AsianFin -- In 2024, the "low-altitude economy" has become one of the most talked-about concepts in business circles. This term refers to the comprehensive economic model that has emerged from the use of various low-altitude flying vehicles, such as helicopters, electric vertical takeoff and landing (eVTOL) aircraft, and drones.

The rapid development of this sector has been propelled by a booming demand for aerial logistics, surveillance, and entertainment, opening the door for new technological innovations and the rise of local industry leaders. Among the standout players is DJI, the world’s leading drone manufacturer, which has not only taken a commanding position in China but also dominates the global market, thanks to its industry-first innovations and strategic business decisions.

While drones have been around for several decades, primarily for military purposes, it wasn’t until the 21st century that drones entered the civilian domain in a significant way. In the early days, drones were primarily the result of DIY projects, with enthusiasts using open-source flight control systems and basic sensors to create the first generations of multi-rotor drones.

These products were mainly limited to hobbyists and geeks, some of whom would later become the founding figures of global drone giants such as DJI and 3D Robotics. However, it was the drastic drop in sensor prices and the advent of better battery technologies—facilitated by the booming smartphone industry—that catalyzed the shift toward commercially viable drones for everyday consumers.

The Early Days: Military Origins to Innovation by Geeks

Drones originated in the military sector during the 20th century, where they were used for reconnaissance, target practice, and other strategic applications. The civilian drone market, however, began to take shape in the early 2000s as enthusiasts and researchers started tinkering with small UAVs (unmanned aerial vehicles). The first commercially available drones, particularly those aimed at hobbyists, were often rudimentary in design, requiring significant technical knowledge to assemble and operate. Many early drone users were hobbyists, engineers, or students working from makeshift labs, contributing to the creation of the first multi-rotor UAVs. Among the early enthusiasts were people like DJI’s founder Frank Wang and 3D Robotics co-founder Chris Anderson.

As the technology advanced, the introduction of more accessible components—such as GPS modules, barometers, and accelerometers—allowed for more stable and reliable drones. By 2010, the commercialization of drones began in earnest, with companies like Parrot in France and 3D Robotics in the United States releasing their first consumer-grade drones. In 2013, DJI launched the Phantom, a drone that would soon become synonymous with the consumer drone market. However, DJI was not the first company to release a consumer drone. Parrot, with its AR.Drone, had already made waves in the market by 2010. Despite some technical limitations, the AR.Drone helped pave the way for drone technology to gain consumer acceptance.

The launch of Parrot's AR.Drone, priced at $299, was groundbreaking in the drone industry. The drone’s ability to be controlled via smartphone or tablet made it an early pioneer in user-friendly drones, although it suffered from limited flight time and weak signal reception. Despite these flaws, it marked the beginning of the shift from the hobbyist realm to the consumer electronics market.

Xiao Xu, a drone enthusiast, shared his experience using the product with AsianFin. "The ability to control AR.DRONE via a smartphone or tablet significantly lowered the barrier to entry. This method of operation is still used by many drone manufacturers today,” said Xiao, adding that on the downside, its 12-15 minutes of flight time per charge and weak remote control signal meant it couldn't fly far or high, making it more of a toy. Coupled with its high price, I only managed to acquire one years later at scrap value from a European player."

The Rise of DJI: From Imitator to Innovator

Despite Parrot's early lead in consumer drones, DJI quickly caught up and became the dominant player in the market. Founded in 2006, DJI initially focused on improving flight control systems and sensors. It wasn’t until 2013, when DJI released the Phantom 1, that it truly entered the global consumer drone market. The Phantom 1 offered longer flight length, a more robust control system, and the ability to carry a camera, setting it apart from competitors like Parrot and 3D Robotics. DJI’s Phantom series also introduced features like automatic return-to-home functionality, which helped make drones more user-friendly and safer for the general public.

In the consumer drone market, DJI stands out with a reputation that overshadows the niche industry itself. For many, this brand is synonymous with drones: DJI (Da-Jiang Innovations). According to the 2023 Global Unicorn Companies Top 500 Development Report, DJI’s valuation has exceeded 150 billion yuan, and it commands over 70% of the global drone market.

Unlike its competitors, DJI quickly established itself as a leader by innovating at an impressive pace. From 2013 to 2016, DJI released several iterations of its Phantom series, with significant improvements in flight capabilities, camera quality, and obstacle avoidance technology. These innovations allowed DJI to outpace its competitors and build a loyal customer base around the world.

By 2015, DJI had secured major funding from venture capital firms such as Accel Partners, raising $75 million and bringing itsvaluation to $10 billion. That same year, DJI’s share in the global consumer drone market surpassed 70%. This success was driven by its relentless focus on improving flight control technology, building a strong domestic supply chain, and innovating at a pace that left competitors behind.

The Decline of Early Competitors

While DJI soared to success, its early competitors, Parrot and 3D Robotics, faced difficulties that led to their decline in the consumer drone market. 3D Robotics, which had once been a frontrunner with its open-source flight control systems and DIY drone kits, was forced to pivot away from consumer drones to industrial drones in sectors like construction and agriculture by 2016, after a round of layoffs and a failed attempt to enter the consumer market. targeting applications in sectors like construction and agriculture.

Similarly, Parrot, another pioneer of the drone industry, struggled to maintain momentum in the rapidly evolving consumer drone market. By 2019, Parrot announced it was exiting the consumer drone space entirely, instead refocusing its efforts on industrial applications such as security surveillance, mapping, and agriculture. In the United States, Parrot’s market share had dropped significantly to just 2.5% by 2021.

The Surgeof Chinese Drone Makers: A New Era in Drone Innovation

While European and American companies struggled to keep up with the pace of technological change, Chinese companies, led by DJI, surged ahead. DJI’s relentless innovation and deep integration with China’s rapidly improving tech ecosystem allowed it to dominate the market. The company’s ability to rapidly iterate on its products and its reliance on a domestic supply chain gave it a significant edge over foreign competitors. DJI’s dominance in the consumer drone market has only continued to grow, with the company accounting for more than 70% of the global drone marketand 80% of the U.S. market by 2018.

In addition to DJI, other Chinese companies such as Yuneec, ZeroTech, and EHang have also made their mark in the global industry. These companies have leveraged China’s manufacturing advantages and quickly scaled their operations to meet the growing demand for both consumer and industrial drones. Yuneec, for example, launched its Typhoon Q500 drone in 2014, which was competitive with DJI’s offerings at the time. However, Yuneec’s limited product iterations and smaller scale have prevented it from achieving the same level of success as DJI.

The rise of Chinese drone companies has also been facilitated by government support and favorable policies aimed at boosting the development of the low-altitude economy. In China, drone manufacturers benefit from subsidies, favorable regulations, and government-funded research programs that help accelerate the development of new technologies. This support has allowed Chinese companies to leapfrog their Western competitors in many aspects of drone technology, from flight control systems to camera quality and beyond.

The Future of the Drone Market: Competition and Innovation

Despite DJI’s dominance, the consumer drone market is far from static. New players are continuing to emerge, offering advanced capabilities such as autonomous flight and obstacle avoidance. Skydio, a U.S.-based company, has positioned itself as a strong competitor to DJI by focusing on autonomous flight technology and producing drones that excel at flying in complex environments. In a bid to win over the U.S. government and defense contractors, Skydio emphasizes that its drones are designed, programmed, and manufactured in the United States, making them more attractive for government use.

In November this year, Skydio claimed that due to sanctions imposed by China, the company had to ration its drone batteries, as reported by Financial Times. Skydio said that it might not be able to find a new supplier until spring next year. Subsequently, there were reports that Skydio had halted production on its drone assembly lines, the report said.

While the consumer drone market continues to grow, it is clear that DJI’s dominance will not go unchallenged. As new technologies, such as AI-powered flight systems and improved battery technologies, continue to emerge, the competitive landscape will likely become even more intense. However, DJI’s deep integration into the global drone ecosystem and its ability to innovate rapidly will likely keep it at the forefront of the industry for the foreseeable future.