China controls an estimated 80-90% of the global drone market and dominates the supply of critical minerals and raw materials, as well as the production of drone components. Even a limited disruption in the Chinese supply chain — through export controls or conflict involving Taiwan — could severely disrupt Western drone manufacturing.
This addiction cannot be broken overnight. China benefits from significant cost advantages. But both the US and Europe are waking up to the danger and have enacted sweeping policies to decouple drone supply chains.
Without action, China will hold the West hostage. In 2024, Beijing suspended battery exports to US drone manufacturer Skydio because of its cooperation with Taiwan. The move forced the company to ration batteries.
The squeeze on Skydio is not isolated. The US Department of Defense’s approved drone manufacturers, vetted through the Blue UAS cleared list, still rely on Chinese components, including sensors, motors, and printed circuit board assembly. Analysts estimate the US would need at least five years to build sufficient lithium iron phosphate battery production capacity to meet military demand.
China maintains a major cost advantage in drone manufacturing thanks to its vertically integrated supply chains built on years of state subsidies and investments. Think of drones as “flying smartphones,” combining cameras, sensors, batteries, and communications systems — areas where China dominates both component production and final assembly.
As a result, drones produced with US or European components are often several times more expensive than China-based alternatives. Reshoring or nearshoring manufacturing will require years of investment and dedicated support to industry as companies face upfront costs to rebuild supply chains, recertify components, and conduct new testing and evaluation.
Furthermore, Western drone manufacturers often complain about inconsistent and relatively small government contracts, complex procurement processes, and restrictive competition vis-à-vis traditional defense primes, discouraging long-term industrial investment. Although recent US Department of Defense contracts seem to reverse this trend, Europe continues to move slowly, with some exceptions.
In order to meet this challenge, both the US and Europe are working to expand domestic production. The US Department of Defense’s Drone Dominance Program aims to produce 150,000 drones by 2028, and the Army’s SkyFoundry initiative seeks to expand US production beyond boutique manufacturing.
The private sector is responding. US companies such as Swarm Defense and ARK Electronics are pursuing sovereign supply chains. Battery firms, including Amprius and Lyten, are exploring alternative chemistries and domestic sourcing strategies to reduce reliance on Chinese lithium-ion materials. Skydio, which was targeted by Chinese blackmail, appears to have stabilized its supply chain and recently committed $3.5 billion to strengthening US drone manufacturing over the next five years.
Washington is putting hurdles on purchases of Chinese products to speed this decoupling. Current regulations prohibit the use of Chinese (as well as Russian, Iranian, and North Korean) components in government and critical infrastructure drones, effectively requiring trusted domestic or allied suppliers. Executive Order 14307, “Unleashing American Drone Dominance,” reinforced this push by prioritizing US-made drones and critical subsystems.
In December 2025, the Federal Communications Commission halted new certifications for foreign-made drones, including Chinese drone makers DJI and Autel systems, after placing them and key components such as batteries, motors, and radios on the agency’s “covered list.” The result, however, has been more pressure on domestic and allied drone producers.
The Pentagon’s Framework requires detailed documentation, third-party audits, and full traceability of critical drone parts down to raw material origins. Several US states, including Florida, Texas, and Ohio, have also banned Chinese drones for law enforcement and public authorities, despite the limited availability and higher costs of domestic alternatives.
The European Union is putting similar measures in place to address its dependency on Chinese drone components and manufacturing. Targets are ambitious: by 2035, at least 60% of defense procurement should come from domestic sources, with drone manufacturing identified as a flagship priority in the Defence Readiness Roadmap 2030. The roadmap is supported by major funding initiatives, including €2 billion for Ukrainian military drones and €6 billion for the joint EU–Ukraine anti-drone wall.
The two major pillars of the European approach are the Critical Raw Materials Act and the Cyber Resilience Act. The raw material legislation seeks to secure access to rare earth elements, lithium, graphite, and other critical resources needed for drone batteries, motors, and electronics by supporting domestic extraction and processing projects such as Sweden’s LKAB rare earth operations and Finland’s Keliber lithium project.
The cyber resilience regulation will impose mandatory cybersecurity standards — from encrypted storage and communication links to tamper-proof direct remote ID and mandatory security patching lifecycles — on most drones operating within the European market.
At the national level, the German and French governments have signed new contracts for small drones and loitering munitions, while Estonia, Lithuania, and Poland have become important hubs for aerial and ground drones and related accessories like launch systems and aerostructures. European investments target upstream industries as well, including specialty metals, electronics, fabricated parts, and advanced chemicals. The EU also promotes startup accelerators, the European Defence Fund, Drone Strategy 2.0, and the Action Plan on Drone and Counter-drone Security. All emphasize interoperability and dual-use technologies, but implementation remains slow due to IP concerns, vendor lock, and slow implementation of standards.
European governments should accelerate the adoption of Modular Open Systems architecture standards to ensure plug-and-play compatibility among sensors, software, and effectors. Interoperability should also become a mandatory requirement in EU and national defense tenders (e.g., under the European Defence Fund) to incentivize the design of open and standard-compliant systems rather than proprietary solutions. They must also generate stronger and more predictable demand for UAS and counter-UAS systems through multinational acquisition schemes and EU defense funding tools such as the Security Action for Europe (SAFE) instrument.
Both the US and Europe have the political will to meet the Chinese drone challenge. But the industrial reality risks sabotaging their efforts. Bans or short-term subsidies will not suffice. Only ambitious long-term planning and procurement will suffice to build a resilient drone supply chain.
Federico Borsari is a Non-Resident Fellow at the Center for European Policy Analysis (CEPA) and a cohort of the NATO 2030 Global Fellowship. At CEPA, he focuses on issues at the intersection between technology and international security, in particular, unmanned systems and autonomy, and his portfolio also includes NATO and transatlantic defense and security.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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