Highlights

• The FCC has banned all foreign-made drones and components from U.S. markets citing national security risks, effectively blocking Chinese manufacturers like DJI, which controls 90% of global consumer drones, unless explicitly exempted.
• U.S. drone makers must now source motors, batteries, cameras, and NdFeB magnets from vetted domestic or allied suppliers—final assembly in America is no longer sufficient to meet new requirements.
• China may retaliate by restricting rare-earth exports critical for drone magnets.
• U.S. firms like ePropelled and Unusual Machines are racing to build sovereign manufacturing capacity in a bifurcating global supply chain.

---

The Federal Communications Commission (opens in a new tab) (FCC) has closed the gate on Chinese drones – adding all foreign-made unmanned aircraft systems (UAS) and components to its “Covered List” of banned equipment as reported by Rare Earth Exchanges™ (REEx). Citing “unacceptable” national security risks, the FCC now bars new Chinese and other foreign drone models from U.S. sale or import unless explicitly exempted by the Department of War or Homeland Security. Existing U.S.-approved drones can still be used, but future models must have fully trusted supply chains.

In practice, this means motors, batteries, cameras, communications modules, and other subsystems must be sourced from vetted U.S. or allied suppliers – final assembly in the U.S. alone is no longer sufficient.

The ban’s scope is sweeping

It effectively cuts off the world’s largest drone firms, especially China’s DJI, from the U.S. market. Western analysts note that DJI and other Chinese companies produce roughly 90% of U.S. commercial drones (and about 77–85% of consumer hobby drones). China’s domestic market ($9.72 B in 2024) is much smaller than America’s ($25.07 B in 2024), but Chinese firms dominate globally per Grand View Research (opens in a new tab). For example, DJI alone holds 90% of the global consumer drone market. In contrast, Europe’s drone market was only ~$4.5 B in 2024. Grand View Research finds North America commands nearly 40% of the world market in 2024, with the U.S. accounting for about 34%. Under those same forecasts, the global drone industry will triple to $160–164 B by 2030, as REEx has reported previously. , driven by AI, advanced sensors, and battery improvements.

• Global vs. U.S. market (2024): World ~$73 B; U.S.
• $25 B (34%);
• China $9.7 B (13%)
• Europe $4.5 B (6%).
• China’s dominance: Chinese OEMs (DJI, Autel, Yuneec) and ODMs built ~90% of U.S. commercial drones. Chinese factories also supply the vast majority of drone parts (e.g., motors and controllers). One data analysis shows 77% of U.S. drone import shipments come from China. In short, the U.S. has been highly reliant on Chinese technology for its civilian and even critical infrastructure drones.

The FCC ruling – based on a White House security review – means going forward, all foreign-made UAS and subsystems are presumed suspect. The FCC’s fact sheet (Dec. 2025) explicitly states that new foreign-produced UAS and critical components “pose unacceptable risks to national security” and will be added to the Covered List. Chairman Carr framed this as “restoring our airspace sovereignty” and “unleashing American drone dominance,” signaling a blunt policy shift. In practice, new drones with any Chinese-made motors, chips, cameras, or comms will be blocked from U.S. markets unless an exemption is granted. The rare-earth community likens this to past telecom bans (e.g., Huawei) – a category-wide exclusion rather than a case-by-case approach per REEx.

Impact on OEMs and Tier‑1 Suppliers: U.S. and allied drone makers must “rescale from prototypes to production-ready, sovereign capability”. Tier-1 suppliers of propulsion, sensors, and control systems face abrupt shifts. For example, motors and electronic speed controllers – once commodity parts sourced on cost – are now strategic.

Finally, as REEx has cited, assembly in the U.S. no longer “solves” a Chinese motor or magnet hidden inside. Leading American startups are racing to fill the gap. Seattle-based ePropelled (opens in a new tab) (cited by the FCC) and Florida’s Unusual Machines (opens in a new tab) are building domestic high-efficiency drone motors and power systems. Unusual Machines recently acquired (opens in a new tab) Australia’s Rotor Lab to cement a U.S. supply chain and will open its own motor factory in Orlando.

Tier-1 sensor and camera suppliers (e.g. Teledyne (opens in a new tab) FLIR (opens in a new tab), Sony, Omnivision (opens in a new tab)) may see new demand if regulators demand non-Chinese optics and comm modules. Drone autopilot and radio modules will also be scrutinized: Qualcomm and other Western chipmakers now have a business opportunity to replace banned Chinese electronics.

Supply‐Chain Reconfiguration

Every link from OEMs down to raw materials is under review. Many U.S. drone companies previously “assembled” their platforms domestically using off-the-shelf Chinese components. That assembly-in-USA shortcut is closing.

Contractors now must trace parts back through Tier‑1 (motors, flight controllers, radios) to Tier‑2 (magnets, microchips, batteries). For example, virtually all current drone motors use neodymium-iron-boron (NdFeB) permanent magnets – and as the REEx community knows well, China dominates NdFeB magnet manufacturing. The FCC’s policy forces motors to use “traceable and allied” magnet suppliers.

U.S. firms like Arnold Magnetic Technologies (opens in a new tab), Permag (opens in a new tab), Noveon Magnetics (opens in a new tab), Vacuumschmelze (opens in a new tab), and Neo Performance Materials(Canada) may be working to scale up NdFeB production to meet the expected drone demand. Battery cells and power electronics (another choke point) largely come from Asia too, so companies like Panasonic (Japan) and Samsung SDI (Korea) may see interest in using U.S. or allied manufacturing for drone-grade Li-ion cells.

Chinese companies are already eyeing the fallout. As REEx reported, Beijing protested the FCC move as “discriminatory economic containment,” accusing Washington of over-generalizing security and demanding a “fair, non-discriminatory” environment. The ban is pushing China to reorient: Chinese officials talk about supply-chain hardening and selling drones to non-U.S. markets. More critically, China now has a motive to leverage its rare-earth and critical minerals exports.

Rare Earth Exchanges reports chatter that China may throttle rare-earth carbonates – essential precursors for NdFeB magnets – sending prices sharply higher. In 2025 alone, Chinese export curbs sent yttrium prices skyrocketing 4,400% in Europe; a repeat of NdFeB ingredients would pressure Western drone manufacturers relying on magnets. In short, drone sovereignty without materials sovereignty is incomplete, as we cited.

Severity of the Ban

The FCC action is far-reaching. Unlike a simple tariff or executive order targeting one company, this is a categorical block – “all foreign-made drones and their critical components” are on the blacklist. In effect, new DJI, Autel, or Yuneec models (and even foreign-sourced parts) cannot receive FCC equipment authorization, a legal requirement to sell radio-equipped devices in the U.S. This means U.S. retailers and agencies will lose access to the lowest-cost, high-volume drones unless exemptions are granted. The authority comes from Congress’s national-defense powers: the FCC updated its Covered List based on a White House national-security determination (per the FY2025 NDAA) that foreign UAS are “unacceptable” risks.

Conclusion

The U.S. ban forces a painful but strategic pivot. It hands an opening to American OEMs and suppliers – those “architected for this environment” like ePropelled or Aurora Flight Sciences – to gain market share. However, it also raises costs and prompts retaliation. Supply chains will bifurcate: Western drones will become more expensive and vertically integrated (with traceable rare-earth magnets and chips), while China will accelerate self-sufficiency (and possibly weaponize mineral exports) as we have reported. This could cause more severe problems.

As Rare Earth Exchanges warns, this is not just a drone story but part of a broader decoupling in technology and critical materials. In the near term, expect U.S. military and industrial drone programs to scramble their parts lists and certify new Tier-1 suppliers. In the long term, the drone supply chain – from OEMs through motors and magnets down to ore – will be rewired for onshore and allied production or risk being locked out of America’s airspace altogether.

© 2025 Rare Earth Exchanges™ – Accelerating Transparency, Accuracy, and Insight Across the Rare Earth & Critical Minerals Supply Chain.