China warns of potential disruption to Western supply chains in response to escalating drone conflicts.
The ongoing trade feud between the USA and China is now affecting the ongoing conflict in Ukraine for the first time: Based on reports from the American financial agency Bloomberg, Chinese suppliers of drone components have started reducing their sales to the USA and Europe. There are either quantity limitations or shipments have been entirely halted for motors, batteries, and control modules.
This move seems to be the initial stage of a broader blockade of crucial electronic components from China, which Ukraine requires urgently for its defense. Western officials anticipate this restriction in supply for the coming year. The precise scope of the export restrictions remains uncertain. Potential measures include stringent export licenses or less stringent regulations, such as the necessity for advance notification of planned exports abroad. According to Bloomberg, these measures could be implemented as early as January.
At first glance, the export controls might appear to be another retaliatory move between Washington and Beijing: Prior to China limiting the supply of drone components, the USA had once again restricted the export of high-performance chips to China. However, upon further examination, it seems that Beijing is pursuing a more extensive objective, namely, to align itself with Western sanctions against Russia in the Ukraine conflict for the first time. To restrict Russia's access to microchips, which Moscow relies on for its rockets and cruise missiles, the USA and EU have long targeted Chinese companies that serve as a hub for Moscow's war machine.
In response, China appears to be attempting to limit the West's access to critical components for the drone war in Ukraine. In the worst-case scenario, this could result in a de facto drone embargo. Following the export ban on essential, rare minerals to the USA, this would be another strategic escalation from Beijing and a clear step towards confrontation with the West and open support for Russia in the Ukraine conflict.
Officially, China presents itself as a neutral party. However, there have been doubts about this stance for a long time. NATO has already declared China a covert ally of the Kremlin since July. Reports have emerged since the summer that China is now manufacturing not only parts but also entire combat drones for Russia's attacks on Kyiv in secret factories. Foreign Minister Annalena Baerbock warned her Chinese counterpart about this in early December, stating that this would be "a new dimension".
The largest Chinese drone manufacturer, DJI, which was recently placed on a blacklist of companies suspected of secretly collaborating with the People's Liberation Army, ceased all deliveries to Russia and Ukraine shortly after Moscow's attack. However, officially, China has not been supplying drone components to these regions since autumn 2023. The fact that the People's Republic is now trying to restrict the supply of critical components to Europe and the USA indicates that China is prepared to openly support Russia in the future.
Garage tinkerers for Kyiv's victory
The Ukrainian military may soon face a significant challenge. The mass production of drones is essential for the country's survival. President Volodymyr Zelensky has set a goal to produce one million drones this year alone. Despite the war, Ukraine has significantly expanded its drone production capabilities, with over 200 officially registered drone manufacturers, according to "Foreign Policy". Including volunteer collectives and garage tinkerers committed to Kyiv's victory in their free time, the total number is over 500.
So far, Ukraine has been able to manufacture hundreds of thousands of flying bombs for Kyiv's troops each month. According to Ukrainian Digital Minister Mykhailo Fedorov, the production could even be higher as Ukraine is now self-sufficient in drone assembly. However, components must still be sourced internationally, as he admitted to the "Guardian". "We conduct night bombing raids and spend our days thinking about how to obtain new drones," an officer responsible for supplies told the "New York Times".
This situation is likely to become more challenging in the future: China controls over 90% of the global market for commercial drones, according to industry associations. No other country has specialized in industrial microelectronics production with substantial government subsidies as much as China. This results in a highly concentrated network of factories and suppliers in China.
Replacing the Chinese drone workshop is not an easy task. While other countries, like India, are catching up - for example, Apple plans to manufacture almost a quarter of its iPhones on the subcontinent to reduce dependence on China - realignment takes several years.
The upcoming embargo also presents significant challenges to the drone initiative of Ukraine's supporting countries: Originally, Britain, Latvia, Germany, and other weapons suppliers to Kyiv planned to provide the country with drone supplies through a joint fund. However, if China limits the supply of components soon, they would have little to offer.
Manufacturers in Europe have been working to shift their supply chains away from China for some time. "Buying Chinese drone components is no longer acceptable in the West," Bloomberg quoted a British founder of multiple drone companies. "China's export restrictions are just part of a process that was already underway." In the long run, China's embargo could potentially become a boomerang for its own industry, boosting drone production in the USA, Europe, Korea, or Japan. However, this would likely require the political realization that drones have become strategic goods, along with appropriate government subsidies.
Similarly to the EU and USA dealing with evading their microchip sanctions against Russia through third parties, China encounters a comparable challenge with its drone embargo. Over the long term, this issue can be resolved through financial means. The West should brace itself for drones becoming more costly. This could be achieved by establishing a homegrown industry on a scale comparable to China, or by being compelled to procure essential components from China via extended or camouflaged supply chains, a strategy Russia has been employing with microchips for a while now.
In light of the export controls, Ukraine might struggle to source critical drone components from China, which could impact its drone production significantly. The ongoing embargo could potentially drive drone production towards countries like the USA, Europe, Korea, or Japan, leading to increased costs for Ukraine and other affected nations.
