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PAGE 3 PAGE 3 KEY DRIVERS OF GROWTH ACCELERATION IN THE COMMERCIAL DRONE MARKET / TREND PAPER Key Drivers of Growth Acceleration in the Commercial Drone Market Commercial Drone Market Trends Driving Accelerated Growth In February 2020, Business Insider estimated that commercial drone shipments will reach 805,000 in 2021, with infrastructure and agriculture predicted to gain the most value from drones over time. ii From a regional perspective, Asia is the largest drone market today, driven by China and Japan with significant growth in India as well. As the commercial market develops, it will mostly be based on inexpensive prosumer and mini UAVs and will be much more price sensitive than the governmental market. Even local law enforcement agencies will be buying mainly prosumer and inexpensive mini UAV systems rather than much costlier and larger UAVs. Also, there will be a considerable crossover between the consumer and the commercial unmanned aerial systems (UAS) markets, such as in real estate where some consumer drones are used for low-end commercial tasks. Consumer drone manufacturers are also creating more capable, complex systems able to take on more demanding commercial work, such as aerial filmmaking and field surveillance due to improvements in connectivity, picture quality, image stabilization and battery life as well as live-viewing video capability. However, consumer systems are predicted to reach their saturation point in the United States and Europe by 2024. Below are the key drivers of growth in the commercial drone market today. Impact of COVID-19 With businesses and people worldwide working remotely and social distancing due to the COVID-19 pandemic, the importance, convenience and efficiency of drone use is coming to the forefront, revealing drone applications that may be here to stay. Government agencies have also responded, such as in the U.S. where the Federal Aviation Administration (FAA) has expedited the approval process for services that help people, workers and communities stay safe and maintain social distance. The ability to promote social distancing and deliver much-needed medical items in a crisis is generating a more positive view of drones by these agencies and the general public, as well as helping accelerate the development and adoption of commercial applications, an extremely important boost for the industry. Drones are being used to help limit contact between people (e.g. deliveries), disinfect facilities, deliver blood/medicine, and make deliveries to remote islands or areas without adequate infrastructure. Many companies are experimenting with drones for food deliveries, packages and urgently needed medical supplies. Delivery companies and pharmacies have been using drones to carry prescriptions to a retirement community in central Florida. A golf course in North Dakota is using drones to deliver snacks to golfers out on the course. In China, DJI Innovations used its UAS to spray disinfectant over three million square meters in Shenzhen and is working to aid 1,000 counties to adopt unmanned spraying to combat the disease. In Ghana, Zipline is using its drones to deliver COVID-19 test samples. The pandemic has also driven demand in the energy segment, especially around inspecting renewables. According to FORTUNE magazine, as of July 2020, about 60,000 developers were working on drone applications with one of the largest drone manufacturers globally. iii These applications include pipeline inspections, 3D mapping, as well as applications related to critical infrastructure and first responders. An attached speaker became a popular drone feature to limit personal interaction between police and other authorities and crowds, with drones flying over beaches, parks, cities and neighborhoods to monitor social distancing and ask people to move when crowds needed to be thinned out. DroneDeploy, a drone software startup in San Francisco, said the number of agriculture flights tripled in the first three months of the pandemic in the U.S., and flights by companies involved in the construction industry were up 70% iv . Most companies have been seeing increases in demand for the same kinds of general applications they were already offering, with services often expanding into more industries. Investments from Venture Capitalists & Major Technology Companies A total of US$2.6 billion in investments by venture capitalists were identified from 2012 to 2019 across the consumer and commercial drone markets. v The large, unified U.S. market, strong U.S. venture capital market and improving FAA rules combined to favor the flood of venture funding. As drone trends and market demand have become clearer, venture capital funding has been targeted toward fewer companies focused on areas such as drone delivery, security, and mining. Increasingly, this funding is shifting from hardware to software and services that will make existing drones more useful. Intel and Qualcomm made numerous investments in drone companies through their venture capital arms, with Intel also Drones delivering medical supplies.