Highlights

• Powerus, a U.S. drone company backed by Eric Trump and Donald Trump Jr., plans to merge publicly and pursue Pentagon contracts by incorporating Ukrainian battlefield technology and filling gaps from Chinese drone restrictions.
• Despite domestic assembly, modern drones depend on neodymium-iron-boron permanent magnets and heavy rare earths like dysprosium and terbium—materials overwhelmingly refined and manufactured in China.
• The drone manufacturing boom directly drives upstream demand for rare earth magnets and processing capacity, creating strategic vulnerabilities and investment opportunities in critical mineral supply chains.

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A new U.S. drone company called Powerus (opens in a new tab), reportedly backed by Eric Trump and Donald Trump Jr., plans to merge with a publicly traded entity and pursue Pentagon contracts. According to The Wall Street Journal, the company aims to incorporate Ukrainian battlefield drone technology while filling a growing gap created by U.S. restrictions on new Chinese-made drones.

In plain terms, the story describes a defense startup racing to capitalize on two converging forces: the rapid expansion of drone warfare and Washington’s push to replace Chinese hardware in sensitive military systems.

The narrative is compelling and politically charged. Yet beneath the airframes, sensors, and software sits a quieter industrial reality: as Rare Earth Exchanges™ has reported, modern drones depend heavily on rare earth permanent magnets and the supply chains that produce them.

The Tiny Materials Powering the Drone Revolution

Nearly every modern drone relies on compact, high-efficiency electric motors. These motors typically use neodymium-iron-boron (NdFeB) permanent magnets, the most powerful commercial magnets currently available.

For higher-performance motors—particularly those operating at elevated temperatures—manufacturers often incorporate small amounts of dysprosium or terbium, heavy rare earth elements that improve magnetic stability and heat resistance.

These materials are physically tiny but strategically essential. Without high-performance magnets, drone motors become heavier, less efficient, and less capable—reducing flight time, payload capacity, and maneuverability.

Today, China dominates much of this supply chain. From manufacture of a substantial portion of the drone market,  the country controls a large share of global rare earth refining and the overwhelming majority of magnet manufacturing capacity. As a result, even products assembled in the United States frequently rely on magnets produced within Chinese-controlled processing networks. This industrial layer rarely appears in mainstream reporting about defense startups.

Where the Reporting Stands on Solid Ground

Several aspects of the recent WSJ report (opens in a new tab) align with broader defense and technology trends.

First, the global demand for military drones has expanded dramatically. The war in Ukraine has accelerated adoption across NATO countries, pushing defense planners to scale production rapidly.

Second, U.S. policymakers have grown increasingly cautious about Chinese drone suppliers. Security concerns surrounding foreign-made systems—especially those produced by companies such as DJI—have driven government agencies to encourage domestic alternatives.

Third, Ukrainian battlefield innovation is real. The country has rapidly iterated drone designs under wartime conditions, making its technology ecosystem a valuable source of practical military innovation.

In these respects, the article captures genuine shifts in the defense technology landscape.

The Supply Chain Question the Article Never Asks

Where the story becomes incomplete is at the material layer.

Launching a drone company is increasingly achievable. Building a fully independent supply chain for the critical materials inside those drones is far more difficult.

Even many Western defense programs still depend on rare earth magnets produced through Chinese refining and magnet manufacturing capacity. Heavy rare earth elements—particularly dysprosium and terbium—remain especially difficult to source outside China.

Unless companies like Powerus secure magnet supply chains that are independent of Chinese processing, their systems could remain indirectly tied to the very ecosystem Washington is attempting to reduce.

Put differently: the drone may be American, but the magnet inside it may not be.

Why Rare Earth Investors Should Watch the Drone Boom

For Rare Earth Exchanges readers, the deeper takeaway is straightforward.

The expansion of military and commercial drone manufacturing is also an expansion of permanent magnet demand.

Every increase in drone production drives additional demand upstream into rare-earth separation, refining, alloy production, and magnet manufacturing—the segments of the supply chain where China still maintains dominant capacity. Until those bottlenecks change, rare earth materials remain one of the quiet strategic foundations of the drone economy. Defense innovation may move quickly. Supply chains move far more slowly.

For investors, policymakers, and industry observers alike, the drone revolution is not just about airframes and software—it is also about magnets, metallurgy, and the global race to control critical mineral supply chains.