Everybody complains Apple isn't innovating, but R&D spending and patents tell a different story

Key Points
  • Apple is investing heavily in new product development, Bank of America analyst Wamsi Mohan said in a note distributed on Thursday.
  • Apple's research and development spending increased from $1 billion in 2009 to $13 billion in 2019.
  • Patents show that Apple is working on technologies in wearables, fitness and health.
Apple Chief Executive Officer Tim Cook greets customers at the grand opening of the new Apple Carnegie Library store in Washington, May 11, 2019.
Joshua Roberts | Reuters

Apple's research and development spending has increased from $1 billion in 2009 to a projected $13 billion this year, not including stock-based compensation, according to a Thursday note from Bank of America analyst Wamsi Mohan.

The amount of money going into R&D in Cupertino shows that Apple is spending heavily both to fend off new technologies which could threaten its dominance in smartphones and tablets, as well as investing in technologies that could help the iPhone maker enter into new product categories, such as wearables, fitness and health.

"The patents around wearables suggest that Apple could be targeting AirPods with biometric sensors, Apple Watch with UV monitoring, gesture recognition for AR/VR applications, machine learning projects to enable autonomous driving and integration of various existing devices with a car," according to the note.

The analysts say that investors are focusing on the "apparent lack of ongoing innovation at Apple," but that they believe that Apple is appropriately investing in new product categories.

"When the iPhone (once in a generation product) becomes the basis of comparison, everything else, however successful, looks incremental," the analysts write.

Apple's massive scale can also mask how large some of its smaller product lines are.

"The wearables business in just 4 years is the size of a fortune 200 company with [estimated] $15 billion in sales (similar to Netflix, Paypal etc.) but the sheer size of the iPhone of $155 billion in 2018 (similar to General Motors) dwarfs the rapid growth of the relatively smaller businesses," Mohan writes.

Apple had 2,160 patents granted in 2018, down 3% from 2017, according to research from IFI Claims. Eight companies had more patents granted during that year, including Samsung, Qualcomm, Microsoft, and IBM, which led the table with 9,100 patents granted in 2018.

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