Two years ago, I was chatting with a very smart venture capitalist about an investment he was making in the drone industry. The hardware side of the drone business would be quickly commodified, he told me, and the real value would be collected by the software makers who built platforms that were used by a wide range of manufacturers.
This was a reasonable assumption to make if you believed the market for drones would look something like the market for Android smartphones. Dozens of manufacturers would squeeze out small margins while relying on a central operating system whose creator could then monetize that massive install base.
Hardware innovation staves off commodification
The reality today, however, looks a lot more like the other side of the smartphone market: Apple’s hardware empire. And the company positioned to be the Apple of drones is China’s DJI. It has captured more than 50 percent of the market for consumer drone sales in the US, and its biggest American competitors are dropping like flies. That dominance has positioned its hardware as the platform, with every major drone software provider working to integrate their offering with DJI’s mobile app and SDK.
The volume of new product being pushed by DJI is astonishing. It released two drones today, updates to its Phantom and Inspire lines. Last week it released a new version of its Matrice drone, and last month it rolled out an entirely new line of drone, the Mavic. The craziest part about all the new product DJI is pushing is that, by and large, it’s only competing with itself.