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Leading the buzz

Low-cost manufacturing and innovative concepts work in China’s favor as it soars ahead of rivals to dominate the global drone market

By ANTHONY WARREN in Hong Kong
anthony@chinadailyapac.com

Drones — also known as unmanned aerial vehicles (UAVs) — are big business. Previously the purview of the military, and enthusiasts who made them at home, the last three years have seen newer, more advanced models flying off the shelves.

Over the Christmas season last year, drones were a popular gift on wish lists worldwide. About 1 million UAVs were sold in the United States alone, making North America the biggest buyer globally.

Yet since the US Federal Aviation Administration ordered drone pilots to register online earlier this year, figures show that more than 50 percent of US-owned drones were Chinese models. Not simply made in China, but designed and developed there.

According to Dronelife.com, more than 500 drone manufacturers exist globally. Of those manufacturers, some 400 are Chinese. Of the 13 most popular brands in 2015, no fewer than eight were Chinese.

According to Dronelife.com, more than 500 drone manufacturers exist globally. Of those manufacturers, some 400 are Chinese. Of the 13 most popular brands in 2015, no fewer than eight were Chinese.

When it comes to the world of consumer drones, it is safe to say that China dominates the market. Market research firm IDC recently determined that sales of commercial-quality drones in China will hit 950,000 units by 2019 — a rise of some 300 percent over four years.

Adam Najberg is the global director of communications for DJI, the world’s biggest civilian drone manufacturer.

He told China Daily Asia Weekly that the company, which is based in Shenzhen, in South China’s Guangdong province, experienced “crazy growth” last year, with the biggest increases in Asia occurring in China, South Korea and Japan.

Between 2009 and 2014, the company’s sales are said to have trebled each year. Last year DJI raised $750 million from US venture capital firm Accel, based on an $8 billion valuation. According to Forbes, DJI claims a 70 percent share of the global drone market.

“Last year I think we (reached) around $1 billion in sales,” said Najberg. “That was roughly double the previous year.”

With 2015’s DJI Phantom 3 drone now selling at about $800 and the professional DJI Inspire 1 clocking in at over $3,000, it is not bad for a company that, just 10 years ago, was run by three colleagues in a Shenzhen apartment.

With 2015’s DJI Phantom 3 drone now selling at about $800 and the professional DJI Inspire 1 clocking in at over $3,000, it is not bad for a company that, just 10 years ago, was run by three colleagues in a Shenzhen apartment.

Founded in 2006 by Frank Wang Tao, a Chinese mainland alumnus of the Hong Kong University of Science and Technology, DJI started off selling accessories for DIY drones. The company’s big break came with the release of the first of the Phantom series in late 2012.

Four years and four iterations later, the sleek white fliers are a staple of the drone industry. Used as a toy and for tasks as varied as moviemaking and terrain mapping, DJI’s popularity has been compared with that of tech giant Apple.

After all, both have cornered their respective markets with plug and play technology wrapped inside a user-friendly exterior.

So how has China managed to pull it off?

For decades, China has been the center of global manufacturing, nowhere more so than in Shenzhen — the so-called workshop of the world.

Drones are a commodity that lends itself well to Chinese manufacturing, and according to some figures, almost 80 percent of the world’s UAVs are now put together in the city’s factories.

“Like most things, cost plays a huge factor in how successfully a product sells,” said Ben Grear, operations manager for Rise Above Custom Drone Solutions. The Australian company sells and adapts UAVs for clients including universities, the police and local government.

“China is able to design and manufacture many electronics and parts far cheaper than most other countries, so this plays in its favor.”

ZDNet, a technology analysis website, reported that exports of civilian drones from China increased by almost nine times in 2015. The total value was said to be in excess of 2.7 billion yuan ($404 million).

ZDNet, a technology analysis website, reported that exports of civilian drones from China increased by almost nine times in 2015. The total value was said to be in excess of 2.7 billion yuan ($404 million).

DJI’s Najberg said “first-mover status helped a lot” in pushing his company’s sales.

He added that the popularity of drones in Asia is underscored by affordability, more disposable income among the middle class and growing interest stemming from media exposure.

Gary Clayton is the chairman of the Unmanned Aerial Vehicle Systems Association (UAVSA), a British-based group that represents drone users.

He said he can trace the surge in sales to three key technological factors: The development of advanced batteries allowing vehicles to stay aloft longer; new regulations on how unmanned systems can comply with aviation authorities; and the fact that recreational use has pushed down manufacturing costs, ensuring competitively priced, high-end models for professionals.

But even if DJI is currently miles ahead of the opposition, it is not alone in the race.

French drone maker Parrot and other Chinese firms like Yuneec — in which US-based chipmaker Intel invested $60 million last year — have been competing in the market for years.

Even Xiaomi, the Chinese electronics company known for its smartphones, recently unveiled its own drone. The mini flying machine costs only 2,999 yuan and is equipped with a professional-level camera.

As more and more — predominantly Chinese — players rush into an increasingly congested market, drones with similar specifications and hardware have become available to buyers. With the actual technology cheap and production costs low, many companies are choosing to compete with cheaper prices rather than better technology.

Najberg said: “The gauntlet (DJI is) figuratively throwing down every time we have a new drone is — if you want a premium drone at the top of the market, you’d better have these features. Otherwise, (customers may ask) what are you charging us for?”

But with China the dominant party in the market, some are asking whether it is possible for companies to compete on a technological level.

But with China the dominant party in the market, some are asking whether it is possible for companies to compete on a technological level.

American drone manufacturer 3D Robotics has refocused itself as a drone provider for big business, where profit margins are higher and production costs are less problematic. At the same time, the company also moved manufacturing from Tijuana, Mexico, to Shenzhen.

“China will always have the edge in the raw manufacture of components,” said Grear of Rise Above. “However, there is plenty of room in the industry for local manufacturers and designers to provide innovative solutions outside of the mainstream.”

Despite this hope, high-profile investments — such as Intel sinking around $127 million into nine Chinese tech and drone companies last year — have gone into bigger UAV companies. Non-Chinese startups and designers, by comparison, have been mostly left out of the loop.

One company shooting for success is Playable Creation, a Hong Kong-based toy manufacturer. It recently demonstrated its own locally designed drone, the Konsept VR32.

Kennes Cheung, cofounder of the company, told China Daily Asia Weekly that although many customers look for low-cost, cut-price models, there is strong positive feedback toward alternative manufacturers.

“We are absolutely tired of such price wars,” she explained. “That’s why we formed Konsept.”

Capitalizing on interest in cutting-edge technology, the fist-sized VR32 drone is piloted through virtual reality goggles. Pilots live-stream what the drone’s camera sees, as if riding onboard. Cheung said interest had already come from the US, Britain, and elsewhere in Asia.

But despite Hong Kong’s talent and technological expertise, manufacturing continues to serve as the deciding hurdle.

The cost to make a drone in the Chinese mainland can be three times cheaper than making it in Hong Kong, said Cheung. Government grants are available but are difficult to get, she added.

“I wish the Hong Kong government could lower the requirements and simplify the procedures so that more companies can enjoy funding.”

“I wish the Hong Kong government could lower the requirements and simplify the procedures so that more companies can enjoy funding.”

While Clayton of UAVSA does not believe Europe can ever compete on manufacturing costs, he sees a time coming when China’s dominance may not be guaranteed.

“The population of China has increasing wage expectations, and figures show that consumerism is growing,” he said. “There will inevitably be a tipping point, and manufacturing decisions may move to the next developing economy.”

Whether the drone crown can be snatched away from China, or whether the market fragments into dozens of small competing firms, remains to be seen.

Drone facts

Cost: The price of consumer drones varies. Those featuring cameras normally start at around $450, with advanced models costing up to $3,000. A typical drone with customizable features and semi-autonomous controls costs around $1,200.

Flight time: Typical flight time for a commercial drone is 20 to 25 minutes, with some professional models being able to remain airborne for up to 45 minutes.

Weight: A typical consumer drone is likely to weigh between 1 and 2 kilograms, although smaller drones may weigh less than 500 grams.

Common uses: Popular uses of drones include hobby flying, cinematography, terrain mapping, prospecting, security and surveillance, agriculture and racing.

Drones are machines — whether in the air, on the ground, or above or under water — that do not need to have a pilot inside to operate them. The drone is guided by remote control from another location, sometimes thousands of kilometers away. Most laws order civilian pilots not to allow their drones to leave their sight.

Modern-style drones were developed by militaries in the 1960s, but it was not until the late 1970s that civilian drones were first used in Japan to spray crops.

Public interest in drones remained a niche concern until the 2000s, when the media generated interest in military drones and producing drone kits became cost-effective.

The first drones aimed at consumers began to appear around 2010, with the Phantom model by DJI from the southern Chinese city of Shenzhen being among the most popular.

Many movies and television shows, including Skyfall, Jurassic World and Game of Thrones, have used drones to capture scenes, while drone racing is now a sport. In May, the winner of the World Drone Prix in Dubai scooped $250,000 in prize money.

Laws home in on drones Governments need to strike a balance between regulating the use of unmanned aerial vehicles and allowing the technology to develop

By ANTHONY WARREN in Hong Kong
anthony@chinadailyapac.com

In April last year, a drone loaded with flares and carrying a vial of radioactive material evaded security around the Japanese prime ministerial home and office in Tokyo. Crashing on the building’s rooftop helipad, it sat there for 13 days before being spotted.

Besides presumed embarrassment on the part of the authorities, the event was used to highlight the country’s perceived laxity in drone legislation.

No one was hurt and the pilot — an anti-nuclear protester — was handed only a suspended sentence. But in response, the Japanese parliament passed laws placing strict restrictions on drones. Now, drones operated by members of the public are effectively banned within Japan’s urban areas.

Globally, until fairly recently, the majority of countries lacked any laws covering unmanned aerial vehicles (UAVs). They were flown by a small, niche community of hobbyists and engineers who normally kept themselves to themselves.

Today the world of drones is a very different place. With UAVs thrust into the marketplace as serious commercial tools, their low cost, free availability and ease of control have made countries keen to bring pilots to heel.

Today the world of drones is a very different place. With UAVs thrust into the marketplace as serious commercial tools, their low cost, free availability and ease of control have made countries keen to bring pilots to heel.

While this may help rein in pilots with mischievous or downright unsavory purposes, governments are seeking to boost drone innovation.

Whether they can balance the two — a comprehensive legal response to UAVs which is open enough to adapt to new advances and applications — is now being seriously questioned.

With regulatory frameworks serving as a scaffold to protect both operators and the public, Karan Girotra, a professor of technology and operations management at business school INSEAD in Singapore, believes laws will benefit the industry.

“A good open, innovation-encouraging, regulatory framework that continues to evolve with technology is necessary for growth of this industry,” he told China Daily Asia Weekly.

“Lack of regulation can in fact be dangerous, as a few bad operators or technologies can turn public opinion against this very promising technology.”

In the United States, only four months before the Tokyo incident, a defense department employee crashed a drone onto the lawn of the White House, leading to the tightening of rules on drones in Washington, DC.

One incident in 2013 in China saw troops and aircraft deployed in response to a drone overflying sensitive parts of Beijing. The UAV was eventually shot down.

Even if radioactive drones or crash landings on government property are not an everyday occurrence, there are still the more mundane issues of privacy and public safety to contend with.

Even if radioactive drones or crash landings on government property are not an everyday occurrence, there are still the more mundane issues of privacy and public safety to contend with.

For example, while Hong Kong’s Civil Aviation Department has introduced rules on where and when to fly, last year the territory’s privacy commissioner for personal data was reportedly looking into updating guidelines on what camera-carrying drones can film and store. It is quite likely that some drone pilots have unwittingly breached privacy laws.

Recognizing the problems in allowing drones to wander free, but also wanting to preempt or at least offer alternatives to strict official legislation that may affect business, some companies have introduced “geofencing”.

These are software and hardware systems that check a drone’s location, mapping it against no-fly zones like power plants, prisons and airports. Switching off these no-fly zones often requires registering with the drone’s manufacturer.

Drone maker DJI — or Da-Jiang Innovations Science and Technology, headquartered in Shenzhen in South China’s Guangdong province — has been using GEO (Geospatial Environment Online) technology for the last three years.

Some have praised GEO’s ability to stop drones flying near airstrips or crowded sports stadiums. But others have complained it inhibits professional fliers from doing their jobs, that the system unfairly alters an already purchased product, and that it collects pilot and drone data when unlocking geofenced zones.

“A lot of people feel a lot of different things about this,” said Adam Najberg, DJI’s global director of communications.

“A lot of hobbyists — when (their market) was very small — might feel they don’t want to have any rules or regulations … What we want is for people to be educated, for governments to make laws and regulations and rules that make sense and are based on facts and figures, not on fear and concern.”

He uses the aviation industry of the 1970s as an example — a period with a “jumble of rules and regulations” — where jetliners traveling even between neighboring countries required different procedures.

Since then, the world has introduced global conventions to create a relatively streamlined international air transport regime.

“You have to understand the aviation industry was able to harmonize regulations,” Najberg said. “And that made the world better.”

However, actual involvement of civil aviation departments in drone affairs has been controversial.

However, actual involvement of civil aviation departments in drone affairs has been controversial.

The Heritage Foundation, a conservative think tank in the US, published a report in March titled The FAA Drone Registry: A Two-Month Crash Course in How to Overcriminalize Innovation.

It argued that the US Federal Aviation Administration (FAA) rushed in laws and overstepped the boundaries of its own powers, regulating what the foundation deemed “a toy”.

In December, the FAA demanded that all drone pilots be registered and tag their drones with a unique identity number. In early August, the same body reported nearly half a million civilian drones and 3,000 licensed companies had been registered.

While this figure does look good — given it took almost a century for a similar number of regular aircraft to be registered with US officials — it is safe to assume that the majority of drones have not been accounted for. The FAA itself reported that more than 1 million UAVs were likely to have been sold in the run-up to Christmas 2015 alone.

So far, Poland and South Africa are the only two nations in the world with comprehensive and unambiguous drone laws.

Nevertheless — pointing to age-old privacy and trespass laws, long on the statute books of many countries — Najberg added: “Do you really want to create a new law for everything that’s invented, or do you use existing laws to apply them to the new technology?”

Using existing laws to cover drones’ uses is hardly new. According to Drone Law Japan, a website run by local legal scholars with experience of operating UAVs in the country, various municipal governments and police have turned to city ordinances to block drone flights.

Cambodia, Vietnam and Myanmar have also previously relied upon old statutes to enforce control — although this may be changing.

One country that is liberalizing, at least in theory, is Australia. Experiments have already been carried out with delivery drones, and from Sept 29, rules in Australia will be relaxed for all pilots flying micro UAVs.

Whether that permits unlicensed commercial use is not yet clear, however.

Some legal experts, sitting squarely on the side of strict interpretation, argue that even uploading footage to YouTube may be an infringement of the law, since the website can monetize videos through ads.

Some legal experts, sitting squarely on the side of strict interpretation, argue that even uploading footage to YouTube may be an infringement of the law, since the website can monetize videos through ads.

Ben Grear is operations manager for Rise Above Custom Drone Solutions, an Australian seller of UAVs whose customers include police forces and universities.

While some drone users see the process of legislation as controversial, he told China Daily Asia Weekly that there are positives in allowing drone pilots to obtain commercial gain from their craft without heavy-handed rules.

On the other hand, leaving things as they are “does significantly increase the risk of unskilled, uneducated pilots operating their craft in areas or in ways that they should not be”.

“However, one could argue that there is little stopping them from doing so right now,” Grear said. “Only time will tell how the new regulations will affect the safety and professionalism of commercial UAV operation in Australia.”

Reaching for the skies Owners of drones are surprising even manufacturers with a constant stream of new applications and money-making ideas

By ANTHONY WARREN in Hong Kong
anthony@chinadailyapac.com

When Joe Chua took his drone to Taiwan last year, he intended to capture footage of one of Asia’s most stunning vistas at Alishan National Scenic Area.

Located in the island’s Chiayi county, the area is famous for its rugged beauty and forested mountaintops where tourists arrive well before dawn to see the sun rise, seemingly through an ocean of low-hanging clouds.

Instead, Chua suddenly realized that he, and not the breathtakingly beautiful landscape, was the center of attention.

“Drones bring people together,” the Hong Kong-based Singaporean executive, who maintains a blog that contains travel photography and drone footage, told China Daily Asia Weekly.

“Drones bring people together,” the Hong Kong-based Singaporean executive, who maintains a blog that contains travel photography and drone footage, told China Daily Asia Weekly.

“Whenever I fly my drone — be it in Taiwan, Australia or even Singapore — strangers do come and chat.” Curiosity about drones, Chua said, is almost universal.

Thirty years ago, owning a pager put you among the technological elite — a professional with a need to be reached on the go.

The now ubiquitous cell phone, laptop and tablet computer all started with professionals, shifting from workplace to the public before blurring the lines between the two.

Although the first drone users certainly were professionals (predominantly military pilots), the surge of sales in the civilian market over the last five years has been almost exclusively the domain of hobbyists.

Yet, things are set to change. Increasing numbers of drone or unmanned aerial vehicle (UAV) owners — whether individuals or businesses — are looking to turn their flying machines from a toy or camera-on-wings into a viable, money-making commercial endeavor.

“What has been really interesting to see is the wide variety of uses that unmanned technology has been put to,” said Gary Clayton of the Unmanned Aerial Vehicle Systems Association (UAVSA).

A British non-profit organization, UAVSA represents and promotes the drone industry in Europe and worldwide.

“Years ago the view was that, when they were allowed in the airspace, the only jobs (drones) could do would be those considered too dull, dirty or dangerous for a human,” he added.

The three Ds, as they are known, included the likes of military use, terrain mapping and the survey of nuclear or chemical spills.

The three Ds, as they are known, included the likes of military use, terrain mapping and the survey of nuclear or chemical spills.

Today this is no longer the case, he said, and such limited three D opinions on drones are expressed only by “ill-briefed civil servants wheeled out onto a conference platform by their staff”.

In reality, it is now “almost impossible to watch television or a film without footage from a UAV that would not have been taken before”, Clayton noted.

“Buildings are inspected at a fraction of the previous costs and collateral damage, large construction sites are surveyed, crops are inspected and the environment is being monitored.”

Almost all industries have embraced the technology, he added, since the computing power and cameras of drones offer information that would not otherwise have been collected.

Although the UAV commercial market is still in its infancy, it has already shown vibrant growth.

Although the UAV commercial market is still in its infancy, it has already shown vibrant growth.

According to the research firm MarketsandMarkets, global spending on acquiring civilian drones in 2014 was valued at $663 million. The research concluded that the civilian drone market would rise to $5.59 billion by 2020 — with the biggest growth likely to be seen in the Asia-Pacific region.

The application of these drones in business could prove a money-maker for companies. In a recent report, Clarity from Above by the international auditing and consultancy firm PwC, the total value of commercial drone solutions (the use of drones for mineral surveying, moviemaking, security etc) would top $127 billion in the next few years.

The growing demand for precise, high-quality data — often linked to the compiling of big data (the analysis of large-volume information for trends) — will see high yields for companies involved in everything from infrastructure to agriculture.

While the biggest investors in drone technology for commercial use are currently in the United States, according to its Federal Aviation Administration only 3,000 companies are currently licensed to provide drone services.

By comparison, Asia is the largest manufacturer, and likely soon to be the biggest user, assuming national or pan-regional legislation on the commercial use of drones can bring it from niche to mainstream.

By comparison, Asia is the largest manufacturer, and likely soon to be the biggest user, assuming national or pan-regional legislation on the commercial use of drones can bring it from niche to mainstream.

Karan Girotra, a professor of technology management at INSEAD in Singapore, equates the primary driver of Asia’s interest in drones to its heavy industries and the cost-efficiency of drones in farming and policing.

“Entertainment and videography is an interesting application that draws media interest,” he told China Daily Asia Weekly.

“But the major business buyers are firms in the petrochemicals, mining, agriculture and security sectors — where drones have found commercially viable applications.”

Indonesia is one Southeast Asian nation already using a legal framework for commercial drone use. Palm oil producing companies hire pilot firms to map and survey plantations and sometimes to check for illegal logging operations.

A government meeting of the Hong Kong Special Administrative Region in June also showed an interest in trialing the viability of drones in protecting the territory’s rare incense trees from illegal harvesters.

What commercial customers look for are examples of “turnkey, ready to go, systems that they can use to deploy and manage a fleet of drones … integrate them with existing systems and build more autonomy and intelligence into them”, Girotra said.

These drones would then help to bring down operating costs. “The basic technology is there,” he said. “What we need are viable commercial models.”

While many out-of-the-box machines allow for multiple uses — replacing a chassis’ regular camera with an infrared is not exactly rocket science — for more specialized professional work, specialist drones are needed.

Adam Najberg is the global director of communications for DJI, or Da-Jiang Innovations Science and Technology, the world’s biggest drone manufacturer. The company, based in Shenzhen in South China, claims a 70 percent share of the global drone market.

While many out-of-the-box machines allow for multiple uses — replacing a chassis’ regular camera with an infrared is not exactly rocket science — for more specialized professional work, specialist drones are needed.

Though it has designed and manufactured a variety of models since 2012, DJI only recently set up an enterprise site to sell equipment recommended for specific work environments, such as crop spraying, media photography, and search and rescue.

“Essentially what you’re looking at is … pretty good off-the-shelf consumer drones,” said Najberg about the company’s models.

“But what we’ve been finding is that different industries have been coming to us and saying (for example): ‘I’m a firefighter, did you know I used your drone to do this? I sent it up to the fifth-floor window of a building to see that there were no flames, instead of sending up a cherry-picker. It’s a very good tool to have on the fire truck.’”

The company has already begun selling crop-spraying drones as, with so many Asian farming communities in mountainous or isolated regions, farmers often spray lethal pesticides on their crop by hand.

“I think that’s where it’s all going,” added Najberg. “The things you want a drone to do, the things that are unsafe for a human to do, you’re going to move more into that space.”

The future of drone development in the commercial and industrial sectors is stepping increasingly into the realm of semi-autonomous — if not fully autonomous — uses.

“I don’t think it’s going to be unusual to walk around a warehouse in a couple of years and see a drone with indoor sensors on it, taking inventory with QR (quick response) codes or RFID (radio-frequency identification) codes,” Najberg said.

“It strikes me that a lot of tasks that we now take for granted — that humans need to do — require a lot of shoe leather, even with handheld computers,” he said.

“If a drone can do it faster, better, why not?”

The majority of civil drone owners, however, will probably never need a UAV that can spray crops or fight fires or report trespassers on private property. For Chua the blogger, sometimes a drone just makes the simple things more pleasurable.

“When I was in Bali,” he explained, “there was no need for me to hike all the way up to the mountains to see the sunrise.

“I just flew my drone up and captured a more brilliant view.”

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