Industry Insights | The market scale of industrial drones in China is expanding rapidly, overtaking consumer-grade products

Drones are a type of aircraft, a technological product developed with the development of communication technology, information processing technology, sensor technology, etc. Aircraft fly by relying on the reaction force of air, rather than the reaction force of air against the ground (or water) surface. Common aircraft include airplanes, helicopters, gliders, airships, etc. According to the "Regulations on the Administration of Civil Drone Pilots (Draft for Soliciting Opinions)" issued by the Civil Aviation Administration of China (hereinafter referred to as "CAAC"), a drone is an aircraft managed by a control station (including remote control or autonomous flight). Its main characteristics include driverless operation, remote control, beyond-visual-range flight, and execution of specified tasks.

Drone systems can generally be further divided into two major categories: military drones and civilian drones.Military drones refer to those used for military missions. They have strong concealment capabilities, can reduce casualty rates and save training costs, and are very suitable for completing high-risk military activities. Civil drones refer to those used for tasks other than military missions.

According to the types of downstream users, civilian drones can be further divided into two categories: consumer drones and industrial drones.Consumer drones mainly meet the general consumer's needs for aerial photography and entertainment. They have good operability, and their prices are mainly concentrated in the range of 3,000 yuan to 10,000 yuan. Industrial drones (also known as commercial drones or industry drones) are mainly used to collaborate or replace manual labor to complete tasks in various commercial fields. They are usually equipped with devices or equipment for completing operational flight activities. Currently, the application scenarios of industrial drones include surveying and geographic information, security monitoring, inspection, emergency response, agricultural and forestry plant protection and other professional fields.

Source: Frost & Sullivan analysis

In 2021, China's leading position in the global civilian drone market was obvious. The domestic market scale reached 76.98 billion yuan, accounting for about 56.7% of the global civilian drone market scale.

This is mainly due to the following reasons:

1) China has a vast territory and a large number of towns, generating huge demand for related drone services. For example, as an agricultural country, China needs to carry out a large number of agricultural plant protection operations every year. However, with the improvement of China's urbanization rate, there is a shortage of rural labor force, and the demand for mechanized operation services provided by drones is higher;

2) China is accelerating the integration of the concept of smart cities. As a country with a high population density, the demand for using technologies such as drones to improve urban management, safety, transportation, energy, and environmental levels is higher;

3) China's consumer drones have excellent performance and high cost-effectiveness, while DJI's products have formed an absolute competitive advantage in the consumer market.

It is expected that in the next five years, the market scale of China's civilian drone industry will grow at a compound annual growth rate of 36.5% to reach 364.35 billion yuan by 2026.

Source: Frost & Sullivan analysis

According to Google's global real-time data, consumer drones were not greatly affected during the epidemic.

The market scale of China's consumer drone industry increased from 15.5 billion yuan in 2016 to 38.81 billion yuan in 2021, with an annual compound growth rate of 20.2%. It is expected that by 2026, the market scale can reach 624.9 billion yuan.

With the decline in product prices and the continuous improvement of the industrial chain, the products provided by drone manufacturers at affordable prices are constantly injecting new momentum into the market.The threshold for C-end consumers to purchase consumer drones has been greatly reduced, which has also stimulated consumers' desire to buy.However, overall, the consumer drone market is still becoming increasingly saturated. Therefore, it is expected that in the next five years, the market scale of China's consumer drone industry will grow steadily at a compound annual growth rate of 10.0%.

Source: Frost & Sullivan analysis

In contrast, the market scale of China's industrial-grade drone industry increased from 4.3 billion yuan in 2016 to 38.18 billion yuan in 2021, with an annual compound growth rate of 54.7%. It is expected that by 2026, the market scale can reach 301.85 billion yuan.

The market development potential of industrial drones in China is huge, gradually becoming one of the important sectors of the global drone industry.

From the supply side, in industrial application scenarios, drone companies continuously improve various models. For example, they equip the aircraft with customized payloads and endow them with infrared detection, radar scanning, pesticide spraying, sound amplification, monitoring and other capabilities to expand the industrial application scope of drones.

From the demand side, in industrial scenarios, drones can partially replace manual labor to execute tasks, bringing cost reduction and efficiency improvement advantages.Take power inspection as an example. Due to the wide range and large volume of inspections, and the complex terrain environment where the wires are located, manual inspection has low efficiency and is prone to problems such as inadequate inspection work. However, drones can execute tasks in complex terrain environments, with inspection efficiency reaching 3 - 5 times that of manual inspection, and can even detect wire problems in advance and prevent problems before they occur. At present, the State Grid and the Southern Power Grid have purchased a large number of drones to execute inspection tasks and gradually increased the proportion of machine inspections.

In addition, the epidemic has had a positive impact on industrial drones. The "contactless" economy brought about by the epidemic has also indirectly promoted the development of industrial drones. During the epidemic, industrial drones assisted in epidemic control, carried out disinfection operations, publicity and persuasion work, and distributed medical supplies/life supplies.

• Cloud computing and cloud AI help the intelligent development of industrial drones

At present, drones mainly operate within line-of-sight (when the drone is within a radius of 500 meters within the line-of-sight of the pilot or observer's visual field and the relative height is lower than 120 meters) and beyond-line-of-sight (when the farthest distance from which the drone can be directly observed without using a camera, telescope or other visual aids) but both require personnel to watch the real-time video transmitted back by the drone for control. Industrial drones are often used in complex working environments, and a slight delay in manual operation can easily lead to aircraft collisions.

On the other hand, the state and society are paying increasing attention to issues such as the flight safety of drones. Therefore, tracking information such as the flight trajectory, altitude, speed, etc. of drones is very important, which puts forward higher requirements for the autonomous decision-making ability of drones.Cloud computing platforms can provide safe data storage and computing services for the industrial drone industry and are an important factor for drones to achieve intelligence.

With the assistance of cloud computing: 1) The flight data of drones can be entered into the cloud computing platform in real time to realize tracking, monitoring and management of drones; 2) Cloud AI can replace manual video viewing to control drones, judge and avoid surrounding obstacles; 3) Cloud AI can also monitor the operation status of drones in real time, autonomously plan flight paths, task payload systems, etc., further liberating manpower.

For example, in the agricultural and forestry plant protection scenario, drones can plan and modify the paths and dosages of fertilization and pesticide spraying in real time according to the detected farmland information, making the plant protection process automated, reducing dependence on pilots, and reducing farmers' learning and operation costs; when inspecting in mountainous areas, drones can automatically identify and avoid obstacles, reducing the risk of collisions.

At present, some players in the industry have begun to integrate cloud computing capabilities into industrial drone solutions. In 2018, DJI Innovation announced a strategic cooperation with Microsoft, aiming to give full play to Microsoft's cloud computing and artificial intelligence advantages and develop richer and more intelligent drone solutions for users in vertical industries such as agriculture, construction, and public safety: DJI Innovation's developers can use Microsoft's Azure to develop and train artificial intelligence models such as image recognition, endow industrial drones with the ability to automatically identify foreign object coverage in inspection scenarios; DJI Innovation drones can use Microsoft's FarmBeats agricultural cloud solution to summarize and analyze data such as temperature, humidity, and light collected from the air and ground, generate real-time picture information, and help farmers observe crop growth conditions and agricultural pests.

• 5G empowers the development of connected drones

5G has the characteristics of ultra-low latency, ultra-large bandwidth, and ultra-high reliability, and has advantages such as wide coverage and massive connections compared with 4G. At present, some drone applications are running under the support of 4G network communication, but are greatly affected by bandwidth, latency, and interference.

With the development of the commercialization process of 5G, the new generation mobile communication network will solve the communication problems encountered in the industrial drone industry applications and endow drones with capabilities such as ultra-high-definition image transmission, ultra-low latency data transmission, beyond-line-of-sight flight, and remote control.For example, in the power inspection scenario, 5G will push the collected video data to a designated business server to achieve a clearer and smoother image viewing experience.

At present, leading players in the industry have included 5G in their strategic development directions. For example, in April 2019, Chengdu Henglong United with China Mobile (Chengdu) Industrial Research Institute and Huawei released the world's first 5G connected drone at the "5G Connected Drone" industry summit, signed a strategic cooperation agreement, and initiated the establishment of the "5G Connected Drone" alliance to jointly create a new industry ecosystem in the vertical field of connected drones.

• Multi-payload integrated drones will become the norm in the future

Due to the relatively single task payload carried by airborne platforms, they can only complete specific functions. However, different from consumer drones, industrial drones are executing more and more tasks. Simply carrying ordinary small cameras cannot meet their task execution capabilities in surveying, inspection, agricultural and forestry plant protection. Secondly, the weight of the drone's task payload is also one of the important factors affecting the endurance time.

How to better integrate multiple payloads with drones and execute tasks with a smaller and more economical platform is the main research direction of the industry.The miniaturization of payloads will be achieved in two aspects: one is the miniaturization of the payload platform. The development of miniature special motors, miniature sensors, and lightweight structural materials will be the main direction; the other is the miniaturization of the payload itself, which requires reducing the volume of devices (such as photoelectric sensors) and adopting special integrated circuits.