Amazon Spent Nearly $23 Billion On R&D Last Year — More Than Any Other U.S. Company

from recode

Tech companies claimed the top five spots in the U.S. for research and development spending again last year, investing a combined total of $76 billion. Amazon was at the top of the list, spending $22.6 billion in 2017, 41 percent more than in 2016 (when it also topped the list).

Amazon has poured resources into AWS, Alexa and technologies like computer vision to support ambitious projects such as the Amazon Go cashierless store of the future. Amazon has also recently been the target of President Trump’s Twitter attacks accusing the company of not paying its share of taxes and for exploiting the U.S. Postal Service.

R&D spending is important not only as it contributes to a company’s own innovation and dominance, but also for its contribution to national productivity, accounting for about 3 percent of the GDP.

Productivity — which in addition to R&D includes other measures like wages and hours worked — has remained mysteriously slow the last few years despite low unemployment and higher profits from major U.S. companies.

Amazon is followed in R&D spending by Alphabet, Intel, Microsoft and Apple.

Facebook rose from 13th place in 2016 to ninth in 2017 as it increased R&D spending 32 percent to $7.8 billion. Part of the spending jump could likely be attributed to Facebook’s Building 8, the company’s secretive hardware research lab.

More here.

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9 Responses to Amazon Spent Nearly $23 Billion On R&D Last Year — More Than Any Other U.S. Company

  1. Luis F Gonzalez Jr April 12, 2018 at 9:00 pm #

    In order to remain competitive and increase growth in the long run companies need to invest tremendous amounts of money in their research and development sector. This is important for reducing costs, increasing quality, and being competitive in the market. Especially in the technology industry, where last year’s model is already considered old and many consumers wouldn’t want it. This is a key factor for companies in order to remain relevant and up to date with their products. Research and development is the most important aspect of a company when it comes to their products and sales.

    Amazon is a conglomerate with billions of fluid capital ready to be used. They have recently started investing about 23 billion dollars into their R&D sector because they realize the outcome will be greater. In other words, the more you invest, the more money you make. Amazon is expanding itself into many different markets and needs to be functioning at a low cost with high profits in order to have market influence in each field. By investing so much money, Amazon has the upper hand by being technologically better and offering more for the same service. For example, their new transportation method of using drones makes firm activities more efficient and productive thus making it more profitable and effective. Big name companies such as UPS and FedEx struggle to keep up with the transitioning corporate world because they invest less money in their R&D, letting them lag behind.

    Amazon isn’t the only player who invests lots of money. Alphabet, Intel, Microsoft and Apple are also realizing the importance of this new trend. The difference is that these four companies are true tech companies who sell or offer service in the technology world. Amazon is more of a retail/ecommerce firm but these four firms are in a more competitive industry. They sell similar products and offer identical services. How do you differentiate yourself? Well, you could release revolutionary tech like Apple accomplished when they successfully revealed the touch screen on IPhone about a decade ago or you could create a service that is more consumer friendly and easer to access like alphabet did with Google and YouTube. These companies aren’t necessarily researching industries they are already in but trying to create new ones such as the streaming age. Amazon is currently investing a lot of capital into this business and are becoming one of the top dogs in that field. Apple could also realize this new activity and start investing in producing original content on their Apple store platform. This would be a good and forward move for Apple and start increasing revenue from multiple venues.

    Not only is investing in R&D good for companies but as well for consumers. The better the technology, the better the product, and the better the offer for consumers. The cheaper it is for firms to produce an item or service, the lower the price it would be for consumers. This is a product of the invisible hand in a capitalistic economy where self-interests brings benefits and positive externalities for society. Amazon is a good example where researching in AI technology in the healthcare sector would be beneficial for citizens in the United States. The prices would decrease and services would be more available at a more accommodating price.

  2. Jacob Abel April 13, 2018 at 1:19 pm #

    The trends laid out in this article I think are pretty positive and I think it comes to no ones surprise that tech companies top the list for R and D spending. Tech companies are obviously doing very well and these numbers only reflect. They also mark that the technologies they have already developed will continue to advance. Amazon being the leader in investment only further shows that they company is further expanding into all areas of business and consumer life. It would probably be a while before we see Amazon anywhere outside of the top 5 of companies. The other interesting trend is that the top 5 companies are all located in Silicon Valley and I am curious to see if any of them are replaced by a company that is not. Ford and GM also top the list and this is probably due to the changing nature of the car industry. Self-driving cars are most likely going to be the way of the future and car companies must respond to this new develop by adopting it.
    The billions upon billions spent by Tech companies clearly outspends any other industry and I am curious to see what comes out of this spending and how much the non tech companies on the list rely on the technologies developed by the major tech companies
    Overall it will be interesting to see what developments come out of all of this R and D spending and how much these companies grow as a result of it.

  3. Damian Mioduszewski April 13, 2018 at 6:33 pm #

    Amazon has been the leading company in innovation in recent years with its amazing customer service and efficiency which can destroy many industries. Amazon has recently been thrown into the spotlight for its accusations that it is effectively a monopoly but one of the main reasons it hasn’t been under for intense pressure is due to the fact it is not very harmful. One of the reasons monopolies have been disliked is due to the fact that it doesn’t promote innovation or competition but this is the opposite of Amazon. Amazon has jumped from industry to industry effectively revolutionizing them but innovating it to make it more effective which helps industry and consumers. Along with helping industries and consumers, It can also help other companies be more effective by showing new strategies and helping promote 3rd parties on their resources. The main point of this article is to show that Amazon has been the leading force in R&D spending larger then even Alphabet. This R&D is immensely helpful in keeping America as the #1 superpower as it helps us to be competitive and Amazon is leading that push which can contradict Donald Trump’s comments on it ruining the American economy. Personally I do believe Amazon should be regulated but should not be completely disintegrated and instead be denied more acquisitions and mergers. Along with the statement amazon’s services and R&D, I do think that is immensely helpful to the American economy and should not be completely ruined by the government. Their interests in improving Alexa and online shopping is also very helpful in just generally evolving and improving the world directly related to consumers.

  4. Nathaniel Valyo April 13, 2018 at 7:16 pm #

    This article is living proof that you must spend money in order to make money. By spending loads of money on research and development, Amazon ensured that the products they are providing for consumers are the very best out there. The belief of “you must spend money to make money” is crucial for any business in order to do well. The thought of it seems paradoxical, but it is just like any investment. What you put in will always be greater than what you put out, assuming what you put the money towards is a strong and educated guess.

    This is better for us consumers for two reasons. First, we get the very best of products, which is obviously good because we are not only getting what we want, but we are getting what we want at the highest possible quality. Secondly, the very best of products in the market prompts us to spend more money, which bolsters the overall economy. Again, this seems like a paradox, because we are spending money in the hopes of an economy with lower prices and more competition. But if we do not spend money, the overall economy will worsen and we, the consumers, will suffer the consequences.

    It is very interesting that of the sixteen companies on the list, ten are technology companies, five of which are the top five companies in the country for research and development spending. This, in my opinion, captures the growing trend of technology companies in the nation perfectly. We have discussed time and time again in class that each and every industry as we know it is going digital, and there is an ever-growing need for tech savvy employees for any and all companies. If spending money as a way of making money is one of the key components of a company, it comes as no surprise that the companies who are best at this are the tech companies, since they are a part of the fastest growing field in the world. These companies recognize the huge need to cater directly to their consumers, and their successes are clearly paying off. Additionally, research and development spending is essential in tech because new and competing products from companies like Amazon, Apple, Samsung, Google and Microsoft are emerging every year, which further prompts the competitors to provide the very best for consumers; the only other option is bankruptcy.

  5. Alan Josefsek April 13, 2018 at 9:16 pm #

    Amazon is undoubtedly one of the largest ecommerce business platforms in the world, and the fact that they have spent much more money on research and development efforts than any other company should come to no surprise. They own many subsidiaries including the following: A9.com, AbeBooks, Alexa Internet, Amazon Books, Amazon Game Studios, Amazon Lab126, Amazon Publishing, Amazon Robotics, Amazon Studios, Amazon Web Services, Audible Inc., Body Labs, Book Depository, Box Office Mojo, Digital Photography Review, Goodreads, Graphiq, Internet Movie Database, Ring Souq.com, Twitch.tv, Whole Foods Market, Woot, and Zappos. These subsidiaries, or sub companies owned by their parent company Amazon, are very research and development intensive. In addition to this, Amazon seems to be trying to become the main company to use for future POS systems, also known as points of sale systems. We see this in their Amazon Go experiment. Is Amazon going to enter the convenience store industry as a competitor to seven eleven? Sure, they can theoretically, but only somebody with a shallow mindset of corporate strategy and operations will believe this is Amazon’s only motive. Based on information that has surfaced over the last few months including a surge in its popularity, the Amazon Go POS is crushing expectations. I believe Amazon is using its Amazon Go store in Seattle, Washington as a proof of concept. This is used to prove the viability of an idea and put it into focus before determining whether or not more money and resources should be directed towards the project. With the success of Amazon Go, it would not make sense for the Amazon corporation to ignore this. If Amazon remains on schedule, I believe they are going to sell their Amazon Go system to other corporations and stores that use in person POS systems. This would eliminate a huge portion of an exponential expense: payroll. While this is unfortunate for the employees in retail around the United States and abroad, it is the future and will occur regardless of the long term expense to employees. For most companies, payroll is anywhere from sixty to eighty percent of a business’s expenditures. So why not eliminate most of this cost?

  6. Ryan Mack April 13, 2018 at 10:44 pm #

    Research and development, or usually just R&D for short, is vital to a company’s growth and innovation but is also important to innovation, productivity and advancement of society overall. It gets us closer to our envisioned future. Many of the products we have today, especially tech and medical, are the products or result of millions of dollars and lots of hours put into research and development. In 2017, tech companies took the top five spots in the United States for research and development spending for a combined total of $76 billion. Amazon held their spot at the top, spending $22.6 billion in 2017. This is a 41 percent increase than what was spent in 2016. Amazon has its foot in almost every market there is, and many companies are fearful that they will get “Amazoned”, that Amazon will enter into and disrupt their market next. Of all the things that Amazon is involved in, they are very focused on developing Amazon Web Services (AWS), Alexa and technologies such as computer vision, which is vital for projects such as Amazon Go, a cashierless/checkout line-less grocery store. Amazon currently operates one in Seattle. It works by having cameras tracking you throughout the store and what you pick up and charges your Amazon account only for what you get. Amazon also plans to use computer vision to develop or improve public safety and home security systems, as well as authentication, autonomous driving, and medical imaging. I find this technology interesting and important for authentication, autonomous driving, and medical imaging, but I’m not to on board with using it as a tracking and surveillance tool. The companies that follow Amazon in Research and Development spending are Alphabet, Intel, Microsoft, and Apple at top 5. Behind them are Johnson & Johnson, Merck, Ford, Facebook, Pfizer, General Motors, Oracle, Cisco, Celgene, Qualcomm, and IBM. R&D is also important to developing medical products, including medicine, medical devices, and even overall treatment methods. There are companies working om developing devices and software that help doctors make more accurate diagnoses. They already utilize IBM’s Watson to help with that. The government also spends on R&D to develop technologies and weapons for defense, though typically it’s with a defense company such as Boeing Defense Space and Security and Lockheed Martin. Not only does research and development contribute to the growth of the economy, but also to the growth of ingenuity, security and the future.

  7. Zachary Corby April 14, 2018 at 11:23 pm #

    Amazon leading the U.S in research and development really does not surprise me, but the amount of money they spend is a little shocking. 22 billion dollars is a ton of money to be investing into trying to develop new products, but it is what Amazon has built themselves up on. The company continues to sacrifice profits for power in the market, and this stat only supports that argument. Amazon is more concerned at looking forward to the future and what could generate huge future profits rather than what can temporarily bring in more profits. The idea of a cashier less store is something that is particularly interesting and I believe completely worth investing in. We have already seen self checkout aisles in almost every supermarket in the U.S, making a whole store full of them would help cut down jobs and save money. Especially with the acquisition of whole foods, this idea seems like it could come to fruition rather quickly so it definitely is worth researching more. What is a little peculiar to me is that the article states that this 22 billion in research and development is 41 percent more then last year. That makes it seem suspicious as if they are planning something very big, but since it is Amazon I guess that number is justifiable. Still that is a huge increase in one year even for a company as powerful as Amazon. I am curious to see how the companies behind them like alphabet and apple choose to respond to this. Investors could be worried long term that they are not spending enough money in research and development and it could create an arms race.
    It is important to understand from reading this article how hard it is going to be for Trump and the Department of Justice to breakup Amazon as a trust because of the implications it will have on the rest of the economy. All of the research they are doing are helping other businesses to make more money, and destroying Amazon would hurt them. The fact that it is for research makes it interesting, because innovation is typically good for the market and the consumers. It allows for new markets to be created, and lower prices while creating better services for consumers. If Amazon is also putting that much money back into the economy and research, it will be hard to find Amazon as a trust. With their profits being lower, and them reinvesting their money into the market it gives an appealing argument to Amazon on why they should not be broken up.
    I fully expect this number to continue growing each and every year moving forward. Amazon has continually proved that they will always be willing to spend the big bucks on innovation, and will sacrifice profit in order to do so. People seem to have complete trust in whatever Amazon does, and given that people are willing to pay so much for their stock they have the resources to do so. In the long run this may pay off for Amazon, and the amount of money they put in to research and development shows their growing power over the market.

  8. Timothy Guerrero April 16, 2018 at 12:43 pm #

    This articles just sheds more light on the absolute dominance Amazon has exhibited as a result of innovation and investment into technological advancements. We’ve discussed several times in class how Amazon is practicing absurdly innovative things such as drone technology and its seamless integration with Whole Foods, however, this article exhibits just how extensive Amazon is in striving for innovations, as it seems as though this is how they believe they will not only remain as, rather become an even bigger powerhouse on the world’s stage. As one constituent commented above – $22 billion is a lot of money. It’s about 7 times the net worth of the businessman defunct President of the United States, Donald Trump, which is a perfect segway as to the implications surrounding his attacks on Amazon. President Trump has recently gone after Amazon for unfair usage of the United States Postal Service and claims that there are perhaps billions of unpaid taxes on behalf of the Seattle based giant. There is more substance to the story, as many argue that this is more of a strike on Amazon CEO Jeff Bezos and how he also operates The Washington Post, an outlet Trump has cited as fake news and criticizes often. This makes us wonder just to what extent the President has on affecting businesses, especially the giants such as Amazon, and how Amazon will respond. By the looks of this chart, we can only assume they’ll further invest in innovation, and slowly cripple smaller businesses in the names of technology and convenience.

  9. Nicholas Marinelli April 19, 2018 at 4:54 pm #

    Amazon is one of the most influential, powerful, and well-known companies in the world. They are exceptional in the field of technological innovation and development, and as the numbers show they are the country’s largest spending R&D company; with a whopping $22.6B spent on R&D, Amazon is leading the way by $6B.
    There is no doubt that Amazon would be on the forefront and in the lead when it comes to this department. Essentially, they are known for their innovational products and their ideas that serve for the customer; consumer behavior is something they clearly specialize in and want the customer to be on the top priority.
    When taking a look at that list provided by Recode, it is important to note that 10 out of the 16 companies there are technology companies. That means companies such as Amazon, Google, Intel, Microsoft, Apple, and Facebook are doing more research and development than healthcare and medical companies. These tech companies are doing more research into our consumer wants and data, than companies trying to cure diseases and cancers. This is alarming and shows where the “money is” in today’s society. There is more of a profit to be found in creating innovation and collect data than there is trying to find a cure for cancer.
    If you look at Amazon, there is no doubt that they are the nation’s number 1 R&D company for a reason. They have a website that is probably used just as much as Facebook, while staying out of the spotlight and understand the consumer better than any other company on that list. They have gone to great lengths to develop such technologies that just a few years ago were believed to be unimaginable. They have created a store with seamless interaction and no cashiers- something only thought of in movies. They have taken pages out of books and scenes from movies to create Bezos’ world- all due to the extensive research, development, and capital put into becoming the world’s number one company.

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