The biggest criticism Apple has been facing now days is that the company has stopped innovating, but the R&D spending and patents tell a different story. Apple’s Research and Development spending has risen from $1 billion in 2009 to $16 billion in 2019. Apple R&D came out to be 7.9% of its total revenue, the highest percentage since 2003. Analysts noticed Apple’s increased R&D costs. On its Q3 earnings call Luca Maestri, Apple’s CFO said that the trend of spending an increased amount on investment would continue.
Maestri also brought up Apple’s $1 billion purchase of Intel’s Modem Division which required upfront investment. Apple’s increased expenditure in the R&D sector and the Intel acquisition is explained with a phase that is becoming known as the “Tim Cook Doctrine” among the Apple observers. Apple has a long-term strategy of owning and controlling the primary technologies behind the products they make. They want to cut third party components from Apple products wherever it makes sense to do so. These primary technologies require a lot of investment. Apple itself develops processors for its iPhones instead of buying off-the-shelf chips from companies like Qualcomm. Apple also developed its wireless bluetooth chip which is a key technology behind the company’s AirPods. This also points towards the growing portfolio of the company. Earlier the company used to develop only one iPhone. Now they develop three. Earlier they used to develop only one iPad. Now they develop multiple models of the iPad. They now have the Watch, AirPods, and Beats Electronics. All of this contributes to a larger product portfolio, which drives up the R&D costs of the company to develop these programs. Apple also has grand ambitions of expanding its services business over the next few years. This requires a lot of investments in services like iCloud, Siri, Maps. The company also recently announced various new services like Apple TV+, Apple Card, Apple News+. Apple is also investing in a lot of future products. Apple’s “Project Titan” is reportedly working on self-driving cars and has hired executives from Tesla and other companies. Apple has also invested in augmented reality. It is a technology that uses sophisticated cameras and computers to place digital objects in the real world. Patents around wearables suggest that Apple could be targeting AirPods with biometric sensors. All this tells us that Apple is working big time behind the scenes due to which they have established a dominance in the research and development. It can also be said that maybe Apple is getting realistic by realizing that eventually the market for high-end iPhones, cannot be sustained by people upgrading every 2 years due to which they are trying to create a market for niche products, like the Apple Watch.
There is no question that the company is a trendsetter. Every product Apple releases sets a bar in its category and many rival companies rush to copy them. Chinese companies like Xiaomi, Oppo, Vivo, Lenovo, Huawei many times have blatantly copied Apple from its laptops and mobile phones to its wireless earbuds and watches.
But why do we see this blind imitation of Apple’s design and technology by other companies? Apple revolutionized the technology sector, first with its Apple-1 computer and then again with its first iPhone. Both of these products completely changed how we interacted with these technologies and created history. Many youngsters think that iPhone was the first multi-touch smartphone. But smartphones have been around for a long time, long before the launch of the iPhone in 2007. The reason people think this way is because iPhone completely re-imagined smartphones and reshaped the industry almost instantly. As was the case back then, iPhone designs continue to shape the industry today. iPhone X wasn’t the first smartphone to have a notch in the display, the Essential phone was launched before iPhone X with a notch. But once iPhone X was launched nearly every Android phone maker rushed to copy it. The perceived value of Apple is very high which is a primary factor as to why the world’s most valuable brands are so successful. What makes perceived value so important from a company’s perspective is that customers may be willing to pay a higher price because they deem the brand to be of high quality or status symbol. This gets to the heart of the continued success of Apple over its competitors. Despite Samsung selling more phones than Apple in the third quarter of 2019, Apple dominated the profits earning a reported 66% or almost $8 billion from a total of $12 billion. The iconic status Apple has received among its hardcore fan base explains why they can charge so much more than their rivals. Other companies try to replicate this success enjoyed by Apple by replicating their designs and technologies. Apple has been criticized for not taking enough risks, but if we look closely then we see that removing the headphone jack was a very big risk for Apple which worked in the end and boosted the sales of AirPods. It was a big risk for Apple to have notched display in their phones which also worked in their favor. Many smaller companies like Vivo, Oppo, etc cannot afford to take such big risks as they don’t know how the consumers will react. But big risks like these working for Apple encourage smaller companies to go ahead and copy their design and technologies.
We can also say that the ideology that western technology is just better also leads to blind imitation of the company’s designs and technology. We find the biggest example of this in the Asian market which is dominated by companies like Xiaomi, Vivo, Oppo, etc., all based in China are popular for copying Apple.
Vedant Sharma is a student pursuing Philosophy from Hindu College.