A detailed Zinnov study on the total R&D spend by Global 500 companies for the year 2014 revealed a total investment of $614B. R&D spend as a percentage of revenue increased to 4.31%. It would also be worthwhile to note that 65% of the overall R&D spend was contributed by the top 100 spenders, with majority of the growth coming from North American and APAC firms.
The study revealed interesting insights that aptly reveal the changing R&D landscape across the globe. Some of the trends are captured here.
1) China has shown highest growth in R&D spend from 2012 to 2014 at 20% CAGR
G500 R&D spend in China has increased rapidly since 2012 at 20% YoY and is expected to reach USD 80 Bn by 2020. This growth rate is much higher when compared to Europe (consistent over the last 3 years), North America (steady at 4-5% growth) and Japan (which is on a recovery after a strong decline the previous year). Consumer/Web 2.0 and E-commerce companies such as Baidu, Tencent, Ctrip.com etc. led the growth in R&D in China, while the contribution by Telecommunication (Huawei, ZTE) and Automotive segment (Great Wall Motors, Byd Co Ltd-H, Dongfeng Motor) is also on a rise. The study also brought to light that companies based out of Beijing, Shanghai and Shenzhen contribute to more than 95% of the total R&D spending in China. The Global 500 R&D spend in China stood at USD 26Bn in 2014.
2) Automotive Sector is a clear leader in R&D spending followed by Software/Internet and Semiconductor
Automotive sector contributes to ~18% of the global R&D spend. The top R&D spenders in the sector include Volkswagen, Toyota, General Motors, Ford and Bosch, who among them contribute to two-fifths of the automotive R&D spend. Software/Internet and Semiconductor also have significant R&D spends contributing to ~12% and ~8% respectively.
3) 152 companies spend over USD 1Bn on R&D
The number of Billion dollar club members in the Global 500 R&D spenders has increased to 152 (from 148 in 2013), though the share of R&D spending has not seen any significant change. An interesting trend however, is the increasing R&D focus in APAC. R&D spend in APAC has increased to 11% of global R&D spend in 2014 as compared to 7% in 2012.
4) Consumer / Web 2.0 & E-Commerce R&D spending has shown highest growth at 35%
Consumer / Web 2.0 & E-Commerce vertical has seen the highest increase in R&D spend, with maximum growth in the US. Semiconductor R&D spending has also grown 7% from the previous year.
5) 42 companies have increased their R&D spend by over 30%
With companies getting more aggressive with their R&D efforts, it comes as no surprise that many companies are pushing the pedal and even doubling their R&D spends. Yes, we’re talking about Tesla. Tesla has doubled its R&D spend in the last year, Facebook’s spend was up by 88%, Thermo Fischer Scientific’s spend up by 75% and many more.
Overall, the landscape seems ripe to accelerate R&D and we would be keen to see how trends shape up in the near future. Stay tuned for more updates.