US bans DJI, but China dominates rare earth magnets and drone batteries

In late April, Skydio, the largest American drone manufacturer, announced a massive $3.5 billion investment over five years to expand domestic production. The plan includes opening a factory five times the size of its current facility, creating over 2,000 direct jobs and 3,000 supplier positions, and building a domestic component supply chain through an initiative called SkyForge. This move came just five months after the FCC effectively banned new DJI drone imports and sales in the United States, removing a company that commands roughly 80 percent of the American consumer and commercial drone market. Skydio’s investment marks the most significant response yet to the core dilemma created by the ban: the U.S. has decided it does not want Chinese drones, but it has not yet figured out how to produce enough of its own.

The ban itself stems from the 2025 National Defence Authorisation Act, which required a U. S. national security agency to complete a formal review of DJI by December 23, 2025. No agency met the deadline, triggering an automatic statutory consequence: DJI was added to the FCC’s Covered List. This blocks new products from receiving the radio frequency authorization necessary for import and sale. Existing DJI products already in the country remain legal to fly, with no grounding or remote disablement ordered. However, the pipeline for new DJI models, accessories, and components is now closed unless a specific national security exemption is granted. DJI reports that 25 new products planned for the U. S. market in 2026 are frozen, representing roughly $1.5 billion in lost revenue. The company sued the FCC in February 2026, and litigation continues.

This decoupling mirrors the broader U. S.-China semiconductor split, which has already cost equipment makers hundreds of millions in lost China revenue. The drone ban follows the same logic: restrict Chinese technology access on national security grounds and accept the economic consequences. The key difference is that in semiconductors, the U. S. has ASML, Applied Materials, and decades of fabrication expertise that China is still trying to replicate. In drones, the dependency runs the opposite direction. China makes the components; America buys them.

The gap between DJI and its American competitors is stark. DJI drones are not merely cheaper; they are better for the price at nearly every market level. A DJI Mini 4 Pro retails for approximately $760. The nearest American-made consumer alternative costs several times more for comparable capability. In enterprise and public safety markets, American platforms from Skydio and Freefly Systems can range from $10,000 to $30,000, compared to $2,000 to $5,000 for DJI equivalents. This price gap is not due to dumping or subsidies. It stems from scale: DJI manufactures millions of units per year through a vertically integrated supply chain in Shenzhen. Skydio manufactures thousands.

DJI invested heavily in R&D for over a decade while facing virtually no American competition. Its dominance was built on consumer-grade innovation,cameras, gimbals, flight controllers, obstacle avoidance,later adapted for commercial, industrial, and public safety applications. American drone companies, by contrast, have largely focused on military and enterprise markets where margins are higher but volumes are smaller. The result is an American drone industry capable of building excellent military systems but unable to produce a $500 consumer drone that competes with DJI on image quality, flight time, or reliability.

The deeper problem is not manufacturing capacity but component supply. China controls approximately 60 percent of global rare earth mining and 90 percent of rare earth processing. Neodymium-iron-boron permanent magnets, which convert electrical current into the lift and torque that keep drones airborne, are 90 percent manufactured in China. Each small drone motor contains roughly 5 to 15 grams of these magnets. Additionally, China manufactures approximately 99 percent of the lithium-ion battery cells used in consumer and commercial drones. Motors and batteries, the two components most critical to drone performance, both originate overwhelmingly in Chinese factories.

American suppliers exist but operate at a fraction of the required scale. Unusual Machines, a Florida-based company, is expanding to three shifts at its motor factory in Orlando. Yet lead times for motors and batteries from U. S. suppliers are six months or longer, compared to weeks from Chinese manufacturers. European startups like Norway’s Stendr are developing AI-driven counter-drone systems, but even those depend on the same magnet, motor, and sensor supply chains that China dominates. The problem extends beyond drone builders to the companies building systems to shoot them down.

Skydio’s SkyForge initiative aims to address this supply chain gap by co-locating suppliers near its own manufacturing operations, reducing dependence on Chinese components, and building the kind of integrated production ecosystem that DJI has spent fifteen years developing in Shenzhen. More than $1 billion of the $3.5 billion investment is expected to go to U. S.-based suppliers. The company has not disclosed the location of its new factory, though it says most new jobs will be in California.

The Department of Defence maintains a Blue UAS Cleared List of approved drone platforms for government use, and the FCC has granted temporary exemptions until January 2027 for drones meeting “Buy American” standards of at least 65 percent U. S.-made content by cost. These policies create a protected market for American drone manufacturers in government procurement. However, they do not address the consumer and commercial markets where DJI’s absence has created a vacuum that no American company can currently fill at a comparable price point.

Europe’s Alpine Eagle is scaling counter-drone production from a new facility near Munich, and Germany captured 90 percent of Europe’s record defence tech funding in the first half of 2025. This shows that the push for sovereign drone and counter-drone capability is not uniquely American. Every NATO member is grappling with the same dependency on Chinese components and the same realization that drones have become too important to national security to source from a strategic competitor. The difference is that Europe is investing primarily in military drone capability. The United States banned the consumer market leader and now needs to replace it across military, commercial, and consumer segments simultaneously.

The timeline for building an independent supply chain is daunting. New rare earth processing facilities take three to five years to build. Battery cell manufacturing plants take two to four years. Magnet production lines require specialized equipment and metallurgical expertise concentrated in fewer than a dozen facilities worldwide, nearly all in China or Japan. Even if every announced American investment proceeds on schedule, the domestic supply chain will not reach the scale needed to support a competitive consumer drone industry before the end of the decade. In the interim, American drone manufacturers will continue to source critical components from China, creating the paradox of “American-made” drones that are 65 percent American by cost but dependent on Chinese magnets, battery cells, and motor components for the other 35 percent.

The Mistral and Helsing European defence AI alliance illustrates a model where software capability, rather than hardware manufacturing, becomes the competitive advantage. American drone companies may follow a similar path: building AI-powered autonomy, navigation, and sensor fusion on top of hardware that still relies partly on Chinese components, while the supply chain gradually shifts. It is not a clean solution. It is the realistic one.

The United States banned DJI because it decided that the national security risk of Chinese-made drones operating across American airspace, inspecting American infrastructure, and surveilling American cities was unacceptable. That decision may be correct. But it was made without a plan to replace what was banned. The $3.5 billion Skydio is investing, impressive as it is, represents a fraction of what DJI has spent building the world’s most capable drone company over a decade and a half. The ban took one vote in Congress. The supply chain to replace DJI will take years, billions of dollars, and a sustained commitment to building manufacturing capacity in minerals, magnets, batteries, motors, and sensors that the United States has spent the past two decades outsourcing to China. The question is not whether America can build a drone industry. It is whether it is willing to spend the time and money required to build one that works.