(Clarifies in the penultimate paragraph that the third office is New York)
* About a third of North American DJI staff leave – sources
* The company is facing geopolitical tensions, affected by US restrictions
* Such risky winds risk eroding DJI dominance – sources
* But the company is a leader fleeing the global and American markets
SHENZHEN, China (March 8th) (Reuters) – Chinese drone giant DJI Technology Co Ltd has built such a successful business in the United States over the past decade that it has knocked out almost all competitors in the market.
However, its operations in North America have been affected by internal reductions in recent weeks and months, with a series of staff reductions and departures, according to interviews with more than two dozen current and former employees.
The loss of key managers, some of whom joined rivals, has exacerbated problems caused by the US government’s restrictions on Chinese companies and raised the once-distant prospect of eroding DJI’s dominance, said four of the people, including two senior executives who were at the helm. company by the end of 2020.
About a third of the region’s 200 DJI team was laid off or resigned last year from offices in Palo Alto, Burbank and New York, according to three former and one current employee.
In February of this year, the head of DJI for research and development in the US left, and the company fired the rest of the research and development staff, numbering about 10 people, at its flagship research center in Palo Alto, California, they said four persons.
DJI, founded and led by billionaire Frank Wang, said it had made the difficult decision to downsize Palo Alto staff to reflect the company’s “evolving needs”.
“We thank the affected employees for their contributions and remain dedicated to our customers and partners,” he said, adding that its North American sales have grown strongly.
“Despite misleading statements from competitors, our enterprise customers understand how DJI products provide robust data security. Despite gossip from anonymous sources, DJI is committed to serving the North American market. ”
He did not comment on other departures of US staff that the current and former employees talked about, although he told Reuters last year that its global structure is becoming “difficult to manage”.
DJI, which has become a symbol of Chinese innovation since its founding in 2006, is one of dozens of companies caught in the crossfire of trade and diplomatic hostilities between Washington and Beijing, such as Huawei and Bytedance.
Sources of staff and competitors say that the company’s brand coverage, technical knowledge, production power and sales force mean that it will not soon lose its crown on the US and global billions of dollars for non-military drones.
But a December order that added the company to the U.S. Department of Commerce’s “List of Entities,” along with the closure of its California research and development operation, could affect its ability to meet the needs of U.S. customers, according to three former senior executives and two competitors.
The Commerce Department’s listing, adopted in connection with allegations that include “high-tech surveillance” with DJI, prohibits the company from buying or using U.S. technology or components.
In the same month, Romeo Durscher, DJI’s chief of public safety in the United States, who played a central role in building the company’s business in providing drone technology to U.S. non-military government departments and agencies, stepped down.
Durscher, a former NASA project manager and an influential figure in the drone industry, now works for the Swiss company Auterion, a competitor of DJI.
He said he left DJI because he was discouraged by staff cuts and what he described as internal power struggles between the US team and China headquarters. He added that the US reorganization has complicated the task of addressing the consequences of US-China tensions and winning government affairs.
“It is not an easy decision to leave the market leader who is far ahead of everyone else,” said Durscher, who joined DJI in 2014. “But those internal battles have diverted attention from the real goal and worsened in 2020. .. we have lost an extraordinary talent at DJI and he is very unhappy. ”
US SECURITY CONCERNS
Private DJI does not publish sales figures. The US Department of Defense has estimated that the US non-military market is worth $ 4.2 billion last year. DroneAnalyst consultancy said that DJI controls almost 90% of the North American consumer market and over 70% of the industrial market.
The U.S. Department of Commerce’s December listing and ban on buying parts in the U.S. could affect the company’s mobile applications, web servers and some battery and imaging products, said David Benowitz, chief research officer at DroneAnalyst and a key figure in the company’s DJI, who works with industrial clients in Shenzhen before leaving last summer.
DJI said in December that the ban would not affect the ability of American customers to buy and use its products.
The listing followed other official blows. In October, the U.S. Department of the Interior said it would buy only drones from companies approved by the Department of Defense, which in August last year published a list of five licensed drone suppliers to the federal government – four American and one French.
DJI said there was no “general ban on the US government from buying DJI drones”.
“Congress reviewed this approach last year and rejected it because … such a ban would be a challenge for many drone-based companies and government agencies,” she added.
“WE ARE STILL PRIMITIVE”
Benowitz said persistent US-China tensions and Washington’s pressure to support DJI rivals could see the company’s North American market share decline. He added that while the federal government covered a relatively small portion of DJI’s business, its restrictions could have a “terrible effect”, with other buyers worried about tougher measures in the future.
“We are at a time when there are too many market opportunities for a player to dominate,” he said.
However, he added that alternatives to DJI were the relative shortcomings, although both political support and security concerns about Chinese drones have increased them in the last year. DJI’s competitors include the French parrot and the California Skydio.
Chris Roberts, CEO of Parrot Inc., America, said 2020 was a significant year for the U.S. company, being named a Department of Defense-approved provider and gaining business from emergency services and security agencies.
Skydio announced last week $ 170 million in funding for Round D and said it has a valuation of over $ 1 billion.
“DJI makes good hardware, but we’re still in the market very early on and we’re very primitive compared to what should eventually exist,” Skydio CEO Adam Bry told Reuters.
FLOTE FANTOM DRONE
When Durscher joined DJI in 2014, the company’s Phantom series turned drones from a niche hobby into a mass gadget. He said he was particularly drawn to the chance to bring drones into the fire and rescue department kit.
He said the technological advances of smaller rivals over the past year have been tempting for some public safety agencies, which could say “let’s go with this drone now, so we don’t have to deal with data security.”
He added that the change could take place as government departments and companies sought to replace drone fleets nearing the end of their life cycles.
Typically, a fleet is expected to last three to four years, according to Benowitz.
Durscher and a few other employees compared DJI’s internal rivalry with projects to “Game of Thrones,” the TV series in which rival factions fight for power. He said this led to a revolving door of Shenzhen bosses and that he reported to 12 different managers in the six years of the company.
Durscher’s departure from DJI followed that of another key North American director last year, including business development director Cynthia Huang.
Huang, who now works with Durscher at Auterion, said the job cuts in the past year were the main reason he decided to leave. The losses in Palo Alto, Burbank and New York followed cuts to DJI’s global sales and marketing teams, which Reuters reported in August.
“Some of the people we lost in these layoffs didn’t make sense,” said Huang, who was hired in 2018 to take the lead in building DJI’s business in North America. “The continuous exodus of talent has been daunting.” (Reporting by David Kirton; Additional reporting by Jane Lee in San Francisco, Alexandra Alper and David Shephardson in Washington; Editing by Pravin Char)