DJI’s blacklist from China to the US threatens to destroy the drone industry

Anyone who has already ordered a Mavic 2 as a Christmas present for drone enthusiasts in their lives should consider themselves lucky. The plane, which sells for about $ 1,500, contains a top camera and is one of the top consumer models sold by its manufacturer DJI.

But on Friday, the US Commerce Department added DJI to a list of sanctioned Chinese companies, which it says were involved in contributing to human rights abuses. This move will make it much more difficult for the company to secure US supplies and will threaten to scratch the global camera drone market, which is dominated by the Chinese manufacturer.

A Commerce Department official said Friday that DJI was added to the list because its products have been used in human rights abuses in China and elsewhere.

In 2017, the company reportedly announced a “strategic cooperation” agreement to provide police drones to the public security office in Xinjiang, China’s northwestern region, which houses a network of internment camps built to house people believed to be a threat to the state.

DJI said Friday it was “disappointed” by the Commerce Department’s decision, adding: “Customers in America can continue to buy and use DJI products normally.”

In the past, DJI said it believed it was being targeted for commercial reasons because it dominated the global commercial drone market.

Brendan Groves, head of regulatory and policy affairs at Skydio, a rival US-based drone maker, said “it’s surprising that DJI wasn’t on the list earlier.”

Mr. Groves, a former lawyer who used to lead the drone’s justice department, said DJI has benefited “worth millions of dollars a year from the terrible state of surveillance that the Chinese have established in Xinjiang for the past four years.” “. *

Since DJI was founded in 2006, it has managed to see almost all other competitors due to its almost unique ability to produce state-of-the-art technological equipment at prices that ordinary consumers can afford.

It does not release its sales figures, but industry estimates estimate that DJI makes between 70% and 80% of the world’s commercial drones and more than three-quarters of those sold in the US.

These remotely controlled box-shaped flying objects have attracted enthusiasts from airplane butterfly models to serious photographers, who have bought about 7 million of them in the US this year.

DJI is now trying to figure out what effect the move will have on its supply chains, but many of its models rely heavily on US equipment. Its Zenmuse XT thermal camera accessory, for example, uses a camera built by the Californian company Flir, while its Spark mini-drone uses a processor manufactured by Intel.

Intel declined to comment. Flir said, however, that “it will continuously align our strategy to reflect future public policy changes as they are adopted.”

The sanctions are similar to those imposed by the Commerce Department on Huawei, the Chinese telecommunications company last year, although the department said on Friday it would review any license application to provide products deemed necessary to combat infectious diseases. DJI drones were used to provide critical supplies during the coronavirus pandemic without the need to risk human contact and to spray surfaces with disinfectant.

However, apart from that small group of products, the US government said on Friday that it would treat any application for the sale of sensitive technology products to DJI with the presumption of refusal.

Spencer Gore, founder of the American start-up Impossible Aerospace, said: “This move makes many DJI products impossible to build today without major redesign.”

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Some of the company’s relatives believe it will be able to survive the immediate effect of the sanctions, as it can secure much of its supply outside the US. But they worry that the reputational damage done will discourage other customers – especially public bodies such as firefighters and police departments that often use DJI drones – from buying the company’s products.

Mike Winn, CEO of DroneDeploy, which provides software used to create aerial maps, said: “The biggest thing here could only be the confusion and uncertainty in the markets. [DJI drones] are used in San Diego police to respond more quickly to crime scenes. “

He added: “Four of the top five seed companies rely on DroneDeploy and fly hundreds of drones over their customers’ crops.”

For DJI, even greater threats loom on the horizon. Earlier this year, the White House drafted a draft order that would have prevented federal agencies from using drones made from Chinese parts. And in an even more significant move, such drones would also be banned from flying across federal states, which account for 28% of the US.

Some in the industry believe that White House officials are now trying to revive that order, especially after Congress refused to include similar terms in the recently approved law to authorize national defense.

Others believe, however, that a new Joe Biden administration will adopt a less confrontational attitude toward the Chinese technology industry and will be more likely to heed the warnings of US suppliers who say they are caught in the crossfire.

Biden officials could decide to issue enough export licenses to US companies to ensure that DJI continues to operate or even try to remove it altogether from the sanctions list.

Paul Triolo, a Chinese technology expert at Eurasia Group, said: “The Biden administration is certainly more likely to listen to those in Silicon Valley who say the Trump administration has gone too far.”

However, a section of Silicon Valley celebrated on Friday.

US drone manufacturers are small compared to DJI, but in recent years companies such as Skydio and Impossible Aerospace have found an emerging niche for first-response and commercial applications.

“It’s hard to imagine a bigger action that would have a bigger impact on the benefit of American drone manufacturers,” said Mr. Gore of Impossible Aerospace.

“The best way [now] to reduce the risk is to buy American. “

*An earlier version of this story incorrectly quoted Mr Groves as the amount that DJI allegedly took advantage of.

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