DJI is a more elusive U.S. target than Huawei

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WASHINGTON, Dec 16 (Reuters Breakingviews) - DJI Technology will be harder to ground than telecommunications firm Huawei Technologies. The U.S. government is squeezing the Chinese drone maker by banning American investment in the company. But unlike Huawei, DJI products are widely used in the United States, including by local police. And Western rivals are tiny, making any further crackdowns challenging.

The mounting Washington restrictions that hit Huawei are now coming for DJI. On Thursday, the U.S. Treasury Department said Americans can’t trade public securities in the drone maker and seven other Chinese technology firms because of their alleged involvement in surveillance of Uyghur Muslims in the People’s Republic.

It’s largely a symbolic move since DJI is privately held but it mimics the growing limitations that ended up effectively banning the Chinese telecom firm in the United States. Last year, the Commerce Department barred U.S. companies from exporting products to DJI, which has been deemed a national security threat by the Defense Department and some U.S. lawmakers.

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It was relatively easy to make Huawei disappear. Though it was once the world’s largest smartphone maker, it had a tiny market share in the United States, where its telecommunications equipment was used by a few dozen rural carriers.

DJI is a different story. More than 900 U.S. public safety agencies use its products, including police departments in New York City and the Boston area. The National Park Service has also used DJI drones to fight recent wildfires in California. It also had a near-80% market share in consumer drones last year in the United States, according to Drone Industry Insights.

Washington’s restrictions have taken their toll. DJI’s share of the global commercial drone market dropped 15 percentage points this year to 54%, according to DroneAnalyst. But the company that benefited the most was another Chinese firm, Autel Robotics, which grew to a 7% share. American company Skydio and French firm Parrot Group each have 3%.

The U.S. government has additional tools to curb DJI. For example, the president could invoke emergency powers to try to ban its products. But enforcing such a drastic measure is unrealistic given its popularity. If it is a security threat, more manageable rules could restrict data storage and limit online connections. Tougher efforts to keep DJI from flying will fall flat.

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CONTEXT NEWS

- The U.S. Treasury Department on Dec. 16 banned Americans from investing in eight Chinese companies, including drone maker DJI Technology. The move is related to their alleged involvement in surveillance of the Uyghur Muslim minority in China’s Xinjiang province.

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Editing by Robyn Mak and Katrina Hamlin

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