No news is good news for DJI, a Chinese unmanned aerial vehicle (UAV) company whose market is mainly overseas.
DJI was lucky not to be on the list of Chinese companies that are represented by TikTok, WeChat, and Huawei in the Clean Network plan recently released by the USA politicians. Despite repeated criticism from the US government, the second boot has shown no sign of falling so far. Moreover, the epidemic, which has lasted for more than half a year, has not caused fatal damage to DJI. In DJI, the popular saying is: “It is politically incorrect to say there is no impact, but it can be seen as a fact that the epidemic has no impact on DJI.”
According to DJI insiders, the epidemic had a certain impact on DJI in March and April, but by late April, the whole curve had gradually returned to normal, and the system including raw materials, staff, product storage, and freight had stabilized. Since May, DJI has returned to the same level of growth at the same time last year.
According to Yang Ge, a founding partner of Beijing Xinghan Legend Capital Management Co., Ltd., the international situation does not have a big impact on the UAV industry. Generally speaking, electronic circuit control and chip circuit control under basic manufacturing are all above 120 nanometers. Its process production does not belong to the preparation of sophisticated chips. Domestic chip preparation can reach the self-production of 60 nanometers, 45 nanometers, and 28 nanometers, which can be achieved through cooperation.
The star company that has always been highly sought after is said that next year it will list in Hong Kong recently, and there are investment institutions are promoting DJI equity financing projects. As for this news, DJI denied: “The internal has not received the listing news.”
For DJI, the real challenge is not the epidemic, nor the US government, but the UAV market, which has been and continues to be hugely successful. The ceiling in the consumer drone market is low, and it’s an industry consensus. Gartner has predicted that the global UAV market will reach $11.2 billion in 2020, of which more than half will be from the commercial drones. “The consumer UAV market is nearing saturation, and DJI’s revenue will peak at 20 billion yuan…” DJI once told us. After a $1 billion financing round in May 2018, DJI was valued at $15 billion, with investors expecting it to be valued at $150 billion in 2023.
According to reports, in its financing document, DJI outlooks at the size of its target market as follows: among the two existing sectors, the cumulative market size of the UAV sector (consumer and industry-level) will be more than 88 billion US dollars from 2017 to 2021, and the annual market size of the image sector will be more than 15 billion US dollars. The three new directions for DJI to expand include: medical imaging AI market with annual market size of more than $5 billion; In education, the annual market size of 3-year-old + science and technology courses with more than 10 billion US dollars; Emerging industries include artificial intelligence, advanced manufacturing, robotics and other related markets around vision, algorithms, image processing, and integrated chip technology.
DJI has launched a number of new products in recent years, including plant protection drones, motion cameras, Handheld Gimbal Cameras, educational robots, lidar…However, these products are either much cry and little wool or still in the cultivating market phase or having difficulties in commercial landing. If DJI is wanting to lift valuation in three years from $15 billion to $150 billion, it must win the second battle beyond consumption level UAV as soon as possible, only in this way, it can convince capital markets its core competitiveness can be copied, just like those Internet companies which are expanding the border.
From this perspective, Mi is certainly not a model or a catchup target for DJI, because Mi has been proven by the market not to have the ability to increase the estimated market value from 15 billion US dollars to 150 billion US dollars in three years with a 10-fold growth rate.
In Education Area- Robomaster S1, RoboMaster Summer Camp and RoboMaster Competition
DJI launched its first educational robot – Robomaster S1 in June last year. It was once seen as a breakthrough for DJI.
At the time, DJI judged that parents who would consider letting their children learn by using a programmed robot should first have the awareness or at least the knowledge in this field to do so. However, those who have studied engineering to this extent are still a minority of the national population.
“The robot education business is an important sector for DJI, but the sales revenue from S1 alone is very small,” DJI’s director of public relations, Xie Tian, told us.
To lower the bar, DJI is continuing to promote online courses, issuing programming cards as a way to teach through having fun and simplify the teaching process. It is also working with public high schools to promote some of the on-campus curricula, using the product as a teaching aid to be taught by professional teachers. But to make the market fully mature, it has to undergo a long-term cultivation process.
The educational version of RoboMaster EP which was launched in March this year has entered the public school curriculum. It has more accessories and higher developer permissions for the main version, and teachers can use it directly to do more lessons. This is another line of technology, but it’s still having a niche market.
In Yang’s opinion, the market competing space for consumer electronics as a single product is relatively limited, and the brand of UAV is bound to take robot application as a track for development, and this is DJI’s action in the field of education robot.
Livox Tech, DJI in Commercial Lidar Application
In addition to educational robots, there is lidar. Livox was hatched within DJI and later operated independently. According to Fang Han, an industry insider who has dismantled Livox Radar – Horizon, the biggest feature of Livox is that it has a very strong capacity for low-cost mass production. But the problem is that the market is also small.
The field of robotics is currently one of the main applying scenarios of Lidar. Driverless cars, as far as he knows, have largely limited use in real cars.
“Technically, it’s not very innovative.” Fang Han concluded that the advantage of Horizon product is that there is no fixed blind spot. As long as there is enough time, it can surely cover every position in FOV. Nevertheless, the disadvantage is that its point-out rate is limited, because of only one transceiver unit existing. Therefore, the number of points generated per second is very limited, at the same time, non-repeat scanning also leads to the need for more complex algorithms to match the image sensor during rapid motion.
From a mass production perspective, Livox should be the best. Mass production capacity just depends on cost, and it means that its only demand is the low cost. This is also consistent with the tone of DJI, making high-tech products at a very low price. “The lidar market capacity is very limited, so it is unlikely to become a new growth area for DJI.” “If you give him all the lidar sales in China in a year, it’s not much in revenue.” Mr. Fang said.
The drone is still the main business of DJI
At present, which one is experiencing the biggest sales growth among DJI’s products? It’s still the consumer drones.
DJI’s consumer products are increasing within the scale of photographic equipment increasing, and DJI’s consumer products are even more flexible. Compared with traditional Japanese photographic equipment manufacturers, DJI’s products are more in line with market demand. China itself is a rapidly rising market for video consumption. The number of people involved in video shooting and production is expanding, and therefore, the real demand for tools is still growing.
The expansion of the consumer market area depends on the trend of mass video consumption and production. With the bottom rapidly expanding, the middle moving up, and the head upgrading tools, meanwhile, users who used to set the movie level in the professional level of radio and television are also exploring to make the Internet short videos, so the key is how to meet the needs of this level of tools.
As long as more and more people are involved in this type of industry, the market will not stagnate, but of course, it no longer had the kind of booming speed brought by growing out of nothing. According to Qianzhan institute’s UAV Industry in China in 2018-2023 Market Demand Forecast and Investment Strategy Analysis Report statistics, from 2013 to 2017, the DJI’s revenue had maintained rapid growth, which represented as 830 million yuan, 3.07 billion yuan, 5.98 billion yuan, 9.78 billion yuan, 17.57 billion yuan respectively. According to Frost & Sullivan’s statistics, the board of directors of DJI expects the company’s revenue to reach 170 billion yuan in 2022.
DJI has not confirmed or denied any of these figures. DJI has never disclosed financing documents, but some cooperative banks and institutions will make documents by themselves to talk about projects to upstream LP or capital management clients. However, DJI itself will not provide data support in this respect. “The field is very vertical and narrow, and DJI is the only company that affects the fluctuation of data, so there is no serious research personnel and tools. The data is just depending on basic searching for public information and collating. These studies are for reference only, and the data in them are not reliable.”
In the beginning, the core logic of inflation was that there was no good solution to aerial photography before the emergence of UAV, and the cost of aerial photography was too high because it might be necessary to spend tens of thousands of millions to get small biplane fixed aircraft to complete.
After the advent of UAV in 2015, its emergence and popularity changed the expression system of lens language. It is said that at present in the Television Department of the Communication University of China, the camera movement of the air lens has become a special course, listed in the curriculum standard.
DJI drone in Agriculture
But the situation of Agricultural drones is changing. DJI now has more to think about from its earlier competitors, such as XAG and Ehang. Reports say that in 2018, The company accounted for 53 percent of the total market share of agriculture drone, with annual revenue of about 1 billion yuan.
By May 6th, the global shipments of DJI plant protection UAV had exceeded 20,000 units by 2020. But it is an objective reality that less than 10% of the farmland which is suitable for UAVs plant protection operations is already using UAV. Yet this does not include woodlands, orchards, etc. Therefore, within the work scope of the Mechanization department and planting Department of the Ministry of Agriculture and Rural Affairs, the coverage of UAV is very small.
DJI’s machine quantity accounts for nearly 70 percent in the fields or users that already use UAV, which is more than two-thirds in China. Since the overall coverage rate is low, there is no point in talking about market share at this point.
Economic benefits are still not the primary goal of DJI agriculture. The business model of DJI agriculture is that professional user (plant protection teams and individual fliers) purchase plant protection planes and related technical services, and then make money by working for farmers. Therefore, only when DJI’s customers can make money from farmers firstly, this business model can continue to operate for a long time.
Farmers will consider the combined cost of plant protection tools and various factors that ultimately affect the harvest, output, and the cash realizable value. Therefore, Eppo teams will become more and more professional and provide a variety of services, which is a process changing from non-professional to professional, and relatively speaking, a longer chain.
At present, in the strategy promoted by China, some mechanization tools have become standard configuration, including special drone subsidies involved in the national agricultural machinery subsidies in each province. It has been a relatively standard system.
Moreover, the popularizing rate of agricultural plant protection drones will certainly be very low, because the agricultural machinery business is to a small market. And the China domestic agricultural foundation is not solid, it is too early to discuss the capital value of the business in such a situation.
In Yang Ge’s opinion, the market transformation of DJI toward agricultural Internet is first of all an attempt. The market does not give explosive feedback on whether the market has a long-term and stable demand for agricultural automation, agricultural informatization, and industrial Internet.
For DJI, to make agricultural plant protection drones, the original consumer-grade UAV is a stepping stone at its entrance and a necessary condition, but at the same time, it needs to build a base station and network construction to form an agricultural digitization and informatization environment, and make soft conditions of information and data in the organization, and then provide a solution of totalization.
Compared with other commercial UAV companies, DJI’s advantages lie in its basic supply chain and performance of performance operability, data collection hardware data sensing which respectively one-ups the world. It has been the No.1 seller in the consumer domain for a long time, which is its entry ticket to the TO Business market. However, its network construction positioning and automation solutions do not have obvious advantages at present.
Therefore, he believes that there are two important entrance barriers for whether DJI can become big and strong in the plant protection drone market. The first one is the explosive level and real demand of the market itself. Is a drone necessary for agricultural Internet as a tool for data collection and information integration? Yang Ge has reservations.
The second one is that there are so many enterprises entering the market at the same time, each of which has its own advantages. DJI has advantages in hardware and data collection only, which cannot determine its market share. In the industrial and agricultural interconnection, the most important market is actually network construction, equipment paving, and Internet construction, as well as the final integrated solution in the industrial Internet. These are actually the explosive points of the market.
So far, the commercial drone has not been a major player in the industry.
Will DJI be a great company?
Two years ago, DJI lost more than 1 billion yuan due to internal corruption, and over 40 people were investigated for corruption. Some sources said that this was a disguised attempt to lay off employees. According to China Securities Journal, DJI responded at the time that “the number of employees in the company rose from 12,000 at the beginning of 2018 to 14,000 by the end of the year. The HRs’ recruitment tasks are heavy, and the lay-off message is pure speculation. ‘(corrupted) people have been caught, so this is not a joke’.”
In April this year, news spread on medias such as Zhihu and Maimai said that DJI would lay off at least 50 percent of its staff due to the epidemic, and the official response was: a rumor. When a star company is short of bright spots in performance, all kinds of problems are magnified.
DJI’s dilemma has remained the same over the past year and he needs another victory to prove itself.
In December last year, after 13 years of establishment, DJI put forward its mission values: “DJI is committed to becoming a technology company that continuously promotes human progress, to be a pioneer in the era of space intelligence, to make the beauty of science and technology beyond imagination as its mission, and to adhere to the values of ‘try your best with ambitions, treasure faith and pursue truth, Happy and humble ‘”.
Xie Tian’s explanation is that ‘ try your best with ambitions ‘ is DJI’s attitude toward products, ‘treasure faith and pursue truth ‘ is DJI’s attitude toward itself, and ‘Happy and humble’ is DJI’s attitude toward partners. But the vague adjectives seem to suggest that DJI may not have a particularly clear direction for the future.
Since 2016, DJI has occupied 70% of the base plate of the worldwide consumer drone market. Despite many challenges, it is clear that in the consumer UAV market, DJI’s advantages are hard to shake. These prove DJI’s success in the past, but it is difficult to illuminate the future.
With Robomaster S1, agricultural plant protection UAV, and even Livox, an internally hatched Livox company, DJI is fighting for the future depending on these steps it has made.
In some ways, DJI is Apple of the commercial drone market. Just like Apple building the ecological chain around iPhone, iOS system, and App Store, DJI has also mastered the hardware and software technical specifications and standards for consumer UAV. As early as 2015, DJI had already opened SDK permissions, and now has more than 100,000 developer accounts around the world.
But DJI’s ecology is different from Apple’s. It’s mostly mission-specific apps or platforms. Consumers may not feel it.
An Apple ecosystem can grow in the trillion-dollar mobile phone market, but is a DJI ecosystem able to grow in the multibillion-dollar consumer UAV market? The consumer drone market has given birth to DJI while limiting its space for survival and development.
If DJI is to become a great company, and worthy of the prestige and values that it now possesses, it will eventually surpass the UAV industry. But where is the second victory?