by Del Cap Thu Oct 31, 2024 5:30 pm
Skydio, the US’s largest drone maker and a supplier to Ukraine’s military, faces a supply chain crisis after Beijing imposed sanctions on the company, including banning Chinese groups from providing it with critical components.
Skydio is rushing to find alternative suppliers after Beijing’s move, which also blocks battery supplies from its sole provider, said people familiar with the situation.
The drone-maker has sought help from the Biden administration. Chief executive Adam Bry last week met US deputy secretary of state Kurt Campbell and held discussions with senior officials at the White House.
American officials are concerned about China disrupting US supply chains and provision to Ukraine of drones used in intelligence gathering.
“This is a clarifying moment for the drone industry,” Bry wrote in a note to customers obtained by the Financial Times. “If there was ever any doubt, this action makes clear that the Chinese government will use supply chains as a weapon to advance their interests over ours.
“This is an attempt to eliminate the leading American drone company and deepen the world’s dependence on Chinese drone suppliers,” he added.
The crisis for Skydio underscores the risks facing US companies that rely on China and comes amid concern among foreign businesses about Beijing’s use of security laws to detain their local employees and carry out corporate raids in the country.
China’s sanctions, imposed on October 11, hit several US groups, including privately held Skydio, in retaliation for Washington’s approval of the sale of attack drones to Taiwan. Skydio had recently won a contract with Taiwan’s fire agency.
Beijing imposed the sanctions before Skydio had succeeded in finding alternative suppliers.
One person familiar with the situation said Chinese authorities visited Skydio’s suppliers, including Dongguan Poweramp — a subsidiary of Japan’s TDK that makes drone batteries — and ordered them to sever ties.
Skydio on Wednesday told its customers it was rationing the number of batteries supplied with drones because of the Chinese move and that it did not expect to have new suppliers until spring.
Skydio is talking to companies in Asia, including in Taiwan. One person familiar with the situation said US officials had contacted Asian allies to discuss ways to help the company. Skydio has also been in touch with Taiwan’s vice-president Hsiao Bi-khim about the issue.
The San Mateo-based group sells to corporate and government customers, including the US military. It said it had sent more than 1,000 drones to Ukraine for intelligence gathering and reconnaissance purposes. The drones have also been used to help document Russian war crimes.
Skydio said its latest model, the X10, was the first US drone to pass Ukrainian electronic warfare tests — meaning they are hard to jam — and that Kyiv had requested thousands of them.
The Chinese action comes as the US Congress considers legislation that would ban Americans from flying drones made by DJI, the Shenzhen-based company that dominates the global commercial drone industry.
“We suspect Skydio was targeted by Beijing because it is likely seen as a competitor to DJI,” said one US official. “If there is a silver lining, we can use this episode to accelerate our work to diversify drone supply chains away from . . . China.”
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