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Pentagon leaders are calling for thousands of drones to prepare for war in the Pacific. But as Trump’s tariffs escalate tensions with China, they face an uncomfortable reality: Silicon Valley’s drone companies are addicted to Chinese components.
The day after Mach Industries showcased its new military strike drone, Viper, through an impressive promotional video, CEO Ethan Thornton found himself in a challenging situation.
Some astute viewers of the video, which had been widely shared on social media under the motto “Show, don’t tell,” pointed out that the drone featured an engine suspiciously similar to one produced by a Chinese manufacturer. Despite Thornton’s firm denial of any Chinese parts in the drone, the situation became more complicated when Palmer Luckey, CEO of defense technology firm Anduril, posed a direct question: “What about the airframe in the video?”
Confronted with the evidence, Thornton agreed on social media that “We feel comfortable blowing up Chinese components for testing purposes,” thus revealing the origin of the engine. Thornton later reiterated to Forbes that “all final production units ship without Chinese components,” but Anduril and Luckey refrained from commenting.
The ongoing conflict in Ukraine, increasing tensions regarding Taiwan, and the prevalence of Chinese drone companies like DJI have heightened the U.S. military’s urgency to acquire affordable and mass-produced drones from domestic or allied manufacturers. However, Thornton’s comments shed light on a troubling reality in Silicon Valley: many companies striving to meet the Trump administration’s “America First” initiative still grapple with the reliance on Chinese-made parts.
Currently, China dominates nearly 90% of the global commercial drone market, producing a vast majority of essential components needed for drone assembly, including airframes, batteries, radios, cameras, and screens, as highlighted by research from Drone Industry Insights UG. This dependence has left the U.S. lagging significantly in establishing the necessary manufacturing infrastructure to rival China’s capabilities. Josh Steinman, former head of supply chain security at the National Security Council, stated, “We are almost completely reliant on our major adversary for them, and our ability to make them.”
This entrenched dependency poses a significant challenge. For instance, during a recent U.S. Marines drone demonstration attended by Vice President J.D. Vance, pictures showed him donning Chinese-made drone display goggles. Major Hector Infante, who leads the training at Quantico, clarified that the goggles were not military-issued and were only for viewing purposes; the White House did not provide a comment on the situation.
US Vice President JD Vance wears a Chinese-made Skyzone headset during a tour of the Marine Corps Base in Quantico, VA.
AFP via Getty Images
The reliance on Chinese parts has alarmed military officials. Several American drone manufacturers with contracts from the Pentagon, including Skydio, have been racing to overhaul their supply chains after sanctions against China curtailed their access to critical suppliers. Trent Emeneker, a leader at the Pentagon’s Defense Innovation Unit (DIU), told Forbes, “China could shut [the drone industry] down globally for a year. It’s a national security issue not just for the United States, but for the West as a whole.”
While some drone companies argue that bureaucratic hurdles at the Pentagon have hampered American industry growth, the pervasive issue of Chinese components has dampened military enthusiasm for large-scale adoption. For instance, military procurement from Orqa, a company positioning itself as the “DJI of the West,” was halted due to the discovery of allegedly prohibited Chinese components in its offerings. Orqa’s CEO Srdjan Kovacevic disclosed, “Most of the western drone companies still rely on Chinese components,” though he mentioned that Orqa had shifted its manufacturing inhouse.
This predicament exemplifies the consequences of President Trump’s tariffs, intended to encourage domestic companies to diminish their reliance on cheaper foreign parts and stimulate local manufacturing. However, such transformations will require years of investment and development. In the meantime, retaliatory tariffs from China threaten to inflate the costs of components critical to American drone manufacturers; an updated export framework has already halted the shipment of essential magnets used in drone motors.
“It’s easier to get sanctioned by China,” remarked Anthony Cote of BRINC, “than it is to obtain Pentagon approval.”
Efforts to enforce restrictions on Chinese imports and materials have faced significant pushback from both Chinese manufacturers and American investors. In response to a potential measure by the Commerce Department aiming to ban or limit drone components from China, venture capital firm Andreessen Horowitz—known for backing drone ventures like Anduril, Skydio, and Shield AI—suggested a more cautious approach involving gradual restrictions while still permitting U.S. companies to source from China.
“Immediately removing all foreign adversary-based sources of supply for critical drone components would have a catastrophic effect on the American drone industry,” asserted Jai Ramaswamy, the chief legal officer for Andreessen Horowitz, in a letter to the Commerce Department last month. The firm declined to elaborate further.
Some national security experts contend that such drastic measures might be necessary. “At some point, you have to pull the bandaid off,” Steinman emphasized. “And either you choose or [China] will.”
In light of China’s advancements in drone technology, the Pentagon prioritized drone acquisitions in 2023, launching the Replicator initiative to rapidly produce and deploy thousands of affordable drones to counteract China’s weapons stockpile. However, the initiative, with first deliveries expected by August, faces a challenging future, and many drone companies claim it does not go far enough to promote widespread adoption.
The pathway to securing drone contracts primarily runs through the Pentagon’s Defense Innovation Unit (DIU), which oversees an annually updated Blue List of drones approved for military use. This list, managed by a small team responsible for evaluating numerous products to ensure they comply with the National Defense Authorization Act’s restrictions on banned Chinese components, includes critical items like cameras, flight controllers, and radios.
Both established companies like Anduril and smaller firms like Neros have made it onto the Blue List. Yet, some drone manufacturers criticize the process as being a bottleneck that stifles industry progress. In the current year, only 23 companies received approval out of over 300 submissions. San Antonio-based Darkhive, which expected to be included, was informed after months of waiting that its drones had not made the list, with DIU stating simply, “try again next year,” according to CEO John Goodson. Darkhive still maintains some Pentagon contracts through alternative methods.
BRINC, which has over 700 law enforcement and public safety clients, recently secured a $75 million investment led by Index Ventures, faced sanctions from China after participating in a U.S.-government-organized sales trip to Taiwan. Like Darkhive, BRINC did not make the Blue List and is transitioning from military contracts to focusing on public safety clients. Andrew Cote, BRINC’s head of strategy, remarked, “It’s easier to get sanctioned by the [People’s Republic of China] than it is to get on the Blue List.”
In December, the Pentagon ceased the use of drones from Croatia-based Orqa, which had presented itself as a Replicator solution — marketed as a source for China-free components — after the DIU found that it included radio modules made in China that violated NDAA regulations, as well as having a subsidiary based in China established in 2022.
Kovacevic admitted that the modules were assembled in China but insisted the fundamental chips came from Taiwan and Europe and argued they are not vital components; he also asserted that the company now fabricates its own modules. In terms of the China-based division, he claimed it has moved operations to Europe, except for one unrelated product that remains sourced from China.
Despite all submissions to the Blue List being rejected, Orqa’s CEO expressed discontent with what he deemed opaque guidelines, stating, “What we previously thought were transparent rules are obviously subject to very creative interpretations. There’s no transparency whatsoever to the process.”
Emeneker, overseeing the Blue List for the DIU, dismissed such claims. He stated unequivocally, “Companies don’t get to decide what is and isn’t legal under the law,” adding that the recent list decisions were compliant with legal standards. “There are always edge cases and hard decisions to make. The process was standardized and designed to provide the best options to the warfighter,” he noted.
While the bans on Chinese components do not include certain items like airframes, engines, and batteries, the implication of relying on these can still be precarious. October brought a stark reality check when China imposed sanctions on Skydio, leading to a battery supply interruption for the largest small drone manufacturer in the U.S. The company, which has raised over $850 million from investors including Andreessen Horowitz and Accel, announced it could not source new suppliers until spring, forcing it to ration battery supplies.
“If there was ever any doubt, this action clarifies that the Chinese government will manipulate supply chains as a weapon to further its interests over ours,” stated Skydio in a public release. Months later, the company had yet to identify a new supplier and did not comment when approached for further information.
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Numerous drone companies vying for Pentagon contracts—like Anduril, Shield AI, Firestorm, CyberLux, and Neros—are now facing sanctions from China. Some companies maintain that their operations remain unaffected. For instance, Lily Hinz, a representative from Shield AI, asserted their technology does not utilize Chinese parts, thus not feeling the sanctions’ impact. Firestorm’s CEO, Dan Magy, echoed this, claiming their drones are free of Chinese components, celebrating the sanctions as a “badge of honor.” Meanwhile, Anduril, which welcomed the sanctions, but declined to issue further comments.
In contrast, other manufacturers have had to adapt. CyberLux’s CEO Mark Schmidt mentioned in an interview with Forbes that his company is actively transitioning away from Chinese parts, focusing on scaling up North American suppliers for essential components, albeit falling short of detailing the related expenses and timeline. Even Neros, based in California and primarily manufacturing its critical drone components in-house, has felt the effects of the December sanctions. Although benefiting from a recent $35 million funding round backed by Sequoia, the company still relies on some Chinese parts. CTO Olaf Hichwa remarked, “Obtaining these components has become increasingly difficult. Nonetheless, this serves as a motivating factor to eliminate any dependence on Chinese parts.”
A consensus appears to be emerging among military officials, national security experts, and drone industry leaders: establishing a supply chain for drones that is devoid of Chinese influence hinges on the complete removal of DJI from the U.S. market. The Shenzhen-based company is recognized as the leading drone manufacturer globally, largely due to substantial government subsidies from China and investments from American venture capital firms like Accel Partners and Kleiner Perkins.
“Until DJI is entirely banned, there’s not enough market to legitimize a U.S. industrial base,” stated Nathan Ecelbarger, chair of the U.S. National Drone Association, which seeks to accelerate military integration of drone technology.
However, DJI has successfully navigated efforts to restrict its market access, disputing the proposed ban on imports of Chinese drones and components from the Commerce Department. The company argued that such moves would “significantly harm a number of U.S. stakeholders.” In addition, DJI has initiated legal proceedings against the Defense Department, claiming it does not pose a national security threat and has lobbied against legislative proposals to prevent its products from entering the U.S. market. “DJI has been unjustly targeted based on its national origins,” the firm asserted in a statement to Forbes.
As of December, a legislative ban on DJI’s products was removed from the annual military funding bill, allowing it to continue operations within the U.S. In a statement following the decision, DJI expressed gratitude to its supporters, largely made up of American clients, asserting: “Your backing had tangible results. Congressional offices were responsive to your input.”
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