The largest US-based drone manufacturer and a vital supplier for Ukraine’s defense forces, faces a severe supply chain disruption following a sweeping Chinese sanctions package implemented on October 11. The sanctions, which ban the supply of essential components from Chinese companies to Skydio, have plunged the American drone giant into a state of crisis.
The sanctions primarily target batteries, a critical component of Skydio’s high-performance drones, forcing the company to scramble for alternative suppliers. According to a recent report by the Financial Times, Skydio’s leadership is now urgently negotiating with partners in Asia to maintain production continuity, underscoring the fragility of US supply chains dependent on Chinese technology.
Beijing’s move to sanction Skydio signals a marked intensification in its approach to restricting technology transfers to foreign entities perceived as posing strategic threats. The sanctions against Skydio are part of a broader retaliation following the US government’s recent decision to approve the sale of attack drones to Taiwan—a development seen as a provocative stance in China’s eyes. In a statement, China’s Ministry of Foreign Affairs cited “national security interests” as the primary motive behind the sanctions.
“By targeting critical technology suppliers like Skydio, China is demonstrating its ability to influence global tech flows, particularly in sectors where the US and China are competitors,” said Robert Spalding, a former senior director for strategic planning at the National Security Council. “It’s a calculated attempt to put pressure on both US drone manufacturers and their government allies.”
The timing of the sanctions exacerbates an already delicate situation for Skydio, as the company has supplied over 1,000 drones to Ukraine for reconnaissance and intelligence gathering in its ongoing conflict with Russia. Skydio’s drones have played a pivotal role on the front lines, with particular contributions in surveillance and gathering evidence of alleged Russian war crimes. However, Russian electronic warfare capabilities have exposed vulnerabilities in Skydio’s earlier drone models, leading to operational failures in Ukrainian theaters of conflict.
In response to these challenges, Skydio recently introduced the X10, an upgraded model with reinforced jamming resistance. The X10’s initial testing with Ukrainian forces has reportedly shown promise, and Ukrainian military leaders have expressed interest in procuring thousands more units.
Nevertheless, with China now blocking the supply of critical components, Skydio’s capacity to fulfill these prospective orders is jeopardized. This new obstacle threatens to disrupt Skydio’s contributions to Ukraine’s defense, an outcome that is raising alarms among US officials.
Amid the escalating crisis, Skydio’s CEO, Adam Bry, has engaged in a series of meetings with key US officials, including Deputy Secretary of State Kurt Campbell and senior White House officials. During these discussions, Bry emphasized the urgency of securing alternative supply channels and appealed for government support.
“This is a clarifying moment for the drone industry,” Bry stated in a letter to Skydio customers. He warned that China’s actions could severely undercut the competitiveness of US drone manufacturers and increase global reliance on Chinese-made components. Bry’s remarks underscored a widespread sentiment among American tech firms that Chinese policies are increasingly a direct threat to the stability of international supply chains and US national security interests.
The sanctions on Skydio align with a broader pattern of retaliatory actions from Beijing against US firms engaged in defense-related sales to Taiwan. Skydio is not the only company feeling the impact. In September, China sanctioned nine other American defense contractors, including Sierra Nevada Corporation and Cubic Corporation, following their involvement in arms sales to Taiwan.
According to industry experts, this wave of sanctions is a demonstration of Beijing’s willingness to use its economic clout to shape global technology supply chains. Reports indicate that Chinese officials even visited Skydio’s suppliers, including Dongguan Poweramp, a subsidiary of Japan’s TDK known for manufacturing high-performance batteries, and pressured them to sever ties with Skydio.
“This level of intervention reveals China’s strategic prioritization of controlling high-tech exports, especially to firms seen as adversaries,” commented Emily de la Bruyère, a senior fellow at the Foundation for Defense of Democracies. “Beijing’s sanctions strategy is sophisticated and could reshape the drone industry on a global scale.”
With Chinese supply lines abruptly cut, Skydio has accelerated its outreach to potential partners in other Asian countries, particularly Taiwan, which faces its own challenges in establishing independence from Chinese manufacturing networks. Discussions between Skydio and Taiwanese officials, including Vice President Hsiao Bi-khim, aim to explore avenues for collaboration that could aid Skydio in bridging its supply gaps.
US officials are reportedly also involved in these conversations, seeking to strengthen supply chain resilience for critical components. The US government is expected to assist in facilitating these partnerships as part of broader efforts to insulate critical technology sectors from Chinese influence.
The latest sanctions come as Skydio’s rivalry with Chinese drone giant DJI intensifies. While DJI commands a substantial share of the global commercial drone market, Skydio has emerged as a formidable competitor, especially within US defense circles. Some American officials believe that Skydio was specifically targeted because of its competitive position vis-a-vis DJI.
“If there is a silver lining, it’s that this situation will likely accelerate efforts to diversify US drone supply chains away from China,” said a US official who spoke on condition of anonymity. This view aligns with ongoing legislative discussions in Congress, where lawmakers are considering new restrictions on the use of DJI drones within government agencies as part of a policy push known as “China Week.” Under proposed legislation, six Chinese-made battery brands would also be prohibited for use within the Department of Homeland Security.
The ripple effects of the US-China drone technology standoff are also beginning to influence policies in other nations. India, which has previously restricted the use of Chinese-made components in defense technology, is now navigating its own supply chain issues as it increases reliance on Skydio-designed drones for military surveillance along sensitive borders.
In September, the Indian Army contracted AeroArc, an Indian defense firm, to deliver nearly 700 drones based on Skydio’s designs for reconnaissance missions in Jammu and Kashmir and along the high-altitude northern border. AeroArc’s Trinetra drone, customized for India’s diverse and challenging terrains, is hailed as a significant leap forward in India’s surveillance capabilities. However, despite extensive efforts to indigenize the design, AeroArc may still rely on Chinese-made batteries, given Skydio’s current supply constraints.
India’s Ministry of Defense (MoD) has previously implemented strict policies against the use of Chinese parts in its defense equipment, suspending a 200-drone order from Chennai-based Dhaksha Unmanned Systems due to Chinese component usage. The MoD’s heightened vigilance reflects broader concerns over national security risks associated with Chinese-made parts. Now, with Skydio unable to guarantee non-Chinese battery supplies until spring, India may face significant challenges in meeting its goal of technological self-reliance.
The crisis with Skydio has spotlighted vulnerabilities within the US defense supply chain, a topic of increasing concern in Washington. Intelligence agencies have long warned that reliance on Chinese-made components, particularly in critical sectors like defense, poses inherent risks. Incidents of corporate raids and employee detentions by Chinese authorities have further underscored the risks faced by foreign companies operating within China.
These developments are part of a wider decoupling effort on both sides of the Pacific. As the US continues to push for legislation limiting Chinese technology in critical infrastructure, China is strategically leveraging its manufacturing power to curb American influence in high-tech domains. Skydio’s situation encapsulates the broader struggle, as Western nations seek to reduce dependency on China in strategic sectors, including aerospace and defense.
