Will Skydio Overtake DJI as the Next Big Drone Manufacturer?

Autonomous drone company making a push to become the top UAV manufacturer.

Without question, DJI products have dominated the global commercial drone industry for years now.

In fact, the company controls between 70% and 80% of the market share and, for several years, it’s faced little competition. With such a high percentage of drones coming from DJI, many manufacturers, namely in the United States, have struggled to remain relevant. The tides of fortune, however, may be changing.

Skydio, an autonomous drone manufacturer, currently recognized as the largest in the United States, may just be poised to dethrone the drone giant in the near future.

Adversity in Recent Years for DJI

In 2017, the United States government began raising concerns over the possibility of “cyber vulnerabilities” with DJI drones.

At that time, numerous military units were using popular DJI platforms, such as the Phantom series. In light of the security concerns, the U.S. Navy released a memo on May 24, 2017, titled “Operation Risks With Regards to DJI Family of Products.

By August, the U.S. Army cited the memo when it banned DJI drone use. And, by May 2018, that ban was enforced across all U.S. military branches.

Military experts cited concerns over the security of the data collected by DJI drones. In their opinion, it was relatively easy to hack into the signal to steal both location and visual information from users.

It was also possible to take control of drones during flights. Fears that hacked drones would expose military strategies rose to the highest levels.

Further issues arose for DJI in December 2020.

The United States Department of Commerce placed DJI on its Entity List. Published by the Bureau of Industry and Security, the list identifies people or businesses which the United States government believes pose a security risk.

The commerce department said their primary reason for adding DJI to the blacklist was due to the company “enabl[ing] wide-scale human rights abuses within China through abusive genetic collection and analysis or high-technology surveillance.”

Now, anyone looking to conduct certain types of business with DJI drones, such as exporting or re-exporting products, must now obtain a license to do so.

However, the list doesn’t make it illegal to purchase or use DJI drones, and the company was quick to point out this fact in their official reply. Per DJI’s response, “DJI is disappointed in the U.S. Department of Commerce’s decision. Customers in America can continue to buy and use DJI products normally.”

Skydio's Opportunity

DJI’s problems have opened the door for other drone manufacturers in the United States.

Perhaps no manufacturer is in a better position to capitalize on the situation than Skydio. Founded in 2014, and based in Redwood City, CA, Skydio designs, builds, and supports its drones domestically. The company is known specifically for its AI-driven engine, Skydio Autonomy™.

Initially, Skydio produced a single drone model, the R1, in 2018. The aircraft was marketed to consumers as the world’s first fully autonomous consumer drone. This breakthrough technology’s commercial success allowed the company to move from the consumer market into more industrial applications.

Over the last few years, the company released its second aircraft, Skydio 2. With even more powerful AI technology, the drone was well suited for industrial inspections as well as consumer applications. Last year, Skydio’s systems design engineer, Joe Enke, joined the Unmanned Uncovered podcast to discuss its development.

 

As the military shied away from DJI, Skydio joined a list of five approved drone manufacturers, along with French manufacturer Parrot, that was approved for military use.

What's Next?

Manufacturers who operate in the United States, and that are already approved for government use, such as Skydio, are already becoming far more attractive to consumers.

In fact, in October 2020, the FAA granted the North Carolina Department of Transportation the first state-wide approval to fly Skydio drones BVLOS for bridge inspections. The groundbreaking waiver is due to reduce taxpayer spend by 75%, and save up to $14,600 per inspection in social disruption cost, just by switching from traditional inspections to drone inspections.

To provide some perspective, NCDOT inspectors are tasked to inspect 13,500 bridges regularly.

If the military’s approval of certain domestically manufactured drones, and the FAA’s granting of a state-wide BVLOS waiver specifically using Skydio’s platforms, is any indication of what is to come, DJI will surely lose market share. The percentage of the market DJI will lose is yet to be seen.

While it’s doubtful that we will see a significant shift overall, but we should expect to see their position erode slightly, as companies like Skydio grow to a much more respectable level.

Regardless of your position on foreign-made UAV security issues, the current developments will be beneficial. With DJI losing some of its hold, more investments will flow into domestic drone companies.

Further investment means a more diverse selection for consumers, increased competition among manufacturers, and overall growth and advancement of the UAV industry.

Will Skydio succeed DJI? Only time will tell.

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David Daly - Contributing Author

David Daly - Contributing Author

David Daly, is an award-winning photographer/writer and licensed (FAA) Commercial sUAS pilot. A graduate of the United States Naval Academy, David is a former Marine Corps officer with a BS in Oceanography and has earned his MBA from the University of Redlands. David has worked for Fortune 100 companies and has a background in aerospace, construction, military/defense, real estate, and technology.

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Drone Industry Outlook For the United States: 2020-2030

The combination of the global coronavirus pandemic and the 2020 presidential election has made it a challenging year for the United States’ economy.

Nearly every industry has experienced the pain of unexpected economic shutdowns. As the race to produce a vaccine continues, we are likely to see further economic difficulties.

The Pandemic's Effect on the Drone Industry

In the short term, many industries, including the UAV industry, have been negatively impacted by current events.

For example, globally, the commercial drone market has shrunk from $4.14 billion in 2019 to $3.64 billion in 2020. Thankfully, this downturn of around a -12% compound annual growth rate (CAGR) is less of a concern in the long run.

Despite the impact the virus and presidential election have had on the drone market, experts expect a strong and relatively quick recovery. By 2023, the commercial drone market will exceed previous levels and reach $6.15 billion, a CAGR of 19.09%.

This global growth is good news for the United States as they are expected to remain the second-largest market for drones, just behind the Asia Pacific region.

By 2030, the entire UAV market is set to be worth $92 billion. Compare this to the 2020 value of $9.5 billion, and you get an impressive CAGR of 25%.

Given the United States’ share of the global drone industry and its annual spending on drones — more than double all other countries combined — there is every reason to bank on the strength of the UAV industry in the United States over the next decade.

US Drone Industry Outlook

Reasons for a Positive Outlook

Several elements are contributing to the optimistic outlook for the United States drone market.

Some of the more significant factors are: the growing number of commercial drone pilots, the expansion of 5G networks across the country, and increased industry adoption of UAVs.

Let’s expand on each of these points.

The growing number of commercial drone pilots

It is important to note that the largest number of registered commercial drones is in the United States. As of Nov. 17, the FAA has a total of over 1.7 million registered drones, with about 30% of these classified as commercial UAVs. Additionally, the FAA has issued over 200,000 remote pilot certifications.

The strong numbers of both commercial drone pilots and registered UAVs speak to the growing opportunities within the United States for the industry. Additionally,  that continued growth highlights the increase in demand for commercial drone pilots with no leveling out in sight.

 

Related: 10-Year Outlook for the Drone Industry Within the United Kingdom

 

5G Expansion

While the United States doesn’t have the fastest 5G network in the world, the system is expanding. Drone technology has advanced much faster than regulators could have ever anticipated. To keep the skies safe, the FAA imposed regulations on drone pilots, limiting the potential of UAV platforms.

Rules, such as the restriction to not fly a drone beyond a visual line of sight, have prevented drones from expanding further into new use cases. As the FAA becomes more comfortable with the technology, these restrictions are becoming less rigid.

With the current FAA restrictions and 4G network, drones can perform as needed. However, they will need 5G networks to operate in the skies sooner rather than later. The growth of these networks in the United States is paving the way for accelerating the use of drones within the county.

Increased industry adoption of UAVs

UAV technology continues to benefit from a growing acceptance of its use across a diverse set of industrial applications. Several businesses that are only recently beginning to use drones on a large scale, such as insurance companies, will become significant utilizers of the platform in the near future.

Other industries, such as construction, emergency response, and energy, have also used drones for quite some time for surveys and inspections. Additionally, the FAA published airworthiness criteria for the proposed certification of 10 different Unmanned Aircraft Systems (UAS) or drones as special class aircraft. This is a crucial step to enabling more complex drone operations beyond what is allowed under Part 107, including package delivery.

Bringing It All Together

During the pandemic, drones have certainly proven themselves as useful tools.

Deliveries of medical supplies, test kits, and other critical items have received a great deal of publicity. People and businesses are becoming very comfortable with the beneficial uses of drones. In fact, we at Consortiq have been heavily involved in a United Kingdom medical supply delivery project!

Even more exciting are the promises of fully autonomous UAV solutions and swarm technology. Once fully developed and given regulatory approval, autonomous systems and swarms could bring about explosive growth for the UAV industry in both the United States and globally.

Sure, the coronavirus has negatively affected the short-term UAV market in the United States. However, given the significant numbers of UAVs and commercial drone pilots, a growing 5G network, and the expanding use of drones in numerous industries, there’s plenty of optimism to brighten the outlook through 2030.

If you have yet to explore the use of drones in your organization, now may be a perfect time. Complete the form below and we’ll help get you started!

David Daly - Contributing Author

David Daly - Contributing Author

David Daly, is an award-winning photographer/writer and licensed (FAA) Commercial sUAS pilot. A graduate of the United States Naval Academy, David is a former Marine Corps officer with a BS in Oceanography and has earned his MBA from the University of Redlands. David has worked for Fortune 100 companies and has a background in aerospace, construction, military/defense, real estate, and technology.

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Trump Administration Changes UAS Export Policy

On Friday, July 24, the Trump Administration announced an update to the 2018 Unmanned Aerial Systems (UAS) Export Policy, which makes it easier for U.S. manufacturers to export certain types of UAS to foreign allies and partners. 

UAS Export Policy? Tell Me More...

Since 1987, the United States and 35 other countries have voluntarily adhered to the international nuclear nonproliferation export guidelines of the Missile Technology Control Regime (MTCR.)

The MTCR is designed to limit the proliferation of nuclear, biological, and chemical weapon delivery systems and related technology, and suggests different levels of export restriction for different two categories of potential exports.

Cateogry I” items, which include ballistic missiles and nuclear-capable cruise missiles, are considered to be the most risky, and MTCR recommends that partner governments should have “a strong presumption to deny” technology transfers through the export of Category I items, regardless of their purpose, though it allows for exports of “rare occasions.” 

Meanwhile, the MTCR suggests a more liberal approach to authorizing exports of Category II items, which include less sensitive and dual-use, missile-related components. 

Currently, MTCR classifies UAS that are capable of delivering a payload of at least 500 kg to a range of at least 300 km, along with their major complete subsystems and related software and technology, to be Category I, while UAS that don’t meet that criteria are classified as Category II

So, What's the Trump Administration Changing?

The new UAS export policy reclassifies a subset of UAS with a maximum airspeed of fewer than 800 kilometers per hour to the less strict “Category II.”

This means that it will be slightly easier to export these types of UAS. 

Why Did They Do That?

White House press secretary Kayleigh McEnany stated that the MTCR’s standards, which are over 30 years old, are outdated and give an unfair industry advantage to countries outside of the MTCR (namely China) while hurting the U.S. drone industry and “handicapping U.S. partners and allies with subpar technology.”

This is in line with a 2017 RAND Corporation study, which argued that restrictions on shipping armed and unarmed drones to foreign customers, such as Jordan, the UAE, and Saudi Arabia, have left U.S. manufacturers at a disadvantage, effectively ceding much of the market to China.  

The Trump administration has been trying to convince MTCR partners to multilaterally adjust the classification since April 2018 but, due to lack of consensus, Trump has decided to change the U.S.’s adherence. 

Will the U.S. Regain Its Share of the International Drone Market?

Some have argued that it’s too late to turn the tide, as the Chinese share of the military drone market has grown a lot, particularly in Africa.

But, there have been reports of Chinese-made drones, such as the CH-4B “Rainbow” Predator-knockoff, performing so badly that the Air Forces that bought them ended up selling off parts of their fleets.

On top of that, European countries remain wary of using Chinese drones for classified military purposes. This means that there is likely still time for U.S. manufacturers to regain lost ground.

What Else Could Happen?

First, the good news: Lifting these export restrictions could improve R&D for drone manufacturing in the U.S.

The previously mentioned RAND study suggests that excessive export controls have stymied UAS research, both in companies and other research organizations, such as universities. The benefits of this R&D could spill over into commercial drone manufacturing, especially for drones designed to perform long-duration operations in harsh environmental conditions.

 

RECENT: Why Enterprise Drone Training Creates Smarter Drone Programs

 

The bad news is that this could exacerbate tension between the U.S. and China. In particular, less than two weeks after the new policy was announced, the U.S. began negotiating the sale of at least four of its large “SeaGuardian” aerial drones to Taiwan for the first time.

The deal still has to be approved by Congress, but if it goes through, it would feed into what the New York Times, calls a campaign by national security officials “to set the United States on a long-term course of competition and confrontation with China.” 

This Sounds Like a Big Game-Changer

Sort of.

Defense Department spokesman Lt. Col. Mike Andrews has stated that the DoD is “fully supportive of implementing all aspects of this Administration’s updated UAS policy,” but stressed that “particularly sensitive components and subsystems [still] must be sold via Foreign Military Sales (FMS), as is the case for sensitive components and subsystems for manned aircraft sales.”

It’s important to bear in mind that other regulatory frameworks, such as the Arms Export Control Act, impose restrictions on the exports of UAS, so the outcomes of this policy change, while nontrivial, may not be as sweeping as they seem. For more information, check out the updated U.S. Policy on the Export of Unmanned Aerial Systems.

Miriam Hinthorn - Contributing Author

Miriam Hinthorn - Contributing Author

Miriam Hinthorn is an experienced management professional who is currently pursuing her master’s in Data, Economics, and Development Policy at MIT while serving as principal consultant at Consult92.

Miriam developed a love for UAS technology when she served as operations manager at Consortiq. Today, having completed over 30 successful projects in 10 countries, she loves solving a wide variety of logistical, technical, and cultural challenges for her clients so that they can focus on what care about most.

Ready to Integrate Drones Into Your Organization? Contact Us Today to Get Started!

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