Apple Deeply Implements “Cook Doctrine” R&D Input to a New History

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According to Apple’s quarterly earnings report, Sina American Stock News spent $4.2 billion on R&D in the quarter ended June, the highest quarterly expenditure in the company’s history.
Apple spent 7.9% of its total revenue on research and development, the highest level since 2003, when it was still focused on iPods and Macs. Apple plans to spend more than $16 billion on research and development in 2019.
On the other hand, Apple’s R&D expenditure is still only a small part of its share repurchase expenditure. Apple said it bought 88 million shares of Apple stock for $17 billion this quarter, more than four times its R&D expenditure.
As research and development spending increases, sales of Apple’s cash cow, the iPhone, have declined. The revenue of the iPhone in the last quarter was 12% lower than that of the same period last year. As a result, Apple is investing in core technologies that may power unproductive devices — but open technology development and exploration come at a price.
Historically, Apple has lagged behind other top technology companies in terms of R&D spending as a percentage of sales, and it still does. In the second quarter of this year, Microsoft spent 13.4% of its revenue on research and development, while Google spent 15.7% of its sales on research and development.
Analysts have noticed Apple’s rising R&D costs. At a third-quarter earnings conference call, an analyst asked Apple Chief Financial Officer Luca Maestri whether the company expected to continue to increase its R&D investment. He said the trend would continue.
“We want to improve the user experience and make our products and services different in the market,” Maestri said. Therefore, we will continue to do so. Of course, there are some types of investments that are very strategic to us, and they will have a long-term impact.
Maestri mentioned Apple’s recent $1 billion acquisition of Intel’s modem division, involving 2,000 employees, the largest acquisition in Apple’s history in terms of employee integration. In 2014, the company bought Beats for $3 billion, but the company had fewer employees than the acquisition.
“You’ve seen our statement about Intel’s acquisition,” Maestri said. This is very important for us. Of course, this requires upfront investment.
Tim Cook, Apple’s chief executive, explained Intel’s acquisition with “Cookism”. The so-called “Cook doctrine” is to reduce third-party components in Apple products as much as possible in any meaningful place.
He said Apple has a “long-term strategy to own and control the key technologies behind our products”. For example, Apple is developing processors for the iPhone, rather than buying off-the-shelf chips from companies like Qualcomm.
This strategy may be working. Apple has also developed its own wireless Bluetooth chip, which is one of the key technologies behind AirPods. AirPods is currently an important component of wearable devices for Apple’s growth engine.
“We’re doing very well in wearable equipment. We stick to this point, and others may not. We really put a lot of energy into it and put a lot of research and development into it, so we are in a very favorable position today, “Cook said.