DJI to suffer from the ban imposed by US technology supplier on Chinese-manufactured drones due to security issues

A US-based multinational company that supplies drone technology to the several states and local security agencies have decided to stop working with Chinese drone manufacturers due to security reasons.

Cape Production, a startup based in California plans to inform its US-based customers that it will no longer offer software that works with Chinese drones. Most of their clients use the software to remotely operate small aerial drones for safety and crime surveillance.

This development is a huge setback to DJI, a Chinese company, and the worlds largest drone manufacturer. Over the years, the company has been striving to dispel concerns about the possibility of its products being used for espionage. 

The recent ban is one of the aftermaths of the waning relationship between the United States and China.  The cost of production of American companies that depends on global supply chains has increased, as they continue to sever relationships with Chinese manufacturers. Nowadays, Chinese-based technology companies are largely seen as suspects in the United States.

DJI is not the first Chinese company to face a similar fate in the US. It will be recalled that the US government has included Huawei, the Chinese technology company in the Entity List. The US government refers to the company as a national security threat and limits its business activities in the US.

The dominance of DJI in the US drone market has caused concerns in recent times. For instance, in 2017, the US Army expressed cybersecurity concerns regarding DJI drones.  Recently, the Department of Homeland Security also issued an alert regarding the possibility of China accessing sensitive video footage in the US.

However, blacklisting Chinese drones will likely hamper the business of Cape, at least for a short while. At this time, all the drones that use Cape’s software commercially are from DJI. Although Cape declines to cite the number of drones, the company confirmed that its application has flown more than 150,000 trips.

Going forward, Cape shall ask new customers to choose drones from a list of approved manufacturers. Only Skydio, another startup located about two kilometers from Cape’s headquarters in Silicon Valley, is included in the list at this time. Skydio recently started working with the Defence Department.

Cape said it will allow its existing customers to continue using their DJI drones till the end of their contracts. Typical contracts with Cape do not last more than a year.

Last month, DJI sent a letter to a Senate sub-committee describing its espionage accusations as a ploy by competitors to gain an advantage in the US market. The company outrightly denied charges that it sends video footage abroad, saying that it has made custom drones without internet capabilities for use by governments.

A month later, the Interior Department analyzed and published its finding on the DJI drones designed for government use. It recommends the approval of DJI drones but advised that its use should be limited to non-sensitive missions that do not carry classified data.  The department cites the lack of a viable domestic alternative as a key factor for approving the DJI drones.

Although government officials and indigenous investors have repeatedly called for the establishment of viable drone industry in the US, China still dominates the industry.

Jim Williams, a former official at the Federal Aviation Administration who now consults for clients that use drones, affirmed the competitive advantage of China in the marketplace.  He said China has drone technology, and the low cost of manufacturing allows them to innovate quickly. It will take some time for a viable competitor to emerge.

Cape initial goal after commencing operations in 2014 is to allow people to create rad skiing videos but started deviating towards law enforcement in 2017.  Cape visited Ensenada, a Mexican beach town which is about 70 miles south of Tijuana to test drones. The police department heard about the test and invited Cape to run a pilot project with them. The company then set up a DJI drone with its application that aids autonomous flying and controls.

The police department in Ensenada began using the drone to respond to emergency calls, and it yielded positive results. The city officials affirmed that the drone had assisted in over 500 arrests and crime rate in the city has dropped by 10%.

Today, clients in the public safety sector account for about 70% of Cape’s customers, followed by businesses in the oil and gas, and utility sectors. Unfortunately, skiers, that were the core of the company’s invention are no longer a focus.

Although Cape’s Rittler did not mention the customers that expressed concern about Chinese equipment, he affirmed that this development is not impulsive.   He said that the company has been preparing to sever ties with DJI over the last 18 months when he joined the company. His focus has been to bring more government customers onboard.

Rittler also affirmed that the recent aggravated geopolitical conflict is not a major factor in its decision. He said that tensions have been underground all these while, they are just becoming apparent to the public.