Following the U.S. Department of Commerce’s move to put China’s DJI Technology Co. onto its Entity List in 2020, barring it from sourcing components from U.S. suppliers, the U.S. government has also stopped procuring the drones that failed to win the Department of Defense’s approvals.
The gap left by DJI in the U.S. market has kicked American drone industry into motion, hoping to fill the vacuum left by the world’s largest drone maker by market share: as of March 2021, DJI accounted for approximately 76%of global industrial and commercial drone market. Intel, at 4%, is the second largest drone manufacturer. In the United States alone, the Chinese maker accounted for over three-quarters of the drones sold.
U.S. decoupling from China, Taiwan’s chance?
While the U.S. sanction certainly hit DJI hard, as it sourced a large portion of its key components from the United States, it is worth noting that 20% of DJI components are sourced from Taiwan. For example, Nuvoton Technology Corp. provided the microcontrollers for DJI, and Chicony Electronics Co. supplied batteries to the drone maker. Inpaq Technology Corp., another Taiwanese company, made the antennas used by DJI drones.
Given Taiwan’s strong semiconductor and electronics manufacturing sector, and its proven capability to supply leading drone makers, the Taiwanese government is now putting together its domestic drone makers, seeking to build a drone industry capable of supplying the United States as well as the growing global drone market. In light of the rising importance of drone warfare, an area in which China has an overwhelming edge over Taiwan, it is not surprising to see that some of Taiwan’s leading defense contractors are moving into the drone industry, hoping to merge the know-how from both the civilian and defense sectors – a trend that has gained traction in both China and the United States.
Unsurprisingly, as Taiwan is building a drone industrial hub in the Chiayi County, located in southwestern Taiwan, National Chung-Shan Institute of Science and Technology (NCSIST) has become a key partner. The military research institution has been central to Taiwan’s quest for defense autonomy, and has come up with some of Taiwan’s most important defense systems, such as the Hsiung Feng cruise missile family. For decades, NCSIST has been looking into military drones as well, including the ongoing research into the highly secretive Teng Yun drone used in reconnaissance and strikes.
Drones as 5G infrastructure
Another prominent player in the Chiayi drone hub is Thunder Tiger Corp. Founded as a civilian company specialized in a wide range of radio-controlled models, Thunder Tiger has recently entered the defense sector.
Recognizing that widespread 5G deployment has been impeded by coverage challenges, especially when stable wireless communication has become the cornerstone of a modern battlefield increasingly characterized by military Internet of Things (IoT), Thunder Tiger has ridden on the trend of integrating drones into telecommunications infrastructure, such as using drones as aerial base stations and relays to enhance 5G penetration. Given the technology’s dual-use nature, Thunder Tiger has partnered with Taiwan’s state-owned Chunghwa Telecom to develop a drone-based 5G solution for both civilian and military application.
Its single-rotor drone, CX-180 Ice Man, serves as a base station by carrying Chungwha Telecom’s equipment, while T-150 Maverick functions as a relay by working with the former, in doing so boosting the 5G signal’s range. The solution has so far been used in disaster reliefs where ground-based communications night be disabled. However, starting from 2020, the military version of this drone-based 5G solution has also made its way into Taiwan’s annual military drill.
Despite the progress, cost is likely the primary challenge for those seeking to take on DJI’s dominant position. The Chinese drone maker’s ability to keep costs down is one of the keys to maintain its unassailable position, and those able to achieve the same economy of scale will likely be the strongest contenders to the Chinese company.