The War is over – at least for the foreseeable future. DJI has sewn up the Consumer Drone Market in a way that makes them untouchable for at least the next 5 years. While some of my fellow analysts will cry and moan “wrong”, DJI may have as much as 80% (and growing) of the “non-toy” under 2K Consumer Drone Business. That leaves the other 20% to all the other makers combined. Many of these would-be competitors have already closed the doors or shrunk to nothing. Some of them never introduced their products in bulk. A short list of the losers (USA centered, but probably accurate many other places, $400-$2,000), goes like this:
Walkera, 3DR, Xiro, eHang, Autel, Yuneec, Parrot, Upair, GoPro, Blade, Hubsan, Hexo+, Airdog and many more.
Putting the numbers in perspective, if DJI is going to sell a million drones in the USA (estimate), Canada and Mexico this year, only three of those companies have the possibility of 5% of this number (50,000 units). These companies are Yuneec, Parrot and Autel. All three companies have announced staff reductions and, according to our internal calculations, are losing market share and struggling to even break even. In the world of high-tech, unit counts such as 50K are not true mass production and therefore have a much higher cost structure.
Why? How? It’s an interesting exercise in competition and engineering to summarize how one company came to dominate the field. We have already written extensive articles on DJI and GoPro as well as a number of pieces touching on the “Drone sales wars” – however, since the war is over we felt a short history lesson might be in order.
Summary – Size Matters and Listening to the Market
The world of technology is moving quickly. A company like Tesla can now design a self-driving car – an item infinitely more complicated than a consumer drone – and produce it within approx. 3 years. With consumer drones, the development cycle for DJI is probably about one year…but, the big difference here is that it takes a smaller company 2 years to come up with a “so-so” new drone while DJI has, in the shorter time period, come up with something truly revolutionary (Mavic Pro, for example). To accomplish this, vast amounts of capital and credit are needed. DJI, given their reputation, has no problem raising money AND their cash flow is such that they often get paid for the completed quadcopters before they have to pay for the components (even many large customers prepay DJI for product!).
Another secret ingredient is people. DJI usually hires only the best for their higher level jobs in engineering, design and marketing. The smaller makers may be able to attract some dreamers, but DJI has the advantage of years of IP (design and engineering problems solved long ago), so their engineers have a head start in years in terms of the total product package.
DJI makes a lot of mistakes – but most of them are small and can be fixed in software. For the past couple years they have gotten most hardware right the first time…not unlike most smartphone and computer makers. This is no small accomplishment because making a consumer drone is actually harder than making most computers…since you can buy off-the-shelf components and operating systems for a desktop or laptop.
When I started following DJI in 2014 I noticed that they, unlike most fast growing companies, actually listened to consumers and made additions to features which were requested. Some of these changes were not easy – for example, the opening up of the Drone Operating System with an SDK (allowing other developers to create software that extended the uses) and the addition of Intelligent Flight Modes (point of interest, waypoint, etc.).
Organized, Chaotic but Eyes on the Prize [Read more…]