Manufacturing News

Fledgling UAV sector helps Chinese companies take off

Unmanned drones, fitted with small cameras, are becoming must-have items. They are also part of a booming business in the civil and military aviation sectors.

You must have seen them darting across the sky on your laptop or TV screens.

Unmanned drones, fitted with small cameras, are becoming must-have items. They are also part of a booming business in the civil and military aviation sectors.

As the market expands, investors are pouring into the unmanned aerial vehicles industry in China. "The application of UAV, or drones, is growing," Xiong Gang, chairman of ASB Ventures (China) Holdings Ltd, said. "This covers aerial photography, entertainment, searching and real-time transportation and logistics."

The company is actively looking to move into the drone sector through partnerships and deals. But then, ASB are not alone as the worldwide market for drones takes off.

According to a report by the Teal Group Corporation, an aerospace and defense consulting company, the global industry for military and civil UAVs will be worth $11.5 billion in 2024 compared to $6.4 billion this year.

The United States-based firm has also predicted that the worldwide market share of civil aviation drones will increase to 14 percent in 2024 from 11 percent in 2014.

Companies are naturally moving quickly to cash in on this rising trend.

Dajiang Innovations Technology Co Ltd, a UAV manufacturer based in Shenzhen, announced in May that it received $75 million of funding from the US venture capital firm Accel Partners. Sequoia Capital, another venture capital company in the US, had earlier invested in DJI without revealing the exact amount.

"DJI has the right sort of deep technology that we are interested in," Neil Shen, the founder and managing partner of Sequoia Capital China, said. "That is why it has increased its market share globally."

Investment has also been plowed into Chinese companies such as Zero UAV (Beijing) Intelligence Technology Co Ltd, a drone manufacturer in Beijing. Zero Tech specializes in aerial photography and received a 50 million yuan ($8 million) from Shenzhen Rapoo Technology Co Ltd in February.

Last September, Chengwei Capital, a Chinese venture capital firm, invested $20 million in XAIRCRAFT Technology Co Ltd, which is based in Guangzhou. XAIRCRAFT was one of the first domestic companies to develop multi-rotor drones.

Another UAV manufacturer, Ehang Technology Co Ltd of Guangzhou, last year received angel funding from ZhenFund and LeBox Capital in Beijing. Then in December the venture capital company GGV Capital was part of a group that invested $10 million in Ehang. "Chinese high-tech startups have transformed from 'Copy to China' to 'Create in China' in recent years, and the trend is especially obvious in the intelligent hardware sector," Shen said.

When it comes to market share, DJI has dominated the consumer sector for drones with a 70 percent slice of the global pie. Last year, the company sold about 400,000 units and reported a profit of around $120 million, according to Forbes, the business media giant. Smart hardware, coupled with low costs as well as an efficient supply chain, has made China a global manufacturing center for UAVs.

"This is also due to the research and development talent in the country," Shen said. "The Internet has also opened up the global marketplace for consumers and this has helped Chinese companies stay ahead of international rivals."

But it is not all clear skies ahead for China's drone manufacturers. One problem is putting together a network that can coordinate UAVs at low altitude for built-up areas such as cities.

"If UAVs from different companies can be connected to a network, it will be huge step forward, and highly valuable," Xiong Yifang, co-founder of Ehang Technology Co Ltd, said.

Competition in the sector will also increase in the future, he pointed out, although the market is expanding at a tremendous rate.

Regulation is another area that will affect the UAV industry. China, for example, has yet to produce a concrete policy on zones. Australia, Canada and the United Kingdom have limited regulations for individual leisure use of UAVs, but that is likely to change as the sector grows. There are tighter restrictions in the US.

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