September is nearly here, which brings such certainties as shorter days, cooler nights, and the announcement of Apple gadgets.
The company traditionally holds an event in the first or second week of the month, which in recent years has generally been when the world is introduced to its latest iPhone, and whatever other new gadgets Apple has been working on. But it’s been a while—with your definition of “a while” correlating to how impressed you are by recycled gadget ideas—since Apple has come out with something truly unique. Most of its recent products—which are generally still well-designed, high-quality devices (ignoring its laptops)—have just been refinements on existing device lines. Even in the early rumors for what’s expected in September, the consensus so far has been an iPhone with four cameras instead of two, and Apple Watches that come in titanium.
Over the past two decades, Apple has spent $68.7 billion on research and development. And there appears to be no slowing down this year: Over the first three quarters of 2019, the company has spent an additional $12.1 billion on R&D. While the amount of money it’s spending remains quite small as a share of its annual revenue, given the amount of revenue Apple is generating these days, it’s still an absolute ton of money.
Apple’s most revolutionary product to date, the iPhone, was first released over a decade ago, back when the company was routinely spending less than $1 billion per year on research. Some of its biggest new product launches to date are the direct result of that product: the iPad is, effectively, a scaled-up iPhone, and the Apple Watch is a compacted version—which itself was first announced five years ago.
So what is Apple spending this vast research budget on? When will we see something other than iterative updates on existing products? Its latest annual report, rather unsurprisingly, does not provide much insight:
The year-over-year growth in R&D expense in 2018 was driven primarily by increases in headcount-related expenses, infrastructure-related costs and material costs to support expanded R&D activities. R&D expense increased during 2017 compared to 2016 due primarily to increases in headcount-related expenses and material costs to support expanded R&D activities. The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace, and to the development of new and updated products and services that are central to the Company’s core business strategy.
Basically, it sounds like Apple is spending more money on R&D each year because its R&D department is getting bigger. But what those researchers are doing remains unclear.
Apple’s business model has shifted slightly in recent years. The iPhone, its longtime cash cow, has failed to find new homes in countries where there’s no affinity for Apple’s brand, especially when homegrown models can do the same things for far cheaper. As a result, Apple has pushed itself to deepen the relationship it has with existing customers, offering them a range of new subscription services, including magazine digests, streaming music, and a forthcoming TV service with original programming.
While its services business has grown impressively in recent years, Apple is at its heart a hardware company. It’s entirely possible that there may be a future where we think of Apple as primarily a software company, much like the shift IBM has painfully undergone, but given the sheer amount of money it’s spending on research, it seems unlikely that will be the case.
There has been chatter for years that the company is working on a pair of smart glasses, taking much of the functionality of the Apple Watch and overlaying it on the wearer’s face. It’s also ramped up its work in health tech (although that team is reportedly facing some rough times), and whatever it’s doing with autonomous vehicles remains unclear. Some of my nearer-term predictions for what it was working on back in 2016 have since come to pass, so I guess there’s still a chance a car or glasses are in the cards.
Will 2019 be the year Apple shows off something new? Or will we be resigned to another cycle of breathless coverage of likely decent updates to long-established products? We’ll probably find out in less than a month.
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