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* About a third of DJI staff in North America share – sources
* The company faces geopolitical tensions, hit by US restrictions
* Such headwinds risk eroding DJI’s dominance – sources
* But the company is an uncontrolled leader in the global and US markets
By David Kirton
SHENZHEN, China, March 8 (Reuters) – Chinese drone giant DJI Technology Co Ltd has built such a successful U.S. business over the past decade that it has nearly driven all of its competitors out of the market.
Yet its North American operations have been hit by internal declines in recent weeks and months, with a series of staff cuts and departures, according to interviews with more than two dozen current and former employees. .
The loss of key executives, some of whom have joined rivals, has compounded problems caused by the U.S. government’s restrictions on Chinese businesses and raised the once-distant prospect of the erosion of DJI’s dominance, four of the people said. , including two senior executives who were with the company until the end of 2020.
About a third of DJI’s 200 team members in the region were made redundant or resigned last year, from offices in Palo Alto, Burbank and New York, according to three former employees and one current employee.
In February this year, DJI’s head of US R&D left and the company laid off the remaining R&D staff, about 10 people, at its flagship US research center in Palo Alto, Calif., Four people said. .
DJI, founded and led by billionaire Frank Wang, said he made the difficult decision to downsize in Palo Alto to reflect the “changing needs” of the business.
“We thank the employees concerned for their contributions and remain committed to our customers and partners,” he said, adding that his sales in North America were growing strongly.
“Despite the misleading claims of our competitors, our corporate customers understand how DJI products provide strong data security. Despite gossip from anonymous sources, DJI is committed to serving the North American market.
He did not comment on other US staff departures that current and former employees have spoken of, although he told Reuters last year that its global structure was becoming “difficult to manage.”
DJI, which has become a symbol of Chinese innovation since its inception in 2006, is one of dozens of companies caught in the crossfire of trade and diplomatic hostilities between Washington and Beijing, such as Huawei and Bytedance.
According to staff and competitor sources, the company’s brand reach, technical know-how, manufacturing power and sales force mean that it will not lose its crown anytime soon in U.S. markets and billions of dollars worldwide for non-military drones.
But a December order adding the company to the US Department of Commerce’s “entity list” as well as shutting down its R&D operations in California could affect its ability to meet the needs of US customers, according to three former senior executives and two. competitors.
The Commerce Department’s list, enacted on allegations including “high-tech surveillance” activated by DJI, prohibits the company from purchasing or using US technology or components.
That same month, Romeo Durscher, DJI’s U.S.-based public safety officer, who had played a pivotal role in expanding the company’s business by providing drone technology to non-military departments and agencies of the U.S. government. , quit his job.
Durscher, a former NASA project manager and influential figure in the drone industry, now works for Swiss company Auterion, a competitor to DJI.
He said he left DJI because he was discouraged by the staff cuts and what he described as internal power struggles between the US team and its headquarters in China. He added that the US reorganization has made it difficult to deal with the fallout from US-China tensions and win government business.
“It’s not an easy decision to leave the market leader who is really far ahead of everyone,” said Durscher, who joined DJI in 2014. “But these internal battles have distracted attention from the goal. real and in 2020 it got worse … lost a huge talent to us at DJI and that’s very unfortunate. “
SECURITY CONCERNS IN THE UNITED STATES
DJI, a private company, does not publish sales figures. The US Department of Defense estimated the US non-military market to be worth $ 4.2 billion last year. Consulting firm DroneAnalyst said that DJI controls nearly 90% of the consumer market in North America and more than 70% of the industrial market.
The December listing by the Commerce Department and the ban on buying parts in the United States could impact mobile apps, web servers, and some of the company’s battery and imaging products, said David Benowitz, head of research at DroneAnalyst and senior manager of DJI’s corporate team, which works with industrial clients, in Shenzhen before his departure last summer.
DJI said in December that the ban would not affect the ability of U.S. customers to buy and use its products.
The list followed other official moves. In October, the US Department of the Interior said it would only purchase drones from companies approved by the Department of Defense, which last August released a list of five government-approved drone suppliers. federal – four Americans and one French.
DJI said there was no “blanket ban by the US government on purchasing DJI drones.”
“Congress considered this approach last year and rejected it, because … such a ban would be a challenge for many businesses and government agencies that rely on drones,” he added.
“ WE ARE ALWAYS PRIMITIVE ”
Benowitz said continued tensions between the United States and China and Washington’s push to back DJI’s rivals could lead to a decline in the company’s North American market share. He added that while the federal government represented a relatively small share of DJI’s business, its restrictions could have a “chilling effect”, with other buyers worried about stricter measures in the future.
“We are at a point where there are too many market opportunities for one player to dominate,” he said.
Still, he added that alternatives to DJI were relative minnows, although political support and security concerns for Chinese drones brought them growth last year. DJI’s competitors include the French Parrot and the Californian Skydio.
Chris Roberts, CEO of Parrot Inc, Americas, said 2020 has been an important year for the company in the United States, having been named an approved supplier by the Department of Defense and having won contracts with emergency services and security agencies.
Skydio announced $ 170 million in Round D funding last week and said it has a valuation of over $ 1 billion.
“DJI makes good stuff, but we’re still very early in the market and very primitive of what should eventually exist,” Skydio CEO Adam Bry told Reuters.
PHANTOM DRONE FLEETS
When Durscher joined DJI in 2014, the company’s Phantom series was turning drones from a niche hobby into a mainstream gadget. He said he was particularly drawn to the opportunity to bring drones into the fire and rescue service kit.
He said little rivals’ technological advancements over the past year were tempting to some public safety agencies, who might say “let’s go with this drone now so we don’t have to worry about security. Datas”.
He added that changes could come as departments and businesses seek to replace drone fleets that are nearing the end of their lifecycle.
A fleet should typically last three to four years, according to Benowitz.
Durscher and several other staff compared DJI’s internal rivalry over projects to “Game of Thrones,” the television series where rival factions vie for power. He said this resulted in a revolving door of Shenzhen bosses and that he reported to 12 different managers during his six years with the company.
Durscher’s departure from DJI followed that of other key executives in North America last year, including Director of Business Development Cynthia Huang.
Huang, who now works with Durscher at Auterion, said job cuts over the past year were the main reason she decided to quit. Losses in Palo Alto, Burbank and Newark followed cuts to DJI’s global sales and marketing teams, which Reuters reported in August.
“Some of the people we’ve lost in these layoffs just don’t make sense,” said Huang, who was hired in 2018 to lead the development of the DJI business in North America. “The continued outflow of talent was disheartening.” (Reporting by David Kirton; Additional reporting by Jane Lee in San Francisco, Alexandra Alper and David Shephardson in Washington; Editing by Pravin Char)
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