China has the US Drone Industry by the Components (Balls)

by Benjamin Cook

The United States has long been at the forefront of technological innovation, but one key sector where the U.S. lags significantly behind is in the drone industry. Currently, China's DJI dominates the consumer and professional drone market, owning as much as 80% of the global market share. This overwhelming dominance poses not just a competitive challenge but also a national security risk. The U.S. must prioritize the establishment of a domestic drone industry to secure technological autonomy and protect sensitive data. However, this won’t be possible without a well-thought-out strategy that addresses the supply chain and market leadership issues. Here’s how the U.S. can jump-start its domestic drone industry.

1. You Can’t iterate faster than China without a DJI Competitor

DJI’s market leadership is built on its ability to rapidly iterate its technology, bringing new models and innovations to market faster than its competitors. This agility allows DJI to consistently maintain its competitive edge while collecting massive amounts of data, which is then used to improve future products. More concerningly, this drone data, collected over U.S. soil by DJI drones, is accessible by Chinese authorities, creating significant security vulnerabilities.

Without a home-grown competitor to DJI, the U.S. will always be playing catch-up. American companies struggle to iterate at the same pace due to limitations in both supply chain efficiency and production cost. Even firms like Skydio and other U.S.-based drone startups cannot scale quickly enough to meet market demands because they rely on key components sourced from China, limiting their independence. If the U.S. is to successfully break away from this cycle, it needs to create an environment where iteration and innovation can flourish domestically, unencumbered by supply chain constraints or external data risks.

2. You can’t build Drones without China: Fixing the Supply Chain

The uncomfortable reality is that most drones, even those designed and assembled in the U.S., rely heavily on Chinese components. China currently controls key aspects of the supply chain for microelectronics, motors, sensors, and batteries—components essential for drone manufacturing. This stranglehold over critical components not only gives China a substantial advantage in cost and production scale but also makes it incredibly difficult for American companies to compete without relying on Chinese suppliers.

To break free from this dependence, government intervention is crucial. The U.S. must incentivize the near-shoring, re-shoring, and friend-shoring of critical component manufacturing. Policies that support domestic manufacturing of microelectronics, motors, and other essential drone parts are needed. This can be done through tax breaks, research and development grants, and investment in domestic infrastructure. Moreover, collaboration with allied nations to build a supply chain that does not involve China could help diversify sourcing and reduce dependence on a single foreign power.

An additional layer of complexity lies in the labor and environmental regulations that make it difficult for the U.S. to compete with China's low-cost production model. However, with proper investment in automation and next-generation manufacturing techniques, the U.S. could reduce costs while maintaining high-quality production standards. An aggressive push to develop U.S.-based suppliers and manufacturers would be a significant step toward breaking China’s chokehold on the drone supply chain.

3. Becoming the Market Leader: Re-shoring the Supply Chain and Outpacing DJI

The key to building out a domestic drone industry is to take over DJI’s position as the market leader. However, this cannot be accomplished without taking control of the supply chain. To do so, the U.S. must prioritize re-shoring and near-shoring, bringing critical drone component production back to U.S. soil or to trusted allies. Friend-shoring with countries like Japan, South Korea, and European allies can help diversify the supply chain and ensure that the U.S. is not vulnerable to supply disruptions.

To effectively compete with DJI, the U.S. must also foster a vibrant ecosystem of drone-related companies that can work together to innovate rapidly. This requires not only investment in existing drone startups but also collaboration between tech companies, universities, and government agencies. A public-private partnership approach, similar to what was seen in the early days of the space race, could give U.S. companies the edge they need to overtake DJI in terms of innovation, reliability, and cost-effectiveness.

Additionally, leveraging existing tech talent and capabilities in AI and machine learning would allow U.S. drone manufacturers to introduce smarter and more capable drones. This would help the U.S. surpass DJI, not just in hardware but in software and autonomous operations. However, none of this will be possible unless the U.S. establishes a stable and secure supply of drone components that are independent of Chinese influence.

Conclusion

To jump-start a domestic drone industry, the U.S. must address both the supply chain and market leadership challenges posed by DJI. This requires strategic government intervention in supply chain development, with a focus on near-shoring, friend-shoring, and re-shoring of critical drone components. Only then can the U.S. foster a competitive environment where domestic companies can iterate faster, innovate more effectively, and ultimately take over DJI’s dominant position in the consumer and professional drone market. Without such a concerted effort, the U.S. will continue to trail behind China in this vital industry.