What does it mean that DJI is being placed in the U.S. Department of Commerce “Entity list”? Such a list contains the names of companies, individuals, research institutes, etc. that are engaged in activities that Washington believes poses a threat to, or is incompatible with, U.S. national interests. It is not surprising that such a list is impacting the drone industry in a major way, since it is unlikely to be known for some period of time.
There has been early reporting by Reuters and Drone DJ that is based on a conference call with a state official. The news comes as a significant blow to DJI — a 14-year-old Chinese company — which has been an almost total dominant force in the drone industry. In fact, it commands an estimated 77% of the market.
Increased tensions between the U.S. and China has long been an increasing concern for DJI’s presence in the States, which is especially true in the area of surveillance capabilities. DJI’s success with their consumer drones also has a serious impact and reach in both industrial and governmental applications. In fact, this drone titan specifically offers a government line of products as part of its enterprise offerings.
DJI is not the only company, but actually one of dozens of companies added to the list, with chipmaker SMIC being one of them.
After the list went public, Commerce Secretary, Wilbur Ross, issued the following very long and blistering public statement:
“China’s corrupt and bullying behavior both inside and outside its borders harms U.S. national security interests, undermines the sovereignty of our allies and partners, and violates the human rights and dignity of ethnic and religious minority groups. Commerce will act to ensure that America’s technology — developed and produced according to open and free-market principles — is not used for malign or abusive purposes.
China actively promotes the reprehensible practices of forced labor, DNA collection and ubiquitous surveillance to repress its citizens in Xinjiang and elsewhere. Over the last two years, this administration has added nearly 50 entities to the Entity List for their support for the Chinese Communist Party’s despicable offensive against vulnerable ethnic minorities. With these new additions, we are applying those principles to the rest of China, including Tibet, and to the authoritarian regimes to which these practices are being exported.
The DOC notably placed Huawei and several of its affiliates on the list last year, a move that has severely hamstrung the hardware giant. Among other things, it cut off the company’s access from key U.S. technologies like Google’s Android and other software. Huawei has opted to develop its own operating system, but the landing has been a difficult one to stick.
There’s been a good deal of talk around restricting free use of the company’s technology by federal and state departments, but this update could prove even more sweeping. DJI has been bracing for this manner of revelation over the past year and change. The drone maker has spent a lot of time and resources lobbying on Capitol Hill.
There’s been a good deal of speculation around the shape these bans will take after a new president is sworn in on January 20. Surprisingly, DJI was flagged as part of the report’s focus on ‘wide-scale human rights abuse.’ Likely that specifically revolves around issues of ‘high-technology surveillance.’”*
The ERC determined to add the entities AGCU Scientech; China National Scientific Instruments and Materials (CANSIM); DJI; and Kuang-Chi Group for activities contrary to U.S. foreign policy interests. Specifically, these four entities have enabled wide-scale human rights abuses within China through abusive genetic collection and analysis or high-technology surveillance, and/or facilitated the export of items by China that aid repressive regimes around the world, contrary to U.S. foreign policy interests.
Competitor Skydio offered a celebratory response to today’s news:
“Based apparently on DJI’s support for abhorrent human rights violations, today’s addition of DJI to the entity list sends an unmistakable message: DJI does not share our values and cannot be trusted. DJI had already acknowledged its obligation to share sensitive information collected in the U.S. and around the world with the Chinese Communist Party –- a serious security risk. Now we learn that DJI has profited for years by supporting the suppression of the Uighurs in Xinjiang Province–the world’s most egregious example of human rights abuses. Today’s news also sends an unmistakable signal to the marketplace: companies should think twice about doing business with a known violator of human rights.”*
If the company is engaging in the alleged actions, or at least in some of them, it obviously deserves to remain on the list until such actions cease.
There is reason to assume that the incoming Biden Administration is likely to take a hardline approach on human rights in China, and therefore, it is unlikely that they will seek to reverse course.
It is not uncommon for companies to come off the list, as long as they satisfy the department standards and stop engaging in activities that the department believes are contrary to U.S. policies and security.
Although being placed on the Entity List results in a loss of reputation in certain circles, most consumers, however, are not likely to care — as long as they can buy a quality product.
It is the hope of many in the drone industry, that if DJI is engaging in the alleged actions, or at least in some of them, that DJI will turn around and meet the standards of the U.S. Department so that everyone will continue to benefit from their impressive, visionary, technology.