Apple Chief Financial Officer Luca Maestri told investors at a Goldman Sachs conference last week that Apple is investing research and development dollars to improve products that don’t generate any sales for Apple but could down the road.
According to a report, which cited the comments the Apple CFO made at the conference, Apple spent $2.8 billion on R&D in the fourth quarter with the company spending around $10.5 billon on R&D for all of 2016, which is around $4 billion higher than 2014.
The report said there are three areas that Apple’s R&D is focused on, with the first being growing its product offerings. The report pointed to Apple’s hardware segment for starters. Apple’s number of hardware products is increasing in its four main categories, which include iPhone, iPad, Mac and Apple Watch. The second category is services in which Apple makes money from Apple Care, Apple Pay, App Store and licensing its technology. This segment is targeted to grow to the size of a Fortune 100 company in 2017, Tim Cook, Apple’s CEO said, according to the report. In order to increase growth, the report noted, Apple is building out services for its iCloud, Siri and Maps. The third area that Apple is focusing its R&D dollars on is the development of technology in-house. The report said Apple is investing in increasing work on its processors and camera sensors for next-generation devices.
The moves on the part of Apple are prompted in part by its dependence on iPhone revenue at a time when the number of first-time buyers of its iPhones is declining. As a result, Apple has to find other ways to boost sales and, at the same time, churn out innovative smartphone products. Other areas that Apple could pour R&D dollars into include augmented reality, virtual reality and self-driving cars, noted the report.