Although its critics will claim otherwise, Apple is still a very innovative company. Sure, it has its share of stinkers — we’re looking at you, Apple Music — but it’s also been ahead of the pack when it comes to features such as implementing 64-bit chips in phones, creating new ways of interacting with touch-based technology such as 3D Touch, and being the first company to use biometrics as the linchpin of its mobile payments service. And yet, the company spends a smaller percentage of its revenue on research and development compared to Google, Facebook, and just about every major player in tech.
What gives?
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A terrific report in Bloomberg Businessweek explains that Apple has never been about spending the most money on R&D, although it has picked up its spending in this category a lot over the past couple of years. All told, Apple now spends 3.5% of its revenue on R&D, whereas Google spends 15%, Qualcomm spends 22% and Facebook spends 21%. That said, Apple is still spending $8.1 billion a year on R&D, which is higher in nominal terms than any of the above mentioned companies other than Google.
One reason Apple doesn’t have to spend 15% or more of its revenue on R&D is that a lot of third-party component suppliers are in fierce competition to win its business every year and thus offer the company its cutting-edge hardware innovations. In other words, Apple’s component suppliers do a lot of work on its behalf in the hopes of winning its very lucrative business.
