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21st of November 2018

Economy



China’s drone makers zero in on armed forces

As China showed off its defence gear at the Zhuhai Air Show this week, hulking combat aircraft and missiles had to fight for attention with much smaller rivals; unmanned vehicles for air, sea or land, were everywhere. 

Every self-respecting Chinese state-owned arms company had an array of drones on display, and more than 350 Chinese private firms now make unmanned aerial, surface or ground vehicles, according to China’s Ministry of Industry and Information Technology. 

“We are seeing a bubble around artificial intelligence and especially in the unmanned vehicles industry, a serious bubble,” said Figo Zhang, chief executive of Yunzhou Technology, a maker of unmanned boat drones. Many of the drone makers exhibiting in Zhuhai said they had been in business for just a year or two. 

Some are attracted by Chinese companies’ easy success in this relatively new market: Chinese companies have already grabbed the lion’s share of the international drone market. DJI, a Shenzhen-based private firm, leads the global market for commercial drones. 

Relatively low entry barriers have also played a role. “The clustering of companies with expertise in electronics components and software in the Pearl River Delta have made it relatively easy to assemble a platform in the mass market,” said Mr Zhang.

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But the rapid expansion of the sector is no ordinary tech bubble. Many of the recent entrants into the industry are taking aim at the military market lured by Beijing’s policy to win more private companies as defence suppliers. 

As early as five years ago, Beijing started allowing private firms to compete with state-owned defence contractors. This year, Beijing started stepping up its efforts to bring private firms into the defence supply chain. 

The government expects demand for military applications to take up whatever overcapacity might be developing in the drone industry. “Our unmanned aerial vehicle industry alone was worth Rmb23bn ($3.3bn) last year,” said a senior official at the Ministry for Industry and Information Technology. “We forecast it to reach Rmb60bn in 2020 and Rmb180bn in 2025, and defence will play an important role in that.”

Sun-Hawk Aviation, a company founded in the central Chinese province of Henan only four years ago, is among those trying to take advantage. At Zhuhai, it launched a drone called Little Whirlwind which it is offering for both cargo transport and military applications. 

Tao Liang, Sun-Hawk’s chief executive, said the UAV, which weighs 125kg but can carry 130kg, could help provide last-mile e-commerce delivery in mountainous parts of rural China. But he also praised the drone as an ideal helper for the People’s Liberation Army or potential military clients in the Middle East and Africa. 

“It belongs to a category called tactical drones, which can be deployed at the forefront of combat positions,” Mr Tao said. He added it could carry missiles, wounded soldiers or small guided bombs just as required, and help the PLA’s special forces in deep penetration operations.

One of the most eye-catching drones at the Zhuhai show was Tianying, or Skyhawk, a turbofan powered flying wing configured UAV launched by state-owned China Aerospace Science and Industry Corp (Casic).

Front view of the CH-7 stealth craft © AP

Casic’s competitor,China Aerospace Science and Technology Co (Casc) came with its own flying wing UAV, the CH-7, as well as the CH-10, its first tilt rotor vertical take-off drone. 

In a separate hall, almost 100 private drone makers were vying for attention with everything from toy-sized, armed, unmanned helicopters, to vehicles resembling photography drones but capable of carrying crowd control gear or sub-machine guns.

Despite Mr Zhang’s complaint about a bubble, Yunzhou Technology is participating in the run on the military market. Mr Zhang expects revenue to soar by 400 per cent this year. He declined to give a revenue figure, but a source close to the company said it had been just under $20m in 2017.

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Military sales are to make a big contribution to that jump. While Yunzhou Technology was initially focused on making boat drones for water pollution monitoring and last year started selling unmanned boats for marine prospecting and sea floor mapping, the chief executive said security applications such as firefighting and rescue, as well as military applications were now just as important.

Yunzhou Technology as well as Ehang, another private Chinese drone maker which is best known for its development of air taxis, have followed China Electronics Technology Corporation (CETC) the country’s leading state-owned supplier of electronics warfare gear, to develop swarming, a technology that allows large numbers of unmanned vehicles to move in sync. 

A Yunzhou unmanned ship conducting research on the lakes of the Qinghai-Tibet plateau

Mr Zhang said the technology could be used for drastically cutting the cost and fuel consumption in seabed mapping operations and make search and rescue operations at sea much easier, faster and more successful. But his company also demonstrated its readiness for military use when in a demonstration earlier this year it had a drone boat swarm line up in the shape of an aircraft carrier.

If China’s many unmanned vehicle makers succeed, they are expected to power not only the PLA but also the country’s exports. 

According to a report from the Center for Strategic and International Studies, the US think-tank, China was the third-largest exporter of military-use drones behind the US and Israel between 2008 and 2017. 

The PLA itself is lending a helping hand. Retired military engineers were one of the main sources of research and development talent for Sun-Hawk, Mr Tao said. Yunzhou Technology has partnerships with universities deeply involved in the defence industry or run by the PLA. An executive at the company said almost half of its research and development staff were retired PLA members.

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