Continuous innovation is the best defense against any wave of disruption or fixtures of obsolescence. It is the research and development (R&D) that drives innovation and a company's commitment towards R&D shows their belief in the power of innovation. Here is some insight on the research and development, innovative ventures and acquisitions by the top companies based on their R&D spending.
Amazon (AMZN) tops the list
The figures by Amazon’s SEC filing reveal a R&D spending of a whopping $22.62 billion in 2017, way up compared to its spending of $12.54 billion and $16.08 billion in 2015 and 2016 respectively. The figure makes 12.7% of its net sales, higher than 11.7% and 11.8% in 2015 and 2016 respectively. Amazon’s research and development expense is set forth within “technology and content” in the financial statement.
Advanced technologies—AI, machine learning, computer vision—are the core of its ventures—be it cloud computing, voice-based virtual assistant, cashless Go stores, drone deliveries or robotic warehouses. To work in these fields, Amazon has set up a number of research labs. Amazon isn’t aggressive when it comes to acquisitions; it made 20 acquisitions since the start of 2015 till 2018 so far. During 2017, the company was granted 1,963 patents by the USPTO, an increase of 18% over 2016.
It has been almost three years since the new name Alphabet was adopted. However, the company continues to be popularly referred to by its old name, Google, which is also its largest business segment. A significant part of its research and development (R&D) investments are directed towards advertising, cloud, machine learning, and search. The company’s approach is based on what was said in the original founders' letter, “we will not shy away from high-risk, high-reward projects that we believe in because they are the key to our long-term success.”
Alphabet spent $16.62 billion, equivalent to 15% of its revenue on R&D during 2017. The spending during 2015 and 2016 were at $12.28 billion and $12.95 billion respectively. The company has made 32 acquisitions since the start of 2016 and it ranks seventh on the list of patent assignees with 2,457 patents in 2017.
Volkswagen AG (VLKAY)
The world’s best-known automobile brands—Audi, Skoda, Bentley, Lamborghini, Porsche, Ducati, Scania, and MAN are a part of the Volkswagen Group. The company has a mighty revenue of $228.27 billion (€196.95 billion) with allocation towards R&D at $15.22 billion (€13.13 billion)—equivalent to around 6.7% of revenue. The company claims to have filed 6,566 patent applications worldwide (around half of them in Germany) during the fiscal 2017.
The company is working on cutting-edge fields such as virtual technologies, sustainable mobility driver assistance systems and automation, alternative drive systems, connectivity and lightweight construction. Volkswagen is setting new standards in the automotive industry with its product line; Volkswagen’s Sedric—level 5, autonomous car is one such example.
The fourth place is shared by Samsung and Microsoft with their R&D spending hovering around $14 billion.
Samsung (SSNLF)
The South Korean Conglomerate Samsung is the largest non-U.S. spender on research and development with $14.85 billion in 2017 (KRW16,803,153 at an exchange rate of KRW1131.08 to USD1). Despite of a huge standalone figure, its R&D spending averages around 7% of its revenue—which is a massive $211 billion. Samsung witnessed a 6% increase in patents during the year, closing the year at the second spot, behind IBM with 5,827 patents. The company acquired eight companies in 2016, followed by five in 2017 and one so far in 2018.
In December last year, Samsung reorganized its software and digital media and communications (DMC) R&D centers into a new entity—Samsung Research to primarily focus on advancements within AI, IoT and keep pace with technological trends. The company will operate 22 R&D centers around the world under the name Samsung Research. In addition, there is an innovation group within Samsung dubbed as Samsung NEXT working on AR/VR, IoT, blockchain, and machine learning.
Microsoft (MSFT)
Microsoft has been committed to research and development across a spectrum of technologies, tools, and platforms since its inception. Advanced technologies such as AR/VR, blockchain, AI, machine learning and quantum computing are part of its current initiatives. Microsoft’s research and development efforts focus on three interconnected ambitions: a) Reinvent productivity and business processes b) Build the intelligent cloud platform and c) Create more personal computing.
It’s outlay towards research and development has gradually risen with each financial year and rising revenues. R&D spending was $11.98 billion, $13.03 billion and $14.72 billion during 2016, 2017 and 2018 respectively—accounting to 13% of its revenue each year (Microsoft's fiscal year runs from July 1 to June 30). Microsoft has acquired 27 companies since the beginning of 2016 till now and was granted 2,441 patents in 2017 alone.
Intel (INTC)
Intel began operations in August 1968 and “dedicated itself completely to research and development, wanting to make the most of its fresh start and develop new technologies instead of just replicating old ones.” 50 years hence, it continues to do so. In 2016, it announced a restructuring initiative to evolve into a company that powers the cloud and billions of smart, connected computing devices. With this, its initiatives and investments in the field of Internet of Things (IoT), 5G wireless connectivity, data center, AI, machine learning and autonomous vehicles are now at the center stage.
During 2017, Intel spent 20.9% of its revenue on R&D, translating to a $13.09 billion. The company has spent around one-fifth of its revenue on R&D over the last couple of years. Intel was awarded 3,023 patents in 2017, ranking fourth on the list. The company made nine acquisitions in 2016. During 2017, it acquired Mobileye for $15.3 billion while in the current year it has made one acquisition so far.
The other companies rounding out the top ten are: Roche Holding (RHHBY), Merck (MRK), Apple (AAPL) and Novartis (NVS).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.