Apple is rumored to be secretly working on a car under Project Titan that is believed to hit the roads by 2020. The Cupertino company has not officially confirmed anything about the project. Given the level of secrecy Apple maintains around its future products, it is difficult to see signs of a specific product under development.
But Above Avalon analyst Neil Cybart says the iPhone maker cannot keep its R&D budget secret, which is part of its financial statements. A significant rise in its R&D spending over the past few quarters suggests that something big is in the works. Cybart has reasons to believe that it’s not an evolutionary update to the iPhone, iPad or Apple Watch because evolutionary updates are hard to be classified as R&D.
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Apple’s quarterly R&D expenses have shot up by $500 million from last year. That’s much higher than $200-$300 million increase in quarterly R&D expenditure observed during the development of Apple Watch. The tech giant’s R&D expenses as a percentage of total revenue have also been increasing. It makes the R&D activity even more impressive considering the company’s revenue continues to go up.
Apple looking to move beyond phones, tablets and watches
Cybart noted that the increased R&D budget shows “Apple has begun work on battery, telematics, and autonomous driving initiatives related to personal transport.” The Cupertino company is spending approximately $2 billion on R&D every quarter, which is remarkable considering its lean product line-up. The primary reason Cybart believes the increased spending is going to the development of Apple car is that evolutionary updates to existing products are unlikely to be classified as R&D.
Apple is expected to spend close to $10 billion on research & development in 2016. It indicates that the company management is looking to move beyond smartphones, tablets and wearable devices. Apple is set to revolutionize yet another industry. Automobile is an industry where Apple can surprise people its cool new products.
Apple shares rose 1.25% to $126.04 at 12:53 PM EDT on Thursday.