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Apple’s CFO explained why its research and development costs increased to $2.8 billion
Alex Grimm/Reuters
Apple CFO Luca Maestri.
Apple spent $2.8 billion (£2.2 billion) on research and development in its most recent quarter, and $10.39 billion (£8.36 billion) through 2016, according to its fourth quarter earnings report.
Analysis of Apple’s quarterly earnings over time show that annual spend is its highest ever.
According to chief financial officer Luca Maestri, research and development spend is Apple’s biggest differentiator from the competition, and stems from the company’s expansion into new areas.
Speaking at the Goldman Sachs investor conference on Tuesday, Maestri said Apple was “working on things that do not generate revenue today” but might be good future bets. Apple made the interview available through its investor relations site.
Maestri didn’t go into specifics, but rumoured projects on the books include the Apple Car and augmented reality glasses.
Apple’s suite of products is much larger than it used to be, Maestri added. “We make three iPhones, we only used to develop one. We develop multiple iPods, the Apple Watch, Airpods, Beats headphones. The product portfolio is larger, so we need more R&D [budget] to develop these.”
The company is spending more on its growing services business, which includes the App Store and iTunes. “Services has grown a lot,” Maestri said during the interview. “We need engineering investments in services like iCloud, Siri, Maps. R&D on services is significantly higher than we used to have.” Services jumped by almost $1 billion (£804 million) in revenue this last quarter, to $7.17 billion (£5.8 billion).
Finally, there’s Apple’s increased focus on bringing core technologies in-house. Maestri said:
“[R&D spend] allows us to keep our differentiation from the rest of the industry. Today, we do much more in-house development of some fundamental technologies than we did a few years ago…think about the work we do around processors, sensors, there’s much more work in-house than we used to do. It means we can push the envelope on innovation, we have better control over timing, cost, quality. We look at that as a great strategic investment for us.”
Apple opened an R&D centre in Israel focused on chip development in 2015, and new centres are set to open in Yokohoma in Japan, Jakarta in Indonesia, and an unspecified location in China.
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