Apple is spending billions on secret R&D projects -- and it keeps spending more

Apple revealed on Tuesday that it continues to invest increasingly more money on research and development.

Apple spent $2.8 billion on R&D last quarter. That’s up from $2.4 billion a year ago. In total, Apple spent $10.39 billion on R&D in 2016 — its highest annual spend ever.

Last year, as Apple’s overall revenue was dropping, it seemed as if Apple might cut back on R&D spending. Reports about Apple refocusing Project Titan, its electric self-driving car project, also suggested that perhaps the company would cut back on R&D spending.

But this recent quarter dispelled that notion — Apple may even be accelerating its R&D spending.

Take a look at these charts:

This doesn’t mean that Apple is one of the biggest R&D companies in the tech industry. As a percentage of revenue, Apple’s R&D spending lags behind companies like Facebook, Alphabet, Microsoft, Amazon, Qualcomm, and Intel.

Apple also spent more on stock buybacks in 2016 than it did on research and development.

It’s undeniable, however, that Apple continues to spend more money on research and development as it looks for a new product to compliment the iPhone as its main growth engine.

Here’s what Apple could be spending its R&D money on:

  • The long-rumoured Apple Car. Although reports suggest that Apple is focusing on self-driving software instead of a full electric car, it still has hundreds of employees working on the project.
  • Something in augmented reality, technology that integrates computer graphics and the internet into the real world. AR is a key focus for Apple and the company is working on a pair of AR glasses.
  • Something in the medical world — perhaps a new way to communicate with doctors or improvements to the health functions on the Apple Watch.
  • Chips. One of Apple’s key strengths is its chip designers, and it recently opened a R&D center in Israel focusing on chips. It frequently patents new techniques for manufacturing chips.
  • In fact, Apple has recently opened or announced plans to open R&D centres in Japan, China, Indonesia, France, Japan, Sweden, and the UK. Keeping the lights on in those facilities and paying employees can add up.

Last year, Apple CEO Tim Cook was asked about the increase in R&D spending. He said:

“The products that are in R&D, there is quite a bit of investment in there for products and services that are not currently shipping or derivations of what is currently shipping. So I don’t want to talk about the exact split of it, but you can look at the growth rate and conclude that there’s a lot of stuff that we’re doing beyond the current products.”

Apple’s reluctance to spend a ton on R&D goes all the way back to founder Steve Jobs. “Innovation has nothing to do with how many R&D dollars you have,” he said in 1998.

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