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Apple Explains Why Its R&D Spending Is On the Rise (cnbc.com)
Apple has steadily increased its spending on research and development over the past few quarters. An executive with the company explained why that's the case. From a report on CNBC: Company's financial guru attributes the spending to something of a much smaller scale: chips. It may not sound like it, but that research is "very strategic and important" for Apple to differentiate itself from the rest of the industry, chief financial officer Luca Maestri said on Tuesday at the Goldman Sachs Technology and Internet Conference in San Francisco. "Today, we do much more in-house development of some fundamental technologies than we used to do a few years ago, when we did more of that in the supplier base -- the work we do around processors or sensors," Maestri said. "It's very important for us because we can push the envelope on innovation, we can better control timing, cost, quality. We look at that as a great strategic investment." On Tuesday, Maestri also noted that Apple's "product portfolio is much larger than it used to be," and that keeping all these products moving along in parallel adds up, especially with smaller markets, like the Apple Watch. While Maestri said Apple drops a "meaningful" amount of cash on products that do not generate revenue today, these products are not very large "in the total scheme of things," Maestri said. "They add up over time, and hopefully, those are good bets that we are making for the future of the company," Maestri said.
Intel has been having major issues recently. Qualcomm has apparently been a thorn in their side. Apple is no longer willing to tolerate a lot of outside suppliers being in control, so apple will bring more and more production under their own control?
It makes sense, Apple's in-house processors have been a major competitive advantage, particularly at a time when Qualcomm has been leveraging patents to get a near-monopoly in the SoC space. Apple's chips have been a generation ahead of the competition for some time, although their infrequent release schedule mitigates that when everybody else catches up and then passes them before the next A chip is then released.
To me, the salient question is whether they are investing to increase profits, or to make better products. The lack of updates in most of the mac line, along with battery and memory issues that crippled the new Macbooks, are decisions about resource allocation - Apple simply isn't interested. This is especially strange, since they still have strong development on OSX. On the mobile side, there is a lot of criticism about a lack of innovation to drive new product sales—but what I see is Apple simply looking to R&D to stabilise cost and production, based on the goal of meeting market expectations more consistently. All of this is very Tim Cook, and not very Steve Jobs. For all his faults, Steve did seem genuine about his passion to make "insanely great" products. Tim seems committed to demonstrable returns stability.