By David Kirton
SHENZHEN, China (Reuters) – Chinese drone giant DJI Technology Co. Ltd. has built such a successful US business over the past decade that it has driven almost all competitors out of the market.
Yet North American operations have been hit by internal experiences in recent weeks and months, according to interviews with more than two dozen current and former employees.
The loss of key executives, some of whom joined rivals, exacerbated problems caused by the U.S. government’s restrictions on Chinese companies, and wiped out the prospect of DJI’s dominance once waning, say four of the people, including two senior managers who will be with the company until the end of 2020.
About a third of DJI’s 200 team in the region were fired or resigned last year, according to three former and one current employee, from offices in Palo Alto, Burbank and New York.
In February this year, DJI’s head of US R&D left and the company fired the remaining R&D staff, which numbered about ten people, at its US flagship research center in Palo Alto, California, four people said.
DJI, founded and run by billionaire Frank Wang, said it made the difficult decision to reduce staff 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 North American sales are growing strongly.
“Despite misleading claims from competitors, our enterprise customers understand how DJI products provide robust data security. Despite gossip from anonymous sources, DJI is committed to serving the North American market.”
No comment was made on the other staff members currently being spoken to by US and former employees, although it told Reuters last year that the global structure was becoming ‘awkward’ to manage.
DJI, which has become a symbol of Chinese innovation since its inception in 2006, is one of dozens of enterprises caught in the crossfire of trade and diplomatic hostilities between Washington and Beijing, such as Huawei and Bytedance.
Staff sources and competitors say the company’s brand range, technical expertise, manufacturing power and sales staff mean it will not soon lose its crown in the US and global markets for non-military billion-dollar drones.
According to three former senior executives and two competitors, a December order could add the company to the U.S. Department of Commerce’s ‘Entity List’, along with the closure of its California R & D business.
The list of trade departments, issued due to allegations, including DJI-enabled “high-tech surveillance,” prohibits the company from buying or using U.S. technology or components.
That same month, Romeo Durscher, DJI’s US head of public safety, who played a key role in building the company in providing drone technology to non-military US government departments and agencies, left his job.
Durscher, a former NASA project manager and an influential figure in the drone industry, now works for the Swiss company Auterion, a competitor of DJI.
He said he left DJI because he was disillusioned by the staff cuts and what he described as an internal power struggle between the US team and its headquarters in China. He added that the US reorganization has made the task of dealing with the effects of tensions between the United States and China and the acquisition of government affairs more difficult.
“It’s not an easy decision to leave the market leader who is all far ahead,” said Durscher, who joined DJI in 2014. ‘But the internal battles diverted attention from the real goal and in 2020 it got worse … lost tremendous talent at DJI and that’s very unfortunate. ‘
US 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. Consultancy DroneAnalyst said DJI controls nearly 90% of the North American consumer market and more than 70% of the industrial market.
The Department of Commerce’s list in December and the ban on the purchase of US parts could affect the firm’s mobile applications, web servers and some battery and image products, said David Benowitz, DroneAnalyst’s head of research, and a senior figure told DJI’s business team. working with industrial customers, in Shenzhen before leaving last summer.
DJI said in December that the ban would not affect the ability of U.S. customers to buy and use products.
The listing follows other official blows. In October, the U.S. Department of the Interior said it would only buy drones from companies approved by the Department of Defense, which last year published a list of five approved drone suppliers to the federal government – four U.S. and one French.
DJI said there was no ‘broad-based US government ban on the purchase of DJI drones’.
“Congress considered and rejected the approach last year because … such a ban would be challenging for many companies and government agencies that rely on drones,” he added.
“WE ARE STILL PRIMITIVE”
Benowitz said the continued tensions between the United States and China and Washington’s pressure to support DJI’s competitors could reduce the company’s North American market share. He added that while the federal government is a relatively small part of DJI’s business, its restrictions could have a “cooling effect”, while other buyers are worried about stricter measures in the future.
“We are at a point where there are too many market opportunities for one player to dominate,” he said.
Still, he added alternatives to DJI, but it was relatively small, although both policy support and concerns about Chinese drones have grown in recent years. Participants in DJI include France’s Parrot and Skydio in California.
Chris Roberts, CEO of Parrot Inc, USA, said 2020 was an important year for the company in the United States, after being named an approved provider by the Department of Defense and winning cases from emergency services and security agencies.
Skydio announced $ 170 million in D-round funding last week, saying it has a valuation of more than $ 1 billion.
“DJI makes good hardware, but we are still very early in the market and very primitive compared to what should eventually exist,” Adam Bry, CEO of Adam, told Reuters.
PHANTOM DRONE FLIGHT
When Durscher joined DJI in 2014, the company’s Phantom range of drones changed from a niche hobby to a mainstay. He said he especially enjoyed the chance to bring drones into the fire and rescue department.
He said the technological advances of smaller competitors over the past year have been attractive to some public safety agencies, who might say, “let’s go with this drone now so we don’t have to deal with data security”.
He added that change could come as government departments and companies wanted to replace drone fleets approaching the end of their life cycle.
According to Benowitz, a fleet will usually last three to four years.
Durscher and several other staff compared DJI’s internal competition over projects to ‘Game of Thrones’, the TV series where rival factions compete for power. He said this led to a revolving door of Shenzhen bosses, and that in his six years at the company, he had reported to 12 different executives.
Durscher’s departure from DJI followed that of other key executives in North America last year, including business development director Cynthia Huang.
Huang, who works closely with Durscher at Auterion, said she is becoming increasingly frustrated because she feels that DJI cannot meet all the growing demands of the enterprise market. In addition, she said that the past year’s reduction in work has contributed to the reasons why she decided to leave. The losses in Palo Alto, Burbank and New York followed the cut of DJI’s global sales and marketing teams, Reuters reported in August.
“Some of the people we lost during the layoffs didn’t make sense,” said Huang, who was appointed in 2018 to take the lead in building DJI’s businesses in North America. “The constant exodus of talent was discouraging.”
(Reporting by David Kirton; Additional reporting by Jane Lee in San Francisco, Alexandra Alper and David Shephardson in Washington; Editing by Pravin Char)