Posted By Simon Montford on Oct 23 2015
Earlier this week I attended the Commercial UAV Show, which was a two day event that took place on 20-21st October 2015 at ExCeL, London. I decided against getting a conference pass (you can check out the agenda here), because what I really enjoy about events is the opportunity to network. By meeting the exhibitors, and chatting with attendees I was able to gain a huge amount of industry knowledge within a very short time.
The other benefit of not sitting through two days of talks was that I was able to spend time checking out the incredible assortment of drones on display. One thing I did notice was that, even though protective netting had been provided by the conference organisers, I didn't see a single one airborne, which was a shame. In hindsight I probably should have asked why this was, but I assume the reason lay somewhere between compliance, and a fear of incurring damage in the event of a collision. Don't forget, the items on display weren't toys. They were very expensive pieces of precision-made industrial equipment.
Types of drone on display
At the event there were three main categories of drone. Firstly, large combustion engine-powered fixed-wing UAVs designed to stay in the air for as long as possible. This category of drone is generally capable of remaining airborne for up to 6hrs, and cost somewhere in the region of $50-150k. Drones such as these are mostly used for search and rescue, as well as environmental monitoring, and aerial surveillance. The two Original Equipment Manufacturers (OEMs) that attended were Textron Systems, and Drone Tech UAV (below).
The next category were mid-sized battery-powered multi-rotor drones capable of lifting reasonably heavy payloads such as LiDAR sensors, and high-spec DSLRs. A few were fixed-wing UAVs like the Agridrone, but they were few and far between. The primarily benefit of the multi-rotor configuration is that they are particularly good at remaining stable during flight. They tend to cost around $30-50k, so far less expensive when compared to military spec drones, but considerably more than something like a DJI Inspire. Flight time is limited to between 30mins and 2hrs, which is sufficient flight time for industrial asset inspection, land survey work, and agriculture. OEMs that attended included AscTec, Delair-Tech, Sabre, DroneTechnology, Aeraccess, and Vulcan (below).
The third category comprised of smaller, lighter battery-powered rotary devices designed to appeal to semi-professionals, and the mass-market. Flight time is around an hour, and they cost around $1-15k. This category contains perhaps the most iconic drone every created; the DJI Phantom. It and drones like it such as the DJI Inspire, and Yuneec Typhoon are mostly used by aerial videographers to film weddings and make promotional videos. They are also used for cattle herding and property inspection work. OEMs that attended included DJI, Aerialtronica, and Yuneec. Parrot were conspicuously absent, as were 3DR (below).
Toy drone manufacturers weren't invited, nor were military drone OEMs, with the notable exception of BAE Systems.
Some of the most interesting innovations I came across were as follows; drone parachute systems developed by Para Zero, drone hydrogen fuel cells by Cella Energy, and a startup called Altitude Angel that wanted to establish a world-wide air traffic control, and compliance solution for drones. Airware is definitely one to watch. The company makes software that enables a single user to operate a fleet of drones from a Windows laptop or tablet. It also provides a cloud platform that lets companies manage tasks from within the field. Enterprise clients pay a monthly subscription to use Airware's software platform.
The general consensus among attendees is that regulation is not the answer. The threat is unlikely to come from professional drone operators. It's the idiot with a DJI Phantom that is most likely to compromise air safety. The biggest concern by the CAA and FAA is that titanium inside many cameras attached to such drones can severely disable a motor if it gets sucked into the intake of a jet or propeller engine. This is why the FAA announced recently that it is looking into mandatory drone registration. This was met with universal dismay as the proposal is considered by many to be completely unworkable.
What's in a name?
Shortly after arriving, I approached an individual working on Yuneec's exhibitor stand, and asked him if he was comfortable with the word "drone". This is because within the Aerospace and Defense industry, the term is widely regarded as anathema. He responded with a grin and said he was absolutely fine with it.
The word "drone" is of course a misnomer because, in almost every case, drones are not autonomous. A far better, and more accurate term is Remotely Operated Aerial Vehicle (ROAV) or Remotely Piloted Aerial Vehicle (RPAV). Other names widely used are Unmanned Aerial Vehicle (UAV), and Unmanned Aerial System (UAS).
What the Yuneec rep and I both agreed on was that the word "drone" is so deeply embedded within the public psyche that it's here to stay. The reason, of course, for the reluctance among the Aerospace and Defense (A&D) industry, is that the word comes with a lot of baggage as a result of what drones have and are being used for by the military.
In my view, attempting to eradicate the word "drone" is a fruitless endeavour. The A&D industry should accept that it has entered the lexicon, and help change the public's perception of what a drone actually is. This is almost certainly why the organisers of "Drones for Good", an annual competition in Dubai, kept the word drone in the title. Another reason may also have been that UAE and UAV sound confusingly similar! The point is that the event is dedicated to finding practical ways civil drones can be used to improve people’s lives. This was a sentiment echoed by almost everyone I spoke to at the conference.
The commercial drone sector is set to grow rapidly. In a few years' time there will be no business like drone business. This is because the market is set to be worth between $6-8bn by 2020, or $15-20bn if you include some military segments. The numbers are pretty difficult to pin down, because the boundaries between military and civilian are becoming increasingly blurred. For example, should military-spec drones that are purchased specifically for immigration control or humanitarian aid work be counted as military or civilian?
Regardless of the exact market size, I predict that military drone OEMs will wake up to the realisation that using drones to blow stuff up is far less profitable than making them undertake tasks that not only create wealth, but also add real value in terms of social impact.
To put this into perspective, it is rumoured that DJI are valued at over $10bn, and that they are preparing to ship over a million units next year! Think about it, that's over a million customers, each paying several thousand dollars per unit, and that's only one of several OEMs operating in the commercial drone market. Admittedly DJI are the market leaders, but their success is indicative of the industry as a whole.
Military drone OEMs will, therefore, almost certainly want a piece of the action, so I expect to see them make inroads either via acquisition or an aggressive marketing push. Having military drone makers enter the commercial civilian market may not necessarily be a bad thing for the end-user, by the way. This is because loads of different technologies that were originally developed by the military are now embraced by consumers. For example, that thing we call GPS that helps us find the nearest Starbucks was originally developed by the military as a missile guidance system. Even the Internet was originally developed by DARPA as a communications system designed to withstand nuclear attack.
I would suggest that any OEM that isn't taking the commercial drone market very seriously today will pay the price tomorrow. In fact I guarantee that almost all the "Primes" aka prime military contractors, are already thinking about how they will be able to capitalise. The problem is, beyond the more obvious applications, it isn't possible to accurately predict what tomorrow's drones will be used for, and importantly how money will be made from selling related products and services. As previously mentioned, the only Prime at the event was BAE Systems. Their booth was tiny by their standards, but believe me they will be back next year with a stand twice the size!
It will be fascinating to see how this nascent market develops. Will the big boys like Raytheon, Lockheed Martin, BAE Systems, General Atomics, Northrop Grumman, that currently focus on making military spec drones priced at around $40 million dollars per system (such as the ones listed here) prevail in the years to come, or will today's upstarts like DJI, Parrot, 3DR, AscTec dominate?
One could argue that it will be a one-sided battle, as the aforementioned sleeping giants clearly possess advantages that the little guys lack. Things like economies of scale, substantial cash reserves, as a result of giant government contracts, and decades' worth of R&D. The problem for the incumbent Goliaths, one could also argue, is that the things that make them strong today could be their downfall tomorrow.
For example, in the new era of low-batch manufacturing and rapid prototyping, do economies of scale even matter? With regards to cash reserves, today's tech startups don't need to spend years accumulating growth capital from retained profits. Instead, they simply shake a money tree, in the form of private equity, and they will receive an abundance of growth capital to scale their businesses.
When it comes to R&D, yes the big boys have huge budgets to develop cutting edge innovation in terms of aerodynamics, materials, construction techniques, propulsion and navigation but will these innovations translate into products that serve the needs of the commercial marketplace ten years from now? Perhaps they will end up making better fax machines at a time when all their customers have moved on to sending documents via email.
All this looks very familiar to me. Today's drone industry reminds me of the mainframe computer industry circa 1950-70. Back then the industry was dominated by a group of manufacturers known as "IBM and the Seven Dwarfs". Well they did dominate for a while, until the likes of Apple and Microsoft appeared on the scene touting what became known as, the "micro computer", and we all know how that David and Goliath story played out!
There are really only three market segments that are being effectively monetized within the commercial drone sector at this point, and they are aerial photography, aerial surveying, and asset inspection. The aerial photography segment has low barriers to entry so is already becoming crowded. There were no dedicated aerial photography companies, but several aerial surveying companies did attend the show including Topcon, Sabre, DroneDeploy, Delair-Tech, Skydronesurvey, and CarboMap. Businesses using drones to inspect high value industrial assets such as wind turbines, pipelines, overhead power lines and flare stacks were Sabre and Inspectahire, but other notable service providers within this new but lucrative sector also include CyberHawk, and SkyFutures.
Technological developments that we will see in 2016
DJI are rumoured to be adding LTE so that all future drones will have "4G ready"* capability as standard. That means that by adding a 4G sim card you'll be able to stream live and direct to the web, which is great providing you have an unlimited data plan, not so good if you don't.
Innovations such as 4G enabled drones are the result of R&D efforts by chip OEMs. Qualcomm's new Snapdragon 801 SoCs (system on a chip) is the size of a credit card, but will make drones more energy efficient, lighter, faster and generally more capable. As SoCs technology improves, drones will continue to get faster, lighter and even more intelligent. Very soon things like collision avoidance will also come as standard. The first drone OEM to get the 801 drone chip will be Yuneec.
Long-term Growth Potential
With regards to the long-term outlook, the truth is that unless you have a crystal ball, or a DeLorean (with time travelling capabilities) there's no way of knowing how drones will be used to make tomorrow's entrepreneur wealthy.
Of course there will continue to be a need, a need for speed not only with regards to the aerial velocity of drones themselves, but also speed in terms of innovation. The gold rush has already begun, and legions of entrepreneurs, backed by keen investors are busy inventing new products and business models. They know that as new uses emerge, a huge demand will follow. This relates not just to the drones themselves, but demand across the entire ecosystem; sensors, accessories, infrastructure, skills, services etc. The smart money knows that there's gold in them thar hills, which is why the gold rush has already begun. I witnessed it myself this week at ExCel, so don't get left behind, now's the time to jump on board!
* 4G (HSPA and LTE) both fall short of the intended spec for true 4G, so in my view anything sub 100 Mbit/s should have been called 3.5G, but hey I don't make the rules. As far as I can tell, anything that isn't true 4G is referred to as either "pre-4G" or "first generation 4G". The point is that the jargon is very confusing, and we are not yet getting the data speeds that the 4G specification originally promised, which was defined back in 2008 as 100 Mbit/s for high mobility devices, such as a smartphone while driving, and up to approximately 1 Gbit/s for low mobility i.e. using a smartphone while stationary. The truth is these days most of us are getting only around 10-20 Mbit/s if we're lucky. When a new standard called LTE Advanced (LTE-A) has been fully deployed we should finally enjoy speeds of up to 100 Mbit/s, but don't hold your breath!
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