Electronics innovation on track, despite the recession?

The Wall Street Journal is out this morning with an analysis showing that, as major U.S. companies are cutting jobs and wages, many (including many consumer electronics companies) are still spending on innovation.

Big U.S. companies spent nearly as much on research and development in the dismal last quarter of 2008 as they did a year earlier, even as their revenue fell 7.7%, according to a Wall Street Journal analysis. (Registration and a subscription is required to read the Wall Street Journal article online.) The sampling looked at 28 of the largest U.S. R&D spenders, excluding deeply troubled auto makers and the drug industry, where R&D spending is dictated by government requirements.

The takeaway: On the one hand, the study suggests the flow of innovative new electronics products may not diminished by the recession as much as feared back in January, when electronics editor Paul Reynolds posted that "it's hard to imagine that the many job cuts announced by electronics sector, and the rumors of more to come from the likes of Sony, won't in some way affect development of new products."

The WSJ analysis, which begins on page one of today's paper and turns to a full inside page, points out that many companies have "learned from past downturns that they must invest through tough times if they hope to compete when the economy improves."

It includes a cautionary comparison from the last major recession, when Apple boosted R&D spending even as their sales dropped while Motorola cut theirs by 13 per cent. The result: Apple launched the first iPods in the midst of the recession, and later saw its sales soar, while Motorola lost ground in developing sequel products to its hit RAZR cellphone, eventually losing ground.

However, the piece also cautions that "the robust R&D spending may be temporary," and may in part reflect how long it can take to cut corporate budgets, including those for innovation. Also, the WSJ notes that some R&D is being retooled to deliver safer, short-term results, rather than developing riskier but more groundbreaking products.

Back in January, we added another worry in regards to consumer electronics, where "groundbreaking technology…is typically introduced at a high price before beginning its move towards the mainstream. Costly, cutting-edge gear is an awkward fit with a marketplace where premium anything is way out of fashion."