America Faces Crucial Drone Dilemma

In a significant move for the U.S. drone industry, the Federal Communications Commission (FCC) has added all foreign-made drones and essential components to its “Covered List.” This classification indicates a potential national security risk. As a result, this measure effectively bans Chinese drone manufacturer DJI, dominating the global market.

Impact on the American Drone Market

This FCC decision opens doors for U.S.-based drone companies, allowing them to gain a larger foothold in the market. It marks a shift toward heightened import restrictions amid ongoing tech competition with China. The FCC, once mainly focused on regulating broadcasting, is now playing a central role in protecting U.S. communications infrastructure.

Authority of the FCC

The FCC’s broad authority enables it to prohibit imports of communications equipment that may facilitate espionage or jeopardize critical infrastructure. Recent congressional legislation has further expanded its jurisdiction to address technology-related challenges from China. This strategic move aligns with ongoing efforts to mitigate U.S. dependence on foreign rare earth materials.

Drone Dominance Strategy

Former President Donald Trump emphasized a strategy for achieving “drone dominance.” The Pentagon has plans to procure 300,000 small attack drones by 2028. However, the ongoing conflict in Ukraine has exposed a notable “drone gap” in U.S. defense capabilities, as many American manufacturers continue to rely on Chinese suppliers for crucial components like batteries and motors.

Challenges Confronting U.S. Drone Companies

• In 2024, China ceased battery sales to U.S. drone manufacturers, causing companies like Skydio to ration their battery supplies.
• Chinese company DJI holds over 50% of the market share for affordable drones, which presents a significant hurdle for U.S. competitors.
• The scale of production allows Chinese firms to amortize costs effectively, making it challenging for foreign companies to compete.

Shifting Production Models

During Trump’s first term, the administration imposed a 25% tariff on imported Chinese drones. In response, DJI shifted its production base for U.S. sales to Malaysia. As of 2024, Malaysia exported three times the value of drones to the U.S. compared to China. This demonstrates the complexities of globalized supply chains and the inefficacy of tariffs as a sole strategy.

Future Steps and Legislative Actions

Recent actions reflect a broader strategy against Chinese technology imports, such as the bans on Huawei’s telecom equipment and various connected vehicle technologies from China. Current congressional discussions are focused on enhancing the Commerce Department’s powers to legislate against imports found in sensitive sectors like data centers and robotics.

While the FCC’s drone restriction may provoke discontent in Beijing, China’s history of promoting domestic purchases could undermine its criticism. As the U.S. navigates the complexities of international trade, targeted import restrictions may emerge as a more appealing option compared to blanket tariffs.