[Report Highlights] Sharp Decline in Drone Market Demand in 2023 Due to Geopolitical Impact

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The intensifying competition between the United States and China has prompted countries like Australia to cease the use of Chinese drone products due to national security concerns, significantly impacting the Asia-Pacific drone market.

In 2023, the global drone market is estimated to be valued at $33.4 billion, with a growth rate converging at 9.2%. As drone applications and use cases become more defined, drone manufacturing materials become increasingly transparent, costs and prices are expected to rationalize. The core profitability of drone manufacturers is shifting towards drone equipment, such as cameras and sprinklers.

Current State and Market Analysis of the Drone Industry

The commercialization of drones has accelerated, leading to the integration of autonomous drone docks and DaaS (Drones as a Service) technology. This has prompted drone suppliers like DJI, FOIA, GEOAI, AeroVironment, Skydio, and others to develop their own drone ground control systems, cloud-based control systems, onboard AI control systems, and multi-series autonomous flight systems. Autonomous flying control system enable AI-driven real-time image recognition, visual navigation processing, data capture, and analysis, as well as automated flights, deployments, take-offs, and landings.

Furthermore, the matured technologies of AI and computer vision have led to the diversification of drone products, allowing companies in the media and entertainment sectors to replace traditional aircraft with drones for tasks such as aerial photography, cinematography, and capturing special effects, resulting in cost reduction and increased efficiency. On the other hand, road and railway operators are combining drones with 3D modeling software to assist in structural engineering design. The logistics sector is rapidly advancing smart delivery models. Hence, the global drone market, including platform systems, automation applications, and drone docks, reached $30.6 billion in 2022, reflecting a 15% growth compared to 2021.

Although drones have a wide range of application areas, their technology and critical components are increasingly influenced by geopolitical factors. The ongoing US-China competition and concerns related to national security have led many countries to discontinue the use of Chinese drone products. Consequently, China, in addition to restricting the export of gallium and germanium for chip manufacturing, announced export controls on certain drones and related equipment starting in September 2023. This decision not only impacts China’s drone industry but also affects its vertical integration, including equipment suppliers for batteries, drone engines, motor controllers, ground stations, and anti-drone systems.

With declining drone sales volume, drone manufacturers are forced to reduce production to control operational costs, resulting in a significant decrease in demand for semiconductor components such as MOSFETs, HMIs, PCBs, sensors, microcontrollers, communication chips (Wi-Fi, Bluetooth), and charging ICs. This has significant implications, particularly for DJI, which holds approximately 70% of the global drone market share, and more than half of drones sold in the United States are either manufactured by DJI or supplied with DJI components.