Apple, Cars, and MicroLEDs

Over the past week, Apple has reportedly cancelled two projects that it had been working on for a decade. One was to develop a car. This project was the subject of enormous amounts of speculation, due to a combination of hopes among the Apple faithful, attempts at secrecy, and most of all the leaks indicating multiple changes in direction, focus, and personnel. A less well-known project was to develop microLED displays. In 2014, Apple acquired startup LuxVue Technology, which had developed an assembly technique involving electrostatic transfer of microLEDs from a wafer to a display substrate. Apple has since been working on developing microLED displays, most notably for the Apple Watch, though the Apple rumor mill produced breathless reports of Apple microLEDs being used in Apple Car. Reports indicate that Apple has spent (or according to the NY Times, “burned”) $10 billion on the car, and $3 billion on microLEDs. These sound like huge failures! But, the point of doing research and development is to try to achieve new products, services, and technologies. Over the five-year period 2018-22, Apple spent $100 billion in R&D, so these two programs likely account for less than 10 percent of its R&D spending over the past decade (these are obviously rough estimates).

Instead of looking at these programs as failures, it is helpful to ask two questions. First, is Apple doing too much or too little R&D? And, second, what should Apple be working on? Over the 2018-22 period, Apple’s R&D spending averaged less than 7 percent of revenues; this is in line with the average for electronics and computers/peripherals companies, but far below that of software, semiconductor, and telecom equipment companies (data source). So while an argument could be made that Apple is not spending enough on R&D, it is not easy to spend tens of billions of dollars a year effectively, and if there are not big failures, the company is probably not taking enough risks. The related question on what projects to pursue is even trickier. Apple is famous for having a very compact product portfolio, not trying to be all things to all customers. In that sense, attempting to develop a car was out of character for the company (which may be the reason that it veered back and forth between developing the entire car vs. in-car technologies). At the same time, Apple has pursued an R&D strategy of developing key technologies for its products (i.e., processors, displays, touchscreens) and contracting their manufacturing. The microLED project fits into this framework. The car project can be viewed as a broadening strategy, while microLEDs were a deepening strategy. One thing Apple does not do is to attempt to enter markets via acquisition, and it is likely to ignore the suggestion that it acquire Rivian, a move that would be great for investment banks.

One of the most critical aspects of R&D is learning; sometimes that means learning what does not work. But the biggest mistake that a company can make is to abandon failed projects without harvesting the learning, applying it to other projects and businesses. It now looks like Apple is moving to generative AI as a deepening strategy, applying some of its work on autonomous driving. While Apple may be successful in harvesting learnings from the cancelled projects, it would also be well-served to reflect on another long development project – Siri.