I try not to get drawn into debates about whether Chinese companies can innovate. It’s a ridiculous question and invites nasty stereotypes. Plus, if I hear one more genius invoke the iPad to justify his claim of American tech superiority I think my head will explode.
You probably know the argument I mean. It goes: Sure, the iPad is manufactured in China but that doesn’t matter because Americans design such awesome devices and brilliant operating systems that they add most of the value and capture most of the profit. (You’ll find data to support the Apple “value-added” argument here and here.)
I don’t deny Apple’s success. But it doesn’t prove Chinese companies can’t innovate, or that there aren’t a lot of advantages to being heavily involved in both the design and manufacture of your products. Consider the case of another increasingly popular electronic gadget: consumer drones. In that category, the global leader isn’t from Silicon Valley or any other Western economy. It’s a Shenzhen-based company called Da-Jiang Innovations Science and Technology Co. (DJI).
DJI claims 70% of the world’s market for drones. Sales surged 60% to $1.4 billion in 2016. DJI’s financial backers include Accel Partners, and its latest funding-round gives the little known firm a valuation of $10 billion.
This week DJI bolstered its already formidable lead in consumer drones by introducing Spark, a new model mini-drone that is as small as a soda can, can be controlled by hand gestures, and costs less than $500.
As recently as two years ago, there were half a dozen companies competing to produce drones in a price and performance format that would appeal to mainstream consumers. Among them: Parrot, a 22 year-old French electronics manufacturer; Lily Robotics, a San Francisco-based drone startup; and GoPro, the popular maker of portable action cameras.
Parrot surrendered in January, announcing it would eliminate two-thirds of the positions in its drone division. Lily, founded in 2013, released a dazzling video in mid-2015 touting a camera drone that would follow you around and could be launched simply by tossing it into the air. The video attracted millions of viewers, raised $15 million in funding, and sold more than $34 million in pre-orders. But the company ran into production difficulties and burned through all its cash. In January 2017, Lily shut down without shipping a single unit.
GoPro had a well-known brand and a solid following among outdoor adventurers. In 2015, GoPro executives announced plans to release an small, affordable drone called the Karma by spring of 2016. But the release had to be pushed back until November and then, only days before launch, delayed again because malfunctions caused the Karma drones to lose power and fall from the sky. Karma was eventually released in February.
DJI was founded in 2006 by Frank Wang, a Hangzhou native studying engineering at Hong Kong University of Science and Technology. Its first product, the Phantom quadcopter released in 2013, was for enthusiasts and professional photographers. Late last year, the company launched a smaller, more portable consumer drone called the Mavic Pro that was priced under $1000 and delivered on features rivals had only promised. The Mavic Pro can fly for about 30 minutes on a single battery charge and has a range of 7 kilometers. It offers a 4K video and yet is is small enough to fold up and put in a book bag. The best thing about the Mavic is its unique software that enables it to detect obstacles mid-air and avoid crashes, and automatically return to “base” if runs low on power. The product drew rave reviews from customers.
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DJI executives cite their location with the manufacturing ecosystem of southern China’s Pearl River delta as critical to their success. The company has its own manufacturing facilities. Engineers can test prototypes in neighboring facilities, speeding product development. DJI can recruit from a large pool of engineering talent. They can’t imagine trying to manage all that from a research park half a world away.
Spark, the new mini-drone, is a classic example of Chinese innovation. It has a range of only 2-kilometers and can stay aloft for just 16 minutes. But it offers many of the same software features as the Mavic, and can be controlled by hand gestures, a big plus for beginners. (Read TIME’s Spark review here.) Spark’s rollout prompted analysts at the Motley Fool to declare: “GroPro’s Karma is Now Dead in the Water.”
Smug assumptions about China’s “inability” to innovate deserve a similar fate.