INDUSTRIAL RESEARCH INSTITUTE'S 6th ANNUAL R&D LEADERBOARD
Armbrecht, F. M. Ross, Jr., Whiteley, Roger L., Research-Technology Management
R&D spending by the top 100 U.S. and global technology investors in 2003
Neither IRI's nor other industry sages' predictions or early estimates for R&D spending in 2003 foresaw the robust turnaround in R&D that actually occurred. Spending in 2003 by the top 100 U.S. companies increased from 2002 by 5.4 percent to $120 billion (Table 1). In retrospect, with better data now available, there is really no surprise, as sales for these same companies increased by 5.8 percent and profits were up a whopping 31.3 percent! Fortunately, R&D expense gains have again moved into the realm of real increase as the growth significantly outpaces inflation.
Even more remarkable is the relative spending by those 91 companies that appear among the top 100 R&D spenders both years. These incumbents increased their R&D outlays by an average of 7.1 percent. The nine new additions to the top 100 increased their spending by 14.9 percent.
These numbers are in strong contrast to the bleak situation in 2002 when R&D was cut by 1.1 percent to $111 billion. It is heartening to see industry return to its strong support of innovation.
For the first time, 2003 saw one of the newer enterprises, a software company, emerge to displace the traditional "old line" manufacturing companies as "king of the hill." Microsoft, increasing its R&D by 18 percent, overtook Ford and moved into first place as the largest supporter of R&D. Microsoft was listed as the fifth largest spender in 2002 but has since restated its R&D expenses upward by more than $2 billion, which would have put it in second position behind Ford in last year's list. The remaining top five members, in order, are Pfizer, General Motors and IBM. These five were the top five last year, just slightly rearranged!
This year it is hard to draw any conclusions about market segment performance from scanning those companies that dropped out of the top IOU and those that joined in their place. And, in fact, every one of the 17 major business segments saw their sales rise, had positive pretax profits, and increased their R&D as a percentage of profits. Twelve of the 17 increased their R&D spending as a segment. Three of those that cut R&D spending-Office and Computing, Telephone and Telecommunications, Internet and Data Processing-increased their profits by six- to nine-fold.
Part of the profit increase, obviously, resulted from R&D cuts. Of the 19 companies with the largest increase in spending, seven belong to the health care industry and six to the computer software industry. Of the 19 showing the greatest decrease, more than half are in the electronics equipment industry.
In 2003, 68 of the top 100 companies boosted their R&D spending, compared with only 52 in 2002 and slightly surpassing the 66 in 2001. In spite of more than two-thirds of the companies increasing R&D, "profit as percent of sales" continued its strong upward trend from 2.3 percent in 2001, 7.9 percent in 2002, to 10.2 percent in 2003. Of the 32 companies decreasing spending, 25 were continuing their downward spiral from 2002.
It is instructive to note, despite the large number of technology-based entrepreneurial small and medium enterprises, that the top 1,000 companies in the U.S. comprise 90 percent of all industrial funding. The top 100 support exactly two-thirds of the total and the top 10 support almost one-third (30 percent) of all U.S. industrial research!
For the sixth year, an interesting trend continues in "research intensity" as measured by "R&D spending as a percent of sales": The top 10 R&D spenders have higher research intensity (above 7 percent) than do the top 25 and the latter have higher intensity than the top 50. …