The escalating trade conflict between China and the United States now includes drones, which play an important role in the defense of Ukraine. According to sources familiar with the situation, Chinese manufacturers have recently begun restricting the sale of key components for drone production to the United States and Europe. These measures are expected to be a prelude to broader export restrictions that Beijing plans to introduce next year – Bloomberg
These restrictions may include the requirement to obtain a license depending on the end use of the components or the need for Chinese companies to notify the government of their export plans. Representatives of the Chinese Ministry of Commerce and the Ministry of Industry and Information Technology have not yet commented on these plans.
Such steps could have serious consequences for the global drone market, especially given their role in military conflicts.
The trade conflict between the US and China has escalated significantly this month. Washington introduced new restrictions on the sale of high-speed memory (HMB) and additional semiconductor manufacturing equipment to China. In response, Beijing banned the sale of dual-use goods to the US military and restricted the supply of certain materials with high-tech and military applications to US companies.
These actions have had a significant impact on the market: prices for such goods have risen sharply, and trade flows have been disrupted as manufacturers are forced to look for new suppliers. The escalation came a few weeks before the potential return of Donald Trump to the presidency, who plans to tighten anti-China policies.
For the first time, China has imposed trade restrictions that apply not only to Chinese goods but also to products with Chinese components supplied both from China and from manufacturers abroad. This indicates that China is trying to emulate the extraterritoriality of the US and EU sanctions.
Restrictions on drones
The supply of key components for drones, such as motors, batteries, and controllers, is severely limited. Manufacturers from China are reducing or stopping deliveries, which is affecting companies in the US and Europe. According to Lorenz Mayer, CEO of Auterion, a drone software company, these restrictions may become more severe in the future.
In response to these moves, European manufacturers are changing their supply chains to avoid dependence on China. James Earle, founder of several drone companies, noted that buying Chinese components in the Western world is no longer an acceptable practice.
China’s sanctions
China has also imposed sanctions on three US companies and 10 officials over the Pentagon’s plans to help Taiwan. The new sanctions include Shield AI, a company that develops autonomous drones used in Ukraine. At the same time, the United States is increasing military aid to Ukraine, including drones, to the tune of $988 million.
Market impact
China controls about 80% of the commercial drone market, which creates risks for Western manufacturers trying to find alternative supplies. Nevertheless, some companies, such as Shield AI, say that sanctions will have little impact on their operations.
These steps may increase competition among suppliers from Japan, South Korea, and other countries, which is likely to be taken into account in Beijing’s strategy. The decision on how strictly China will enforce the new restrictions will show the seriousness of its intentions.
Ukraine, which relies heavily on access to cheap Chinese components, may experience significant difficulties due to these restrictions. The production of drones, which has become strategically important in the war, is under threat.
Many Western countries, including the United States and European states, are already looking for alternatives to Chinese supplies, but dependence on Chinese manufacturers remains significant.
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