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Apple has increased its research and development (R&D) funding by 39 per cent in 2012.
The company said in a recent 10-K filing that its R&D budget grew by $1bn in 2012. Apple reported that it spent $3.4bn on R&D this year. The company pointed to shrinking gross margins on its competitors' products as one of the reasons behind the increased R&D spending.
"[Apple] expects to experience decreases in its gross margin percentage in future periods, as compared to levels achieved during 2012, and the company anticipates gross margins of about 36 per cent during the first quarter of 2013," Apple said in its filing.
"Expected future declines in gross margins are largely due to a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value to customers and anticipated component cost and other cost increases."
With companies like Google and Amazon pricing their devices at cost, Apple sees itself having to keep up. Apple said in its filing that creating devices with improved product margins and stopping competitors from infringing on its products would be part of its focus going forward.
"Many of [Apple]'s competitors seek to compete primarily through aggressive pricing, very low cost structures, and emulating the company's products and infringing its intellectual property," Apple said in its filing.
"If the company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the company's intellectual property, the company's ability to maintain a competitive advantage could be adversely affected."
Apple's filing comes as the company goes through a major management shake-up. Its senior vice-president of iOS Scott Forstall was recently ousted from the company. His absence will lead to a variety of other Apple executives taking on added responsibilities.