White Paper

Download the full whitepaper detailing the challenges facing the drone industry and recommendations for U.S. lawmakers and regulators here detailing:

China Flooding the U.S. Market with Subsidized Drones

• Threat to U.S. National Security
• Threat to U.S. Aviation Leadership & Workforce
• Threat to U.S. Values & Fundamental Human Rights

U.S. Drone Manufacturing Competitiveness & Security

• Leveling the Playing Field for U.S. Drone Manufacturing
• Federal Market Demand Programs
• DoD Programs
• Enabling Regulations
• Drone Cybersecurity
• Restrictions and Tariffs on Chinese Drone Imports

White Paper Intro

For 120 years, since December 17, 1903, when Orville and Wilbur Wright launched the first crewed flight on a hill in Kitty Hawk, North Carolina, the United States has been the world leader in aviation. The U.S. leads in commercial, business, and general aviation manufacturing and has a total aviation workforce of more than half a million people. But there is one segment of the aviation industry that the United States does not lead: uncrewed aircraft systems (UAS) and domestic drone manufacturing and operations. While the U.S. has been content to maintain leadership of traditional segments in the aviation industry, China understood the tremendous economic and national security implications of uncrewed aviation and took aggressive measures to dominate the global UAS manufacturing and technology market.

In 2015, China launched “Made in China 2025,” a ten-year whole-of-society effort to invest in key industries, primarily in the technology area, to ensure China’s world leadership and market dominance. In a distinct role reversal with high-tech capitalist economies in the West, China has removed red tape to development while enabling sophisticated market mechanisms to spur rapid growth. While much of the discussion on Chinese government involvement in the industry has centered around direct subsidization, the scope of their support is far greater. No Chinese company or investment firm is free of Chinese Communist Party (CCP) involvement. The CCP has used its influence to:

• Direct investment firms to invest heavily in drones and component parts;
• Direct banks to provide low-interest loans to industry participants;
• Direct companies to build Chinese domestic supply chains;
• Direct companies to buy domestically to meet domestic market share targets;
• Direct companies to spend a high percentage of their revenue on research and development; Direct companies to partner with high-tech industry to ensure an end-market; and
• ​Direct state-owned companies to acquire and transfer western technology.

While this infrastructure has developed a robust internal industry for uncrewed systems in China, it has also allowed them to project their influence abroad and use their monopolistic position to put U.S. manufacturers at a disadvantage by flooding the global market with subsidized drones.

This is an illegal trade practice the U.S. Department of Commerce (DOC) labels as “dumping.” In 2019, the U.S. Undersecretary for Defense, Ellen Lord, highlighted this challenge, noting, “We don’t have much of a small UAS industrial base because DJI dumped so many low-price quadcopters on the market, and we then became dependent on them.” More recently, former Secretary of Homeland Security, Chad Wolf, wrote that, “Chinese drone dumping presents a challenge not only to U.S. competitiveness, but more importantly, to our national security.” This monopolistic position has also created barriers to the development of U.S. supply chains for the autonomous industry by effectively excluding them from the largest markets. The results of Chinese drone dumping have been devastating to the U.S. drone manufacturing industry. Chinese drones account for more than 90% of the consumer market, 70% of the enterprise market (drones used as industrial tools), and 92% of the first responder market.

From the perspective of U.S. competitiveness and security, incentivizing U.S. leadership in the drone industry represents a strategic imperative in a market long characterized by state-subsidized companies based in China that have access to virtually unlimited, free to low-cost capital. As this paper will lay out, China has used its monopolistic position to flood the U.S. with subsidized drones, distorting the marketplace in favor of Chinese drones, stifling competition, and inhibiting new entrants. Further, by preventing access of U.S. component manufacturers into industry supply chains, China is able to stifle U.S. development of critical technology in autonomous systems. This has resulted in an emerging series of threats to the United States ― including threats to national security, to the nation’s position as a global leader in aviation, to its aviation workforce, and to its democratic values and fundamental principles of human rights.

AUVSI accordingly challenges the U.S. government to take resolute action to level the playing field for U.S. drone manufacturers and their component suppliers. Additionally, we urge the U.S. government to work with its partners/allied nations to ensure they consider similar aid to support their domestic drone manufacturers and component suppliers. Together, the United States and its allied nations can effectively level the international playing field and spur robust competition with certain companies that are tied to our collective foreign adversaries. This paper sets forth the case for action and offers concrete policies to ensure U.S. companies can compete and win in the marketplace. Many of the suggestions in this paper would apply to small UAS, but the same lessons learned can be applied to larger UAS as well.

Further, the policies will enable change for markets beyond drones, including other autonomous and uncrewed vehicles, as well as other emerging technologies, which often use many of the same components and technology stacks. Lastly, consistent with AUVSI’s standing as an international organization, the recommendations in this paper will open supply chains for electronic components and rare earth materials that can be utilized by other international drone and electronics markets outside the United States that are also struggling to compete with subsidized Chinese competition and its dominance of the global electronics supply chain. AUVSI encourages the U.S. government to coordinate these activities with allied and partner nations, consistent with Washington’s approach to semiconductor reshoring, to generate a “stronger, more secure supply chain.”