See Modest Increase In U.S. R&D Spending

Research Technology Management, Sep/Oct 2009

Once again, Schonfeld & Associates, Inc. is forecasting growth in R&D spending by U.S. firms in the coming calendar year, although this time the operative word is "modest."

The 33rd and latest edition of the Libertyville, Illinois consulting firm's annual R&D Ratios and Budgets expects the pharmaceutical industry to again be the biggest R&D investor, with the drug companies increasing their 2010 budgets by more than 10% to spend $110 billion. Last year's forecast called for the drug companies to increase their budgets 9.9% to $105 billion.

Schonfeld expects Eli Lilly will be the top spender in 2010 at $11.6 billion followed by Roche, Johnson & Johnson, Pfizer, Novartis, Sanofi- Aventis, Astrazeneca, Merck, and Schering-Plough, each projected to spend over $5 billion. Much of this investment is spurred by new discoveries and attempts to protect expiring patents, Schonfeld says. Electromedical apparatus makers, led by Medtronic, will spend $5.3 billion, a boost of 9.6%.

Automotive companies are forecast to add nearly $60 billion to this investment pool, an increase of 4.4%.

The major software companies will spend $33 billion on R&D in 2010, an increase of over 10%. Microsoft continues to lead, with a budget of $9.7 billion, an increase of 7.6%. Oracle, SAP and Electronic Arts will also invest over $1 billion in 2010. Google and Yahoo, joined this year by Ebay, whose software is not available for purchase, plan to invest over $1 billion in 2010.

The biggest single R&D investor in 2010 will be Toyota at $13.2 billion, followed by Eli Lilly at $11.6 billion and Volkswagen at $10.5 billion. Toyota plans an 8.6% increase, while Eli Lilly will spend 16% more.

R&D budgets of semiconductor makers will increase 5.7% to $33.9 billion. Intel will again have the largest R&D budget, $6.1 billion, up 3.8%. R&D budgets of the industries that are major users of chips, such as Electronic Computers and Computer Communications Equipment as well as other related industries, such as Computer & Office Equipment and Computer Peripheral Equipment, are also all expected to hike spending.

Manufacturers of communications gear plan on increasing their R&D spending by 9.9% although cellular communications firms will increase by only 1.4%.

Schonfeld's forecasts are drawn from a database of 3,000 public companies, relying on data compiled from Form 10K reports to the SEC and a proprietary econometric model. The model combines individual firms' historical R&D spending with the major R&D drivers, which include profits and sales.