The unmanned aerial vehicle, (UAV) commonly called a drone, is small in size but can be equipped with numerous functional capabilities. UAVs can be used to replace people in performing unpleasant, dull, and dangerous tasks. By improving execution efficiency and reducing risk to operators, they can take advantage of these features to expand the range of market applications.
With the advancement of technology and system integration, UAVs have expanded from military applications to commercial and consumer applications. The United States is the largest drone market, and the Asia-Pacific market has grown rapidly to become the second-largest market. The world drone market will reach 46.7 billion US dollars by 2025, with a compound annual growth rate of 16.1% from 2019 to 2025, of which 70% will be for military use and 30% for civilian use.
The history of UAV:
Unmanned aerial vehicles appeared in 1918 during the First World War. Due to the high technical difficulty, they were not officially put into service, but they started the development of the unmanned aerial vehicle industry. With the advancement of technology and system integration, UAVs have moved from military applications to commercial applications. Application areas have expanded and a variety of consumer-level products have entered daily life. In recent years, many countries around the world have actively invested in the drone market. For example, China, which entered the drone market more than ten years ago, has the largest market share in the U.S. commercial market and accounts for 70% of the global aerial photography market.
UAV market size:
Given the future aviation market prospects, the FAA announced in 2019 a forecast for the development of the aviation industry in the next two decades. The existing market size has exceeded 277,000 commercial drones registered with the FAA in 2018. In addition, there are many American companies in the market. For example, Amazon, Google, Walmart, etc. have introduced drones to deliver goods. According to the growth rate, it is predicted that more than 500,000 commercial drones will be put into use by 2022, and 800,000 by 2023. It is expected that commercial drones will gradually replace low-price competition in the commercial market with the upgrade of performance and application value.
From a global perspective, with the rapid growth rate of the U.S. and Asia-Pacific market, followed by the European and Middle East markets, not only is the drone market growing rapidly, but the growth rate of its application service revenue is also quite astonishing. The global drone market size was valued at USD 16.4 billion in 2018 and is expected to reach USD 46.7 billion by 2025, growing at a CAGR of 16.1% from 2019 to 2025.
The growth of military drones in global defense procurement is one of the largest markets, accounting for approximately 75% of the overall market, and will be an important factor driving the growth of the drone market. The leading industries driving the drone services market include film and multimedia, utilities, energy and infrastructure sectors, and agricultural management. On the whole, the factors driving the growth of the UAV market come from the expanding industrial application cases, the gradually affordable hardware and service prices, high imaging aerial photography and sensing, integration of information and intelligence, and rapid recovery rate of return. UAV avionics equipment will be the fastest-growing segment of the market during the forecast period, covering automation technology to improve path control, satellite navigation, and flight management to reduce the workload of flight control.
Due to the increasing demand for private (including personal entertainment and commercial) and government applications, the overall size of the global drone market has exceeded US$100 billion from 2016 to 2020. Although the military segment accounts for 70% of the market, and military drones are the mainstream of market applications, the commercial drone market is still considerable, and the application of consumer products and civilian/government markets is gradually increasing from 30% of the market size. Most commercial drones use electric propulsion. The application output value of the overall UAV market belongs to the field of observation and measurement with the highest proportion of 37%, express logistics services account for 25%, inspection and other services account for 25%, and the field of surveillance and security accounts for only 13%.
Application Areas of UAV Market:
The main application modes of UAVs are divided into three categories, namely aerial work platforms, aerial communication, and logistics transportation. In terms of technology, the advantage of electric propulsion drones lies in the use of electric motors. Compared with diesel and other engines, it has the characteristics of low pollution and high mobility. At the same time, it can achieve 3D spatial positioning with the new GPS positioning technology. In the future, drones can be dedicated to overcoming the problems of wireless communication, intelligence, human-computer interaction, and charging systems. It will shorten the distance between technology and applications, and expand the potential application value of drones, replacing the general danger, time-consuming and expensive hard work.
As UAV technology becomes more and more mature, its application scope is also becoming wider and wider, from the most familiar personal entertainment or commercial shooting to smart agriculture which has emerged in recent years. Farmland big data can be collected to make fertilization and pesticide spraying more accurate, improving agricultural productivity.
UAVs have the advantages of expanding multiple markets:
UAVs have the advantages of high mobility and ease of operation and have been gradually applied to the fields of engineering inspection and search and rescue. It is hoped that in the future, they can replace personnel detection in search and rescue missions in disaster areas and reduce personnel risks. In addition, the use of drones for traffic flow management is also a popular application area. Drones are dispatched to monitor road conditions of traffic hot spots in real-time. In the past, in congested areas of roads, roadside equipment vehicle detectors and real-time image recording data were used to determine the congestion situation. If drones are used to take pictures of traffic flow, they can monitor traffic from an aerial perspective over a wider tracking area.
AI can be used to conduct in-depth analyses of the collected images, vehicle trajectories, vehicle speeds, etc., to analyze the behavior of drivers in specific situations, helping to avoid traffic accidents, and alleviate road congestion.
UAVs cover a huge industrial value chain:
The industrial value chain covered by drones is quite wide, and the scope of the industrial value chain covered by the production of a drone is almost equivalent to the production of a smartphone. In terms of system and key component requirements, the upstream R&D and manufacturing of simple hardware and software can be divided into the following parts:
- Body structure: The frame body of the drone, including materials and processing
- Power system: It can be divided into fuel drive or electric drive. If an electric drive is used, lithium batteries are currently used. The technology of fuel cells is not yet mature, but market applications have high requirements on the endurance of drones. Therefore, the power technology of the power system will be a future key development direction.
- Flight control system: The core system components for control of the normal flight or hovering of the entire drone, including chips, GPS, gyroscopes, etc.
- Others: Navigation system, image transmission system, communication system (such as an antenna), remote control system, and various auxiliary equipment systems required by different tasks, such as PTZ, light high-resolution camera, etc.
In addition to upstream R&D and manufacturing, the UAV industry value chain also includes sales and service value such as UAV control training, operational service business, and integrated application services. According to the global UAV market trend, the military UAV market is still the largest sales market, but the consumer UAV market is used for personal leisure and entertainment. Benefiting from the reduction of costs due to mature technology, the sales price has been reduced, and the sales volume has continued to rise.
What cannot be ignored is the development potential of commercial drones. Since the COVID-19 epidemic has aroused interest in drones in many industries, many drone companies have begun to cooperate with local governments to carry out sanitation, medical resource supply, and control during the blockade, accelerating the promotion and application of commercial drones to more fields.
The bottleneck for commercial UAVs: Safety still in doubt
In practice, there are still many difficulties that need to be overcome, including regulation, technology, and capital requirements, to successfully promote the use of commercial drones. In logistics applications, because the safety of drone logistics services has been questioned, drone express delivery cannot be popularized as quickly as expected.
Although door-to-door delivery cannot be achieved, logistics providers, who already have a mature land transportation distribution network, can still use drones to deliver packages inside their logistics and sorting centers and then deliver them to customers by trucks. However, from the perspective of the entire logistics chain, the least efficient and most expensive part is the last mile in delivering to the home. From this perspective, it has given non-traditional logistics service providers a big business opportunity. This is also the reason why retailer Amazon is actively investing in automated logistics technology. Eager to take the lead in last mile delivery service through breakthroughs in automated logistics technology, they have received many patents on drone technology.
Security Regulatory Restrictions: Impacting Service Provider Profitability
To realize the business model of drone logistics services, it is ultimately necessary to return to the question of cost-benefit analysis. Safety supervision involves load and flight height restrictions, which directly affect the profitability of service providers.
In the future, to maintain the high-profit margin of drones, developments will focus mainly on the use of drones to provide various services and follow-up maintenance. It is believed that the market sales and application fields of UAVs will continue to expand. Although there are still technical conditions to be broken through, it is believed that the evolution of UAV technology will boost the development of various industries in the future.