $26.25 billion in 2022.
Why is Apple’s innovation spending increasing?
model Apple’s spending is partly in line with the company’s business, which emphasizes finding ways to create disruptive innovation and gain a competitive advantage. The American technology company has maintained large spending on R&D aimed at improving the user experience, distinguishing its products and services from the competition in the market.
Notably, Apple’s 2022 spending is still growing despite the global economic downturn, characterized by high inflation and the risk of interest rate hikes. Apple’s response to the current economic crisis provides a glimpse into how the company values its R&D department. For example, Apple halted hiring for some jobs, excluding the R&D department, as a measure to reduce budgets when uncertainty prevailed.
The Meaning of Apple’s R&D Spending
Spending on R&D can also mean that Apple will have more products and services in its research line beside the current iPhone, iPad, Mac, and Apple Watch. Moreover, this budget shows the company’s potential in pivoting to other new products and services, beyond the “golden egg” iPhone.
Innovation spending also informs Apple’s strategy in finding ways to own and control the technology that powers its key products. Apple has made acquisitions to strengthen the foundation for building new products and services.
Moreover, R&D will help Apple towards more revenue besides strengthening the brand image. Apple has maintained a loyal customer base thanks to its strong brand image over the years. Therefore, the company must invest more in product research to keep this status.
Regulatory oversight
However, despite the rapid increase in spending, Apple, like other tech giants, still faces hurdles of regulatory scrutiny. In recent years, the company has come under closer scrutiny from antitrust regulators.
It is worth mentioning that despite maintaining R&D spending, according to analysts, the US technology giant is lagging behind its competitors. In this case, Apple has no choice but to allocate more money to innovation.
Overall, Apple’s R&D spending does not guarantee profitability or good stock performance. But it can start to pay off when research projects are successful. Similarly, Apple can also suffer from poor performance even after pouring a significant amount of money into innovation.