Quick Bites | Biggest spenders on research and development
April 24th, 2023 | Article
By: Paul Zwi
Which companies are the largest spenders on Research and Development (R&D), and why does it matter?
R&D spending is a good sign of a corporation’s future as it demonstrates a commitment to innovation and a willingness to invest in future growth. Here are some reasons why R&D spending is considered a positive indicator:
Development of new products and services: Investing in R&D allows a company to develop new products and services that can meet the changing needs of customers. This helps the company to stay ahead of its competitors and maintain its market share.
Improved efficiency and productivity: R&D investments can lead to process improvements, automation, and the development of more efficient production methods. These improvements can help the company reduce costs and increase productivity, which can ultimately result in higher profits.
Competitive advantage: By investing in R&D, a company can gain a competitive advantage by creating products or services that are unique and difficult for competitors to replicate. This can help the company to differentiate itself in the market and maintain a strong market position.
Long-term growth: R&D investments are often focused on long-term goals, such as developing new technologies or entering new markets. While these investments may not immediately lead to increased profits, they can position a company for sustained long-term growth.
Overall, R&D spending signals that a company is committed to innovation, growth, and competitiveness, which are all positive indicators for future prospects.
What about Australian companies?
The average ASX 200 company spends just 3% of its revenue on R&D. This compares to a global average of over 6% for listed companies. According to ChatGPT, the 5 top spenders on R&D in Australia in 2020 were as follows:
Commonwealth Scientific and Industrial Research Organisation (CSIRO) – a government agency that conducts scientific research. In 2020, the CSIRO spent AUD 925 million on R&D.
Telstra – in 2020, Telstra spent AUD 484 million on R&D.
CSL Limited – a biotechnology company that develops and manufactures vaccines and plasma-based therapies. In 2020, CSL spent AUD 468 million on R&D.
Rio Tinto – in 2020, Rio Tinto spent AUD 433 million on R&D.
BHP – in 2020, BHP spent AUD 385 million on R&D.
I’m surprised not to see the big banks on that list, and perhaps also a couple of our large tech companies like Atlassian and Canva – perhaps a more recent and updated list would include them. I would love to see Australian companies spending more on R&D and innovating their way to global success.
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