Game of drones: Chinese giant DJI hit by US tensions and staff shortages

SHENZHEN, China (Reuters) – Chinese drone giant DJI Technology Co. Ltd. has built such a successful business in the United States over the past decade that it has nearly knocked out all competitors in the market.

However, its U.S. operations have been affected by internal reductions in recent weeks and months, with a series of staff cuts and layoffs, according to interviews with more than two dozen current and former workers.

The loss of key administrators, some of whom have joined rivals, has exacerbated the problems caused by US government restrictions on Chinese companies and raised the prospect, once remote, of domain erosion. of DJI, according to four of the people, including two senior executives who were in the company until the end of 2020.

About a third of the region’s 200 DJI team was fired or resigned last year from the Palo Alto, Burbank and New York offices, according to three former employees and a current one.

In February of this year, DJI’s U.S. head of R&D left and the company fired the remaining R&D staff, with about 10 people, at its U.S. research center. in Palo Alto, California, four people said.

DJI, founded and led by billionaire Frank Wang, said it made the difficult decision to downsize in Palo Alto to reflect the company’s “evolving needs”.

“We thank the affected employees for their contributions and remain committed to our customers and partners,” he said, adding that their U.S. sales grew strongly.

“Despite the deceptive claims of competitors, our business customers understand how DJI products provide solid data security. Despite gossip from anonymous sources, DJI is committed to serving the US market. “

He did not comment on the other departures of US staff that current and exemplary people were talking about, although he told Reuters last year that its global structure was becoming “difficult to manage”.

DJI, which has become a symbol of Chinese innovation since its founding in 2006, is one of dozens of companies caught in the crossfire of trade and diplomatic hostilities between Washington and Beijing, such as Huawei and Bytedance. .

Staff sources and competitors claim that the company’s brand reach, technical know-how, manufacturing capability and sales force mean it won’t lose its crown soon to the multimillion-dollar U.S. and global drone markets not military.

But a December order adding the company to the U.S. Department of Commerce’s “List of Entities,” along with the closure of its R&D operation in California, could affect its ability to meet the needs of U.S. customers, according to three former executives and two competitors.

The Commerce Department’s listing, promulgated by allegations that include DJI-enabled “high-tech surveillance,” prohibits the company from buying or using U.S. technology or components.

That same month, Romeo Durscher, head of public safety for U.S.-based DJI, which had played a central role in setting up the company’s business by providing drone technology to U.S. non-military government departments and agencies, quit your job.

Durscher, a former NASA project manager and influential figure in the drone industry, now works for Swiss company Auterion, a competitor to DJI.

He said he left DJI because he was discouraged by staff cuts and what he described as internal power struggles between the U.S. team and China headquarters. He added that the US reorganization complicated the task of dealing with the consequences of US-China tensions and winning government business.

“It’s not an easy decision to leave the market leader who is far ahead of everyone else,” said Durscher, who joined DJI in 2014. “But those internal battles distracted the real purpose and by 2020 it got worse. .. I lost a huge amount of talent at DJI and that is very unfortunate. “

AMERICAN SECURITY CONCERNS

Privately owned DJI does not publish sales figures. The U.S. Department of Defense estimated that the U.S. non-military market was worth $ 4.2 billion last year. Consulting firm DroneAnalyst said DJI controlled almost 90% of the consumer market in North America and more than 70% of the industrial market.

The U.S. Department of Commerce’s December listing and ban on buying parts in the United States could affect mobile apps, web servers and some of the firm’s battery and imaging products, said David Benowitz, head of research at DroneAnalyst and senior staff from DJI’s business team, working with industrial clients, in Shenzhen before he left last summer.

DJI said in December that the ban would not affect the ability of U.S. customers to buy and use their products.

The list followed other official blows. In October, the U.S. Department of the Interior said it would only buy drones from companies accepted by the Department of Defense, which last August released a list of five federally approved drone suppliers: four Americans and a Frenchman.

DJI said there was no “widespread US government ban on buying DJI drones.”

“Congress considered this approach last year and rejected it, because … this ban would be a challenge for many drone-dependent companies and government agencies,” he added.

“WE ARE ALL PRIMITIVE”

Benowitz said persistent U.S. tensions and Washington’s push to support DJI’s rivals could see the company’s U.S. market share decline. He added that while the federal government comprised a relatively small portion of DJI’s business, its restrictions could have a “creepy effect,” with other buyers worried about tougher measures in the future.

“We’re at a time when there are too many market opportunities to dominate a player,” he said.

However, he added alternatives to DJI through relative mines, although both policy support and security concerns about Chinese drones have caused them to grow over the past year. DJI’s competitors include the French-based Parrot and Skydio in California.

Chris Roberts, CEO of Parrot Inc., America, said 2020 has been a significant year for the company in the United States as it has been named an approved Department of Defense provider and has gained business in emergency services and security agencies.

Skydio announced last week $ 170 million in round D funding and said it had a valuation of more than $ 1 billion.

“DJI makes good hardware, but we’re still very early in the market and we’re very primitive compared to what should finally exist,” Skydio CEO Adam Bry told Reuters.

FANTAMIC DRONE FLEETS

When Durscher joined DJI in 2014, the company’s Phantom series was transforming drones from a niche hobby into a conventional apparatus. He said he was especially drawn to the opportunity to introduce drones to the fire and rescue department kit.

He said the technological advances of smaller rivals in the last year were tempting for some public security agencies, who could say “let’s go with this drone now because we don’t deal with data security.”

He added that the change could come as government departments and companies tried to replace drone fleets nearing the end of their life cycles.

Normally, a fleet is expected to last three to four years, according to Benowitz.

Durscher and several other teams compared DJI’s internal rivalry for projects to “Game of Thrones,” the television series where rival factions compete for power. He said this led to a revolving door of Shenzhen chiefs and that he informed 12 different executives in his six years in the company.

DJI’s Durscher exit followed that of other key North American executives last year, including business development director Cynthia Huang.

Huang, who now works with Durscher at Auterion, said she felt increasingly frustrated because she felt DJI was not able to meet all the growing demands of the business market. In addition, he said, job cuts over the past year added to the reasons he decided to leave. Losses in Palo Alto, Burbank and New York had followed the cuts made to DJI’s global sales and marketing teams, Reuters reported in August.

“Some of the people we lost in these layoffs, it didn’t make sense,” said Huang, who was hired in 2018 to take the lead in setting up DJI’s business ventures in North America. “The continued exodus of talent was discouraging.”