Drones MarketResearch By Partha Chowdhury

partha2ch@gmail.com

March 2016

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Contents

Executive Summary…………………………………………….3Application Areas………………………………………………..4Executive Summary—Market Measurements……………....5-6Key Trends Shaping Drone Market……………………………7Top 3 Growth Drivers……………………………………………8Top 3 Challenges……………………………………………10-12Market Size and Forecast……………………………………..13Decision Support References……………………………...14-15

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Executive SummaryDrones are at the forefront of revolutionizing market across various application areas. The

current consumer base of non-military drone is around 1 million and market size estimated to be 9 Billion USD & 12 Billion USD in 2015 respectively for Military & Non-Military Drones. There are 3 categories of model- Entry Level Hobbyist priced at $300-$500 per kit, next level devices from around $750 per kit, Enterprise models costing from $10000 and up. Drones can be further categorised based upon application– Cargo Delivery System, Surveying, Aerial Photography & Video etc. Some of the crucial factors that influence consumer decision are Speed, battery life, weight of the equipment, direct control distance.

Forecast for global non-military drones market is pegged to grow at CAGR of 11.5% between 2016-2020 and for military drone at CAGR of 5.2%. Drones has seen surges in demand also because of the demand in hobbyist consumer electronics. Other electronic devices are adding to the hysteria of flying drone like increasing use of smartphones and tablets. Consumers have the option to fly drones using smartphones and other smart devices.

2014 2015 2016 2017 2018 2019 2020$0

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Global UAV Market Projection

Non-Military

MilitaryBi

llion

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Application Areas

AERIAL PHOTOGRAPHY & VIDEO MAPPING

SURVEYING

SEARCH AND RESCUE

INSPECTIONSUNMANNED CARGO

SYSTEM

DHL “Paketcopter” for parcel delivery

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Forecast Period Market Growth Rate

11.5% (non-

military)

5.2% (military)(CAGR, 2016-2020)

Market Concentration

70%(% of market share held by

top 3 companies)

Executive Summary—Market Measurements

Market Stage

Growing

Market Revenue

$12 B

(non-military)

(2015)

Market Units/Volume

1,000,000 (non-military

drone)(2015)

Average Price Per Unit

$400(Entry Level)

$10000 (Enterprise)

Market Size for Last Year of Study Period

$12 B (non-miltary)

$9 B (military)(2015)

Base Year Market Growth Rate

3% ( Military)

4.4% (Non-Military) (2014 to

2015 growth)

Total Drone Market, Global, 2015Market Overview

Stable IncreasingDecreasingNote: All figures are rounded. The base year is 2015. Source: Trusted Business Intelligence

Reports.

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Number of Registered Competitors

441

Top 3 Companies

DJI, Parrot, 3D-

Robotics

Number of Major Competitors

3(active market competitors in

base year)

Executive Summary—Market Measurements (continued)

Competitor Overview

Stable IncreasingDecreasing

Current Potential Users*

1 M

* Note: All figures are rounded. The base year is 2015.

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Key Trends Shaping Drone Market

Reduced cost of Development

Increasing Consumer base –

Early Adopters

Regulations coming into effect

Increase in High Altitude, Long

Endurance Drones

Drone is one of the most talked about topic in recent times due to its untapped potential applications. This market is also seeing increase in demand as the modern consumer gets richer technology experience in terms of high-end gadgets. It works with smartphone and tablets, that makes it pro consumer choice technology. Also penetration rate of internet is helping in increasing consumer base of early-adopters. It is very important factor because those people will go on exploring possibilities of drone application, who are open to innovative technologies and falls under early adopter category. Drones have an appeal of remote control devices with high definition photography capability, plus the enjoyment similar to kite flying.

Another factor that is shaping up the drone market is reduced cost of development of drone. Sensors and lenses were used extensively in drones and with advancement of manufacturing technology, these costs are reducing gradually. Also, a smartphone or tablet can be used to control drones removing the cost of controller. Drones uses gyroscope and accelerometer that is already in bulk production because of high demand of smartphones. This is leading to reduction in overall cost of development.

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Top 3 Growth Drivers

Technological Innovation

Rise in demand for Last-mile delivery

Internal & External Security concerns

Drones are very popular video surveillance products and also finding its application in many other areas. Even though drone market is at early stages in its lifecycle, but still it is strongly expected to grow in volumes and application in coming five years. One of the most important factor that will drive this growth in drone market, is technological innovations. Drone development cost is heavily depended on utilized power to increase fly time, modern sensors and associated controlling device cost. Consumer devices are becoming more advanced and at the same time cheaper also. As per research, there are 1860 million smartphone users globally and its further increasing. These devices are helping to boost drone market as associated compatible sensors & controlling devices that the user is well equipped to use in daily life.

Another major factor contributing to the hysteria of drone market is the need for last-mile delivery with minimal human interventions. There are certain cases where in order to improve value chain, e-commerce and other companies are seeking drone concepts to ensure timely delivery of packages, even at places where humans may take more time to reach.

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Top 3 Growth Drivers.. Contd.

Technological Innovation

Rise in demand for Last-mile delivery

Internal & External Security concerns

The concept of getting drones delivered packages is still under scrutiny in many regions due to security concerns. But companies like Amazon, DHL, e-Bay etc. are leaving no stone unturned to explore uses of drone to improve their business potentials. The very concept of last-mile delivery by drone where a person getting his/her ordered package delivered right outside the 10th floor balcony by a drone, is gaining popularity among consumers. Application of drone is also being tested to reduce HIV testing waiting time for infants in Malawi by UNESCO. In a normal process, it takes 11 days for the sample to reach testing laboratory from health centre and another 8 weeks for the results. Application of drone by UNESCO here, will dramatically reduce such waiting time.

Another important factor driving the drone market growth, is the need for increased security at remote areas where human intervention is difficult. Especially in Defense sector drones have been used as a weapon at many times and requirement of expert drone flyer too is increasing.

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Top 3 Challenges

Legal, Privacy issue and Regulatory

Policies

Hardware cost for viable application

Spectrum Allocation and integration in

national airspace

Drone market has strong reason to grow in future, at the same time it is facing some crucial challenges ahead. One of the first being uncertainty in regulations as there are no set norms citing approved manufacturers, specifications, applications etc. Some regions like USA, has come up with certain norms regarding drone (also known as UAS- Unmanned Aircraft System) registration and exemption for commercial uses. In the first such drive in 2015 around 1,81,000 drones got registered in USA under Federal Aviation Administration (FAA) and this number will increase further.

But many regions still lack basic regulations that is keeping drone manufacturers in dilemma regarding specifications and its application. Drone sometimes can infringe public privacy as it tends to hover unrestricted and thus transmitting photographs/videos of its surrounding. There is concern for trespassing and privacy issues which is still under debate in many regions. If these regulations and legality gets proper shape in future then drone market poised to be a game changer for many markets.

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Top 3 Challenges.. Contd.

Legal, Privacy issue and Regulatory

Policies

Hardware cost for viable application

Spectrum Allocation and integration in

national airspace

Drone cost is an important factor for volume growth in many applications. Technological advances helps to reduce cost of associated device but the demand of rigid hardware for certain application is keeping the cost at high. Drone flying over a longer period is considered a challenging task. Any hobbyist can fly a drone, but flying at even 50 km/hr in 3 dimension with just a camera view, is difficult for trained professionals sometimes. Surrounding environments, winds & sudden cloud burst can interfere with the electronics and the drone may lose control. There were several reports of drone crashes. Anti-collision feature in drones add to the hardware cost & weight of the drone. Also, one of the most sought after application of drone, drone delivery, is viable only if the hardware is lightweight enough and at the same time cost of delivery of upto 10 Kms remain between $8 and $12. This cost is unlikely to go down in coming years, and so the hardware cost of such equipment is going to be high.

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Top 3 Challenges.. Contd.

Legal, Privacy issue and Regulatory

Policies

Hardware cost for viable application

Spectrum Allocation and integration in

national airspace

Many regions is not having set norms on how much air space a registered drone should be utilizing to avoid collisions, unwanted uses and avoid interference with present air navigation system. In order to accommodate such system, present air navigation grid need to be revamped and advance technology needs to be implemented. Another important factor is communication between several drones and its controllers will become challenging as wireless spectrum is costly resource.

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Market Size and ForecastThe current user base of non-military

done is around 1 million units and the numbers are farther increasing as favourable norms getting shaped. In 2015 the market size of non-military drone is estimated at $12 Billion USD and forecasted to grow to $22 Billion by 2020 at CAGR 11.5%, between 2016-2020. Similarly military drone market size is estimated at $ 9 Billion USD in 2015 and forecasted to grow to $12 Billion USD by 2020 at CAGR of 5.2%.

2014 2015 2016 2017 2018 2019 2020$0

$5

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$12

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Global UAV Market Projection

Non-Military

Military

Billi

on

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Decision Support References

• http://www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/DHL_TrendReport_UAV.pdf

• “Technology, Media & Telecommunications Predictions 2015”, Deloitte

• http://www.forbes.com/sites/kellyphillipserb/2015/12/15/faa-announces-registration-requirements-new-drone-tax/#112447d652b5

• http://www.roboticstomorrow.com/article/2016/01/top-three-quadcopter-drone-companies-are-from-china/7475

• http://www.unaids.org/en/resources/presscentre/featurestories/2016/march/20160317_malawi_drones

• http://fortune.com/2014/10/08/drone-nation-air-droid/

• http://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/

• http://fortune.com/2016/01/06/federal-drone-registration-system/

• List of Commercial Drone Manufacturers: http://www.uavglobal.com/commercial-uav-manufacturers/

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Decision Support References

• http://marketersmedia.com/marketreportsonline-global-drones-market-2016-trends-opportunities-growth-drivers-competitive-landscape-2020-forecast/106805

• www.faa.gov/uas/

• http://www.aia-aerospace.org/assets/AIA_UAS_Report_small.pdf

• http://www.lucintel.com/lucintelbrief/uavmarketopportunity.pdf

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Thank You