Apple grows its investment in research and development

Apple's investment in R&D grew 14% in 2019 compared to 2018

The smartphone industry is marked by heavy competition and technological innovation remains the major source of competitive advantage for fims in this industry. Apple is one of the top three brands in the smartphone industry based on number of units sold. Technology is also the primary differentiator in the smartphone industry. Apple's market share in the third quarter of 2019 in the smartphone industry grew sharply compared to the second quarter. The sales of iPhone 11 were impressive beyond expectations. Demand was just so high that Apple was forced to ramp up production of iPhone 11. The base model drove the highest demand.

According to Statista, the market share of Apple grew to 13% in the third quarter of 2019 from 10.1% in the second quarter of 2018. Samsung held the largest market share in the third quarter at 21.8% and Huawei's market share despite the ban was 18.6%. While Samsung's market share declined in the third quarter compared to the previous, Huawei's and Apple's increased. Apple gained nearly 3% market share in q1 2019.  One of the primary drivers of demand of iPhones is Apple's focus on research and development. Within two years, Apple's expenses related to research and development have grown by more than $4.6 billion. From around $11.6 billion in 2017, its investment into R&D grew to $16.2 billion in 2019. Moreover, the research and development expenses of Apple Inc during 2019 were around 47% of its total operating expenses. 

R&D Costs$ 16,217$14,236$11,581
% increase14%23% 

Apple's Mac sales grew by 2% in 2019 compared to 2018 driven mainly by higher sales of Macbook air. iPhone sales were weaker than the previous year right from the first quarter.  The release of iPhone 11 and iPhone 11 pro equipped with dual and triple cameras respectivly and the A13 bionic chip drove sales of iPhones higher. In 2018, Samsung's R&D expenses were higher than Apple.  However, Apple has grown its investment in R&D in the next year. 

Below are the research and development expenses of Apple Inc for each quarter for fiscal 2018 and 2019.

Q1$3.9 bn$3.4bn
Q2$3.95 bn$3.4bn
Q3$4.26 bn$3.7 bn
Q4$4.1 bn$3.75 bn
Total$16.22 bn$14.22 bn

Apple has grown its investment in research and development to strengthen its competitive advantage and to grow its market share.  It is innovating its products to beat the competition. Apart from the iPhone 11 with latest features and higher processing power, the new Macbook Pro is also equipped with better features including the most advanced thermal architecture and powerful processors as well as faster memory. Higher focus on research and innovation could help Apple grow its market share faster in future. In 2019, it has definitely paid off which showed in the form of higher sales of iPhone 11 at a time when smartphone demand seems to have plateaued.