Just a few weeks ago, Israel initiated its war against Iran by launching a drone attack to take out Iranian air defenses, carving out a corridor for the IAF’s F-35s to enter the battlefield to devastating effect, killing over a dozen senior commanders (including the military’s chief of staff) in the initial days of the war. Critically, the attack was deployed from an Israeli drone base developed and operating deep within Iranian territory – a first in military history. That same month, Ukraine launched Operation Spider Web, smuggling first person view (FPV) drones into Russian territory inside false roofs of portable containers. The drones, the kinds that hobbyists race on weekends, were remotely activated and used to attack Russian air force bases, badly damaging high-value Russian military planes, destroying some.

Clearly, drone warfare is no longer in the realm of the theoretical. But over the past two decades, the gap between the US and China in virtually every aspect of drone warfare has widened to an alarming degree. It’s not just that China has launched into the stratosphere of drone development, but that the US is sinking further into a quagmire of inaction, underinvestment and complacency.

What makes the situation dire is that the vulnerability is systemic — a failure matrix consisting of manufacturing incapacity, outdated laws and regulations, decades of underinvestment, a complacent military culture, and the extreme difficulty of defending against drones in even the best of circumstances. Even today, with the drone threat looming, the US has barely scratched the surface on solving any one of these challenges, let alone all of them.

China’s current drone production capacity stands at around 500,000 units per month, with the ability to ramp up in time of war. US capacity is, at most, one-tenth of that. While tourists can order drone-delivered takeout to the Great Wall of China, in the US not even the world’s most powerful companies have been able to scale stratospheric regulatory hurdles. As a result, America’s drone industry is little more than a Chinese drone wrapper. The vast majority (read: all) of America’s 10,000-strong agricultural drone fleet are Chinese made. The drones operated by U.S. law enforcement, including 823 out of 879 drones registered to Texas police agencies, come from China. Even the trickle of drones produced in the US are, in many ways, Chinese: their core parts — form factor, electric motors, chips, gimbals, batteries, sensors, cameras — all, to varying degrees, bear the same stamp of dominance: Made in China.

On drone defense, the situation is just as bad, and maybe worse. Over the past 15 years, China has built 3,000 aircraft shelters, including hundreds of hardened shelters, to protect their planes against drone attacks like the one suffered by Russia last month, when a number of its bombers were destroyed by drones smuggled into the country. The US, by comparison, has added just two hardened shelters and 41 soft shelters across the entire Indo-Pacific region outside South Korea.

This is to say nothing of civilian drone defense, which isn’t just sub-par but non-existent. Consider what a few well-placed drone attacks could do to America’s brittle, overworked electrical grids. With coordinated attacks against sub-stations, entire regions could be shut down: hospitals, supermarkets, industrial centers, gas stations, police precincts, even military bases, would go dark. Imagine drone-borne mortar attacks against packed mega-stadiums, dirty bombs striking three or four strategic sites in tandem, and swarms of first-person view (FPV) units carrying out targeted assassinations on government officials. Now picture all these events unfolding together, the opening, chaos-inducing phase of a broader strategic attack.

There were over 12,000 drone incursions (known technically as temporary flight restriction violations) — that we know of — at US events and venues last year, an 8 percent increase over 2023. US military bases saw 350 drone incursions — and, as Pirate Wires reported, China is buying up farmland surrounding bases at an alarming rate. In one case, a Chinese national was caught flying a camera-equipped drone over Vandenberg Air Force Base. The operator was charged, convicted, and deported to China. Military bases like Vandenberg are particularly vulnerable, not just because they lack the technology to defend against drones, but also because they’re often legally prevented from doing so. Only about half of US bases meet the criteria of “covered installations” which have the authority under American law to shoot down unmanned aircraft, which means 50 percent of military bases in the US are legally prohibited from shooting down drones.

Nearly all law enforcement agencies are legally prohibited from shooting down drones without prior FAA approval. Earlier this year, the NYPD requested authorization to be able to shoot down or otherwise disable drones if they seem hostile, a request that has not since been granted. Only select federal agencies, including DHS and FBI, can take down drones, but only if the risk they pose meets a certain threshold, such as occurring at national security events, like major sports events, political rallies, or international conferences.

“We’re vulnerable everywhere,” says Ian Laffey, CEO and co-founder of San Francisco-based startup Theseus, which equips drones with non-GPS-based geolocation capabilities. “If you can get a boat close enough [to the US], these things will fly hundreds of kilometers. That would be very scary,” Laffey says. While America’s bicoastal oceans have traditionally been a buffer between it and its enemies, drones can exploit that strength as a vulnerability. Nation-states, cartels, and terror groups now have access to the kinds of drones that can be launched from a bordering territory, like Mexico, a difficult to defend border, or even within US territory.

“Look at the US [military capabilities] against our adversaries,” says Jason Lu, founder and CEO of Flyby Robotics, a startup that makes drones equipped with advanced GPU compute, large payloads, and state of the art cameras. “We don’t have as many ships as the Chinese. We don’t have as many land forces as the Chinese. But we have superiority in our air force. What Operation Spider Web has shown is that really advanced planes are really powerful assets but when they’re on the ground they’re extremely vulnerable.”

A significant part of the problem is that the American military is living in an outmoded paradigm. In this paradigm, aerial defense has been fully solved by technologies that can intercept incoming attacks at every level, from small rockets to ICBMs. But, where the US installations are concerned, these are weapons that get launched from dozens, hundreds, or even thousands of miles away. The interceptor systems were designed with these threats in mind.

None of this applies to $500 drones that can fit into your hand luggage and are launched a few miles away from their targets. These drones have turned US territory into the new undefended hinterlands of aerial defense. And while US law enforcement would likely uncover workshops producing the explosives drones need to become weaponized, that’s not the case for a drone manufacturing factory located in Haiti, Mexico, or Cuba, locations that make transports to the US via a small fishing boat or cartel submarine a reality.

“We spent a very long time and a lot of money over the past couple decades preparing to fight near-peer adversaries that have tanks, planes and ships,” says Michael LaFramboise, co-founder and CEO of Aurelius, a San Francisco-based startup developing directed-energy solutions to face drone threats. “We now have massive divergence in what the optimized military technology is out there, where instead of large planes you’re fighting many distributed systems.” In many ways, says LaFramboise, drones have developed so rapidly that they’ve outstripped defense technologies. The options for defense are few. Some, like directed energy (i.e. lasers) are still being developed. Others, like gun turrets, are expensive to build and install.

The American drone crisis has its roots in two intertwined forces: US under-investment and Chinese over-investment. Over the past two decades, software, especially SaaS B2B, dominated venture investing in the US, leaving precious few resources for hardware developers. Where an innovative software startup could realistically reach $100 million in annual recurring revenue in a year, it’s not uncommon for hardware development to require millions of dollars and years of work just to build a workable prototype. Amplifying this effect, until very recently defense tech was considered by most of the VC world to be politically toxic, a vice industry akin to porn and gambling, much more risky and vastly less profitable. While the shift towards defense tech, spurred largely by the two companies that have shaped the landscape, Palantir and Anduril, seems now like a foregone conclusion, as recently as two years ago, defense was widely considered “un-investable,” says LaFramboise.

As a result, the drone industry that does exist in the US is not only embryonic by Chinese standards, but extremely vulnerable. The number of companies working in the space is astonishingly small, making it relatively easy for an adversary to kill off the entire ecosystem — in more than one sense of the word.

“The companies involved in the US drone industrial chain can be counted on your hands,” says Jason Lu. “There are two good flight controller producers, one or two good ground station producers, one or two good GPS producers. I know all the CEOs making good hardware in the US personally. Most of them are in the same group chat. We could be decapitated easily,” Lu says, adding a nervous laugh.

China (to say the least) did not make this mistake. With its top down, government-led venture ecosystem, it did the very opposite. In most, if not all, cases, a compelling market need drives innovation progress. In this context, only two countries in the world have an immediate need for attritable drones (i.e. units made so cheaply they are designed to be lost in combat): Russia and Ukraine. And that need only arose in 2022, when the war began.

China, which is not engaged in a long-term ground war, never had this need. So it solved the demand problem related to drone development by addressing the supply side. Recognizing early on that drones would be a decisive factor not just on the battlefield but in the world of commerce, the Chinese paved the way for a massive glut of supply, which then fired demand. Much of this had to do with clearing away regulatory debris that would hinder drone development.

China took a “scale first, regulate later” approach that allowed the country to quickly develop their drone industry, then built regulation around a real-world scenario. By 2013, the Civil Aviation Administration of China (CAAC) allowed unlicensed flight of drones under 7 kg, with practically no national oversight or operator licensing. Tighter and more specific controls (like real-name pilot IDs), only came later, culminating with a regulatory framework implemented by the CAAC in 2023. Until then, most of the regulation involving drone development and operation was limited to registering drones to their operators, so the state could track them. Local governments created innovation zones for companies like DJI to develop their products.

Beyond visual line of sight (BVLOS) flights (flights where the drone is operated beyond the pilot’s ability to see it directly) were almost entirely unrestricted, making drone usage in agriculture, infrastructure inspection, and logistics a reality. Autonomous drone systems were also virtually unregulated, with no national restrictions in place and only light regulations gradually eased in between 2015 and 2018.

With a clear regulatory horizon, companies could innovate cheaply by using the kind of trailing-edge technology bountiful in China — outdated chips, efficient motors, cheap form factors, and mass-produced batteries — to make lots and lots of drones. With this glut of supply, and almost non-existent regulation stopping novel use cases, demand was a matter of finding where imagination and economics intersected. Tackling this, the country developed an entirely new economic sector, the “low-altitude economy,” to leverage the power of drones into growth.

What emerged was a special economic zone that exists between 100 and 2,000 feet altitude across the entire country. This includes China’s 250,000 agricultural spraying drones in use (compared with 10,000 in the US), as well as fleets of drones used to inspect buildings, monitor roads, facilitate delivery, perform fire and police patrols, and conduct geological surveys. The layer of fallow airspace between the ground and the high sky suddenly became economically fertile.

But, as is often the case with China, there was also a trade strategy behind the progress. With its approach to drone manufacturing inherently reliant on commodification, China had to find a moat to preserve its edge. It found one in commodification itself.

“China has an industrial policy of flooding the [drone] market and basically just killing everyone on policy and price,” says Lu. “And that’s been a deliberate Chinese industrial policy, to deprive the West of any drone development.”

The US took the opposite approach, implanting a massively complex drone regulation framework on an industry that did not yet exist (and still doesn’t). In 2012, Congress passed the FAA Modernization and Reform Act, which required the FAA to integrate drones into national airspace, a mandate the agency complied with only in the most reductive sense. Under the new regulations, commercial drone operation was essentially illegal, barring an exception from the FAA, which basically no one got. In 2014, drone operators could apply for an exemption to a provision of the regulations called Section 333 that would allow them to operate commercial drones. But the application took months to process, required the operator to have a pilot’s license, and also required a separate Certificate of Waiver of Authorization (COA).

In 2016, Section 333 was made obsolete for small drones under 55 pounds by a new regulation called Part 107, which arguably made the situation worse. Under Part 107, you could operate a commercial drone but only within your visual line of sight, during the daytime, and without flying over people or cars — a considerable feat in most parts of the country. The rule prohibited drone flight exceeding 100 mph and 400 feet of altitude. Unless operators secured waivers, autonomous line-of-sight mapping (to build 3D maps of a region), drone delivery, and long-distance infrastructure — all the things China became adroit at doing — were banned.

In 2018, the FAA added another layer of regulation with a new rule called Section 44807, which granted exceptions to drones over 55 pounds but only on a case-by-case basis, with each applicant detailing their specific aircraft, mission, and safety mitigations for approval. Again, BVLOS operations were prohibited by default, as were night flights and flights over people. In some cases, operators needed a private pilot license. Applications, which took months, were rarely approved.

The combination of restrictions across the various regulations — namely, no BVLOS, night flight, flight over people, or autonomous flight — made the commercialization of drones a practical impossibility. And this may have been their aim. When Jeff Bezos promised Amazon drone delivery in 2013 (and again in 2016, and 2022), the confidence in his predictions stemmed from a technological horizon that was startlingly near. It was clear to most in the industry that closing the technology gap would take a few years at most, a notion borne out by China’s ability to master drones in that timeframe. What neither Bezos nor the rest of the industry could foresee is the extent to which the maze of bureaucracy would hobble not just drone delivery, but miscarry an entire industry.

It’s an astonishing thing to witness the rise of a commercial technology advancing so quickly that it’s able to outstrip military defense against it while regulatory progress remains in a two-decade deep freeze. For the moment, the effects of the government’s white-knuckle legislative grip on drones are still difficult to see, as they exist in the form of unrealized benefits and lost competition. But it’s possible, if not likely, that the consequence of wrapping the future in red tape will explode into all of our lives, right when we’re least prepared for it.

The end of history has, itself, ended. And the world is marching closer to war. It’s now evident that technology is going to be not simply a part of war, but its essence. Whether it’s possible, at this late stage, for the US to address the drone crisis in a way that closes the gap with our greatest global adversary remains to be seen.

—Ashley Rindsberg