Apple spends very less on research and development (R&D) in comparison to many other prominent tech companies.
Businesses spend a lot of money in research and development. Google's parent company Alphabet is researching on autonomous cars and Facebook is developing virtual reality headsets. Previously, Microsoft was known for its software but now the company also offers tablets such as the Surface Pro and some accessories like keyboards and mouse.
Apple has also launched a smartphone, tablet and a smartwatch, which need significant R&D. However, a Bloomberg report suggests that Apple does not spend a lot on R&D but the company is still successful.
The Bloomberg report highlights that in 2015 Apple spent only 3.5 percent of its revenue, or $8.1 billion on R&D. By comparison, Facebook spent around 21 percent, or $2.6 billion, Qualcomm 22 percent, $5.6 billion, and Alphabet 15 percent $9.2 billion, on R&D.
Ram Mudambi, a professor at Temple University in Philadelphia, explains that the secret behind Apple's success is that the company relies on the advancements made by its supplies. Mudambi adds that Apple's big size motivates the company's suppliers to pitch the best and the most advanced product they have to Apple.
"Suppliers are racing with each other to get Apple's business, and part of the racing they are doing is spending more on R&D," says Mudambi.
Apple is aware that it can rely heavily on its suppliers but even then, the company has been increasing its R&D budget every year. In 2014, Apple spent $6 billion on R&D while in 2013 the company spent only $4.5 billion on R&D.
Apple's biggest investments have been in the proprietary semiconductors, which are present in the company's most popular devices such as the iPads and the iPhones. Apple's new A9 chip, which is present in the iPhone 6s and the iPad Pro, is very fast in comparison to some of the fastest processors available in the market.
Apple has also increased its workforce in the semiconductors departments, which hints that the company is now spending more on R&D also.
The Bloomberg report also suggests that Apple spent only $3.5 billion in marketing and advertising in the last four quarters. However, Google spend $8.8 billion on marketing and advertising in the past three quarters.
Tim Swift, who is a business professor at St. Joseph's University in Philadelphia, says that Apple's marketing is the most sophisticated and effective marketing, which helps the company reduce its spending on R&D.
