U.S. drone manufacturer Skydio says it faces problems sourcing some components after China imposed sanctions on the company. China announced the sanctions earlier this month.
Why has China imposed sanctions?
China imposed its sanctions on October 11. The sanctions targeted Skydio, as well as two other defense firms and ten individuals. As a result, Chinese companies are banned from supplying Skydio with critical components. China introduced the sanctions after the US Government approved giving $567 million in defense assistance to Taiwan. This funding was for the supply of attack drones. Taiwan is a self-ruled country. However, China considers Taiwan to be a breakaway province and so should be under Chinese rule.
What has been the impact?
The sanctions imposed by the Chinese government have had a severe impact on Skydio. This is because the company didn’t have time to find alternative suppliers before the sales bans came into force. As a result, there has been an immediate impact on Skydio’s ability to source batteries for its drones. The company said that it has taken “the drastic step of rationing batteries to one per drone.” Skydio also said that it doesn’t expect to have new suppliers on board before Spring 2025.
How has Skydio responded?
The Chinese government has linked the sanctions to the U.S. support of Taiwan. However, Skydio believes there are also commercial reasons for the ban on supplying it with components. The Financial Times reported details of a message to customers from Skydio’s Chief Executive, Adam Bry. Bry said, “This is a clarifying moment for the drone industry. 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.”
What we think
China’s territorial claim to Taiwan is clearly part of the reason behind the sanctions imposed on Skydio and other companies. However, it’s also likely that the sanctions are at least in part a response to the impending ban on the sale and use of DJI drones in the United States. By limiting the supply of Skydio drones, more customers will be driven towards DJI’s products. In addition, there is another concern. Skydio has supplied more than a thousand drones to Ukraine to support its war effort against Russia. The US government has already accused China of supporting Russia and the action against Skydio will also impact on Ukraine. Hopefully, Skydio can find new component suppliers as soon as possible.
