Industry Intel: Fall Review

The Amazon Prime Air hybrid drone that was previewed on Sunday. Credit: Amazon. Via: Gizmag.

The Amazon Prime Air hybrid drone that was previewed on Sunday. Credit: Amazon. Via: Gizmag.

By Arthur Holland Michel and Dan Gettinger

In a video released on Sunday, Amazon previewed its delivery drone prototype. The two-minute teaser features a drone that can take-off like a helicopter and fly like a fixed-wing airplane, giving it greater range and the ability to potentially land right on your doorstep. While the Internet giant’s Prime Air concept has inched a bit closer to becoming a reality, the drone industry is not waiting for Amazon’s proposed special air zones before expanding on its own. There’s a burgeoning market for unmanned aircraft and, although the exact numbers vary, hundreds of thousands of drones are expected to be sold to eager shoppers this holiday season. In addition to the consumer and commercial demand, the market for military drones is likewise growing as the U.S. loosens controls on exports of UAVs.

To get a sense of how the market for drones has changed, we’ve surveyed some of the key events that have shaped the drone industry since September, 2015. Here are a few takeaways from the fall:

Civil and Commercial

  • In August, Intel Corporation announced that it will invest more than $60 million in Yuneec Holding Ltd., a Hong Kong-based company that manufactures consumer drones. “We’ve got drones on our road map that are going to truly change the world and revolutionize the industry,” Intel CEO Brian Krzanich said in a video presentation on the company’s website. Intel has been developing software, including a sense-and-avoid capability, for small commercial drones. (Wall Street Journal)
  • In September, Consumer drone maker Lily Robotics set out to raise up to $15.5 million in Series A investment at a $100 million valuation. Lily Robotics is developing an easy-to-use commercial photo drone. The funding target was based on a $100 million valuation of the company. (Forbes)
  • A startup called FLYBi completed a successful crowdfunding campaign to develop a quadcopter hobby drone that can be connected to a Virtual Reality headset. The drone will stream high resolution video to a VR headset on the ground and will be capable of swapping out its batteries by itself. FLYBi raised $107,000 in the campaign. (Slate)
  • The Federal Aviation Administration fined SkyPan, a Chicago-based company $1.9 million for flying drones for profit without permission. The FAA alleges that SkyPan International flew dozens of unauthorized operations over Chicago and New York City, two airspaces that are especially busy. The fine is the largest that the FAA has ever levied against a drone operator. Previous fines have typically ranged from $5,000 to $10,000. (Washington Post)
  • Canadian drone manufacturer Aeryon Labs received $60 million investment from American venture capital firm Summit Partners. Aeryon’s drones are popular among utility companies. The company will use the funding to double the size of its staff and expand its operations. “In the last four years, we have grown 100 per cent year-over-year in terms of sales,” Dave Kroetsch, Aeryon’s chief executive, told The Globe and Mail.
  • Wal-Mart applied for permission from the Federal Aviation Administration to test drones for home delivery and improving efficiency at warehouses. The company plans to use drones made by DJI to count inventory at warehouses and deliver packages in residential neighborhoods. “There is a Wal-Mart within five miles of 70 percent of the U.S. population, which creates some unique and interesting possibilities for serving customers with drones,” Wal-Mart spokesperson Dan Toporek said in an interview with Reuters
  • Chinese drone maker DJI opened a 12,000 Square foot research and development facility in Silicon Valley. The company, which makes the popular line of Phantom quadcopter drones, as well as a range of larger professional-grade multirotors, raised $75 million in funding from U.S. venture capital firm Accel Partners in May. The facility will house up to 75 engineers. (Fortune)
  • An Estonian startup is developing plans for a ground-based drone delivery system. While much attention has been paid to Amazon and other companies’ plans for aerial drone delivery systems, the team behind Starship Technologies believes that using unmanned ground vehicles for deliveries is safer. Starship was founded by two former co-founders of Skype and currently employs a team of about 40 people. (TechCrunch)
  • Torquing Group, a company that manufactures a micro-drone called as the Zano, announced that it has gone out of business. The Zano was initially funded on European Kickstarter, setting a record by raising more than $3.4 million. The company folded following reports that the small drone was defective and the subsequent departure of co-founder and CEO Ivan Reedman. Kickstarter has issued a statement on the bankruptcy, stating that it may initiate an inquiry. (Ars Technica)

Military

Several large purchases of unmanned aircraft by foreign governments have been finalized in the past few months. Each of these deals has been several years in the making; together, they mark a significant increase in foreign military sales of U.S. drones over previous years.

  • On October 6, the State Department approved the sale of four General Atomics MQ-9 Reapers and associated equipment to Spain for $243 million.
  • On November 4, the State Department agreed to sell Italy a $129.6 million package of weapons required to weaponize its fleet of MQ-9 Reapers, making it the second U.S. ally after Great Britain to fly armed Reaper drones.
  • On November 20, the U.S. finalized a $1.2 billion deal with Japan for three Northrop Grumman RQ-4 Global Hawk drones.

Besides these big-ticket items, other smaller military drone contracts with foreign governments were announced this fall.

  • In September, the U.S. agreed to sell small Boeing Insitu ScanEagle reconnaissance drones to the governments of Cameroon and Kenya for $9.4 and $9.9 million, respectively. The deal with Cameroon was accompanied by a promise to temporarily base a detachment of General Atomics MQ-1 Predator drones to aid in the fight against Boko Haram.
  • Also in September, the U.S. sealed a $9.05 million contract with AeroVironment to provide RQ-11B Raven drones to Ukraine. This transfer was initially announced by the Obama administration in March.
  • In October, AeroVironment announced that seven U.S. allies had purchased the RQ-11B Raven drone for a total of $18.5 million. The participating nations were not disclosed.
  • The U.S. government announced on November 25 a $70 million contract with Boeing Insitu to provide the government of Afghanistan with 65 ScanEagle drones.
  • It was also announced in November that General Atomics would provide contractor logistics support for French MQ-9 Reapers based in Niamey, Niger. This $19.07 million deal represents the third year in a row that American contractors will be working on the French Reapers in Niger.

A variety of military contracts were announced for American drones spanning the procurement and modification of existing systems to research and development of new capabilities.

  • On November 11, for example, the Navy announced that it would be purchasing additional MK 18 underwater drones from the Massachusetts-based Hydroid, Inc. for $8.7 million. (For more on underwater drones, click here.)
  • Other items included $18.2 million for Logos Technologies for researching a wide-area surveillance system that can fit on a small drone like the Navy’s RQ-21 Blackjack. Cox Construction Co. received $26 million to build a new hangar and facilities for unmanned aircraft at Ft. Irwin National Training Center in California.
  • Although the larger contracts for procuring MQ-9 Reapers were announced earlier in the year, several contracts for modifying and upgrading the drone fleets were released this fall. For example, General Atomics received $12.07 million for upgrading the electrical systems on 60 MQ-9 Reapers and $51 million for improving the structural integrity of the aircraft. (For more on the MQ-9 Reaper, click here.)

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