Are these drones too Chinese to pass US scrutiny in an anti-China moment?

A one-man startup believes it has an answer to the US government's concerns about Chinese-made drones dominating commercial sales in the American market.

The CEO and founding partners of Anzu Robotics are all Americans, and the company is headquartered in Texas. The company's drones, which are expected to be used by law enforcement, utilities, architects and others, are assembled in Malaysia and run on servers located in Virginia.

There's just one problem: Anzu has multiple, close ties to China and to DJI, the Shenzhen-based company targeted by legislative and regulatory efforts to curb Chinese drone sales in the United States.

About half of Anzu's parts come from China. Much of its software originated there. Anzu has licensed its drone design to DJI, which receives payment for each drone Anzu orders from its manufacturer in Malaysia.

This crossover raises questions about whether Anzu is truly independent from DJI, China's leading drone manufacturer, or simply a rebranded version of it.

Despite accounting for 58% of commercial drones sold in the United States, DJI's business has recently been overshadowed by federal and state regulations intended to protect against potential Chinese access to information gathered by drones, according to a 2022 analyst report. drones in America.

The company now faces the grave threat posed by a bipartisan bill in the House that would dramatically limit its future access to the U.S. communications infrastructure on which its products run.

Given its ties to DJI, Anzu is somewhat of a litmus test for Chinese companies facing an increasingly hostile regulatory environment in the United States.

If moving manufacturing out of China and distributing its products through a company with a U.S. zip code can help avoid being blacklisted by federal agencies or effectively outlawed by Congress, the formula established by Anzu may not work only for DJI but for other Chinese companies whose US business is under scrutiny.

If those efforts fail, it would be another setback for Chinese businesses trying to manage growing suspicion and animosity toward China in Washington.

Randall Warnas, Anzu's CEO and sole employee, said in an interview that in exchange for granting Anzu a commercial license, DJI receives a cut of every dollar Anzu pays its Malaysian manufacturer to make its drones.

However he acknowledged that Anzu was essentially DJI's idea.

Early last year, he recalled, a DJI representative who said he was speaking on behalf of the company's senior executives approached a group of U.S. drone industry executives with the question: “What would be the appetite to try to do it so we can bring our own? technology – DJI technology – and make it suitable for long-term use in the United States?”

DJI's concept – which Mr Warnas said was also pioneered by many other DJI employees – was embraced by Anzu's founders: himself and three partners who he said are US citizens.

Their goal, he said, “was to somehow cleanse the Chinese essence of their technology to make sure there was still a roadfor sales in the United States.

Mr. Warnas has been in contact with the office of Congresswoman Elise Stefanik, the New York Republican who spearheaded new legislation to effectively ban future DJI drone operations in America, to discuss Anzu's efforts and how to comply with regulations Americans. But Ms. Stefanik was apparently unmoved by the more than hour-long question-and-answer session that Mr. Warnas said he held with one of her staff members on Thursday.

“This desperate attempt to evade tariffs and sanctions is futile,” Ms. Stefanik said in a statement on Friday. “DJI and all of its shell companies will be held accountable.”

Regina Lin, a spokeswoman for DJI, said in a statement that her company's licensing partnership with Anzu “was established with the goal of improving the accessibility of capable, affordable drones on the market.” She said DJI had no other financial ties to Anzu, calling Anzu “a completely independent company.”

Some analysts said that while Anzu's move may be successful in the short term, its business model could soon be threatened by the tougher guardrails that Congress and regulators are considering imposing on Chinese companies and their affiliates in the United States.

“It's a Band-Aid on a bullet wound,” said Craig Singleton, director of the China program at the nonpartisan Foundation for Defense of Democracies.

However, some lawyers and drone industry veterans said they admired Anzu's creative strategy and saw no imminent regulatory risks to its business model.

“Anzu Robotics is doing what many in our industry have been asking for,” said Chris Fink, a drone dealer in Fayetteville, Ark., who has fielded inquiries about Anzu drones from users who are wary of buying Chinese products in the current regulatory context. but they can't afford to buy American-made drones.

Anzu officially launched in April, four months after receiving equipment approval from the Federal Communications Commission in Washington. Anzu has already received thousands of inquiries about its drones, Warnas said. He estimated that those investigations had led to at least 400 orders, all referring to third-party brokers in the United States like Mr. Fink.

The company is run from the office of Mr. Warnas, a longtime drone salesman who worked for DJI early in his career and briefly served as chief executive of Autel, another Chinese drone maker, in 2021. He resigned after just nine weeks, blaming his lack of autonomy for the short term.

Mr. Warnas, an American citizen, lives outside Salt Lake City, Utah. But Anzu collects mail at a corporate office complex in Austin, Texas, and lists that address as its official location.

Austin “is going to be where the long-term future of Anzu Robotics is,” Warnas said, “but right now there's no reason to dive that deep.”

Anzu parts are produced in both China and Malaysia. According to Mr. Warnas and documents reviewed by The New York Times, they are assembled at a plant in Malaysia.

The product assembled there — a forest-green commercial drone known as a Raptor that drone experts say looks a lot like some of DJI's Mavic 3 models — is shipped to U.S. logistics hubs. The drones are operated by flight control software and a user app originated by DJI but modified by Anzu's data security partner Aloft, a Syracuse, New York, company whose servers are located in Virginia, to ensure that user data remains in the United States and is not collected by third parties without the user's permission, according to Mr. Warnas.

This complex arrangement seemed necessary to Anzu's founders due to Washington's antagonism towards China.

According to a bill passed by Congress in late April and immediately signed by President Biden, the social network TikTok could be effectively banned in the United States unless it is soon sold to domestic owners.

Congress is considering a number of other bills intended to limit Chinese technologies and products, including the Countering CCP Drones Act, a bill sponsored by Ms. Stefanik that is intended to substantially reduce DJI's presence in the United States . And both Congress and Biden are embracing new tariffs on Chinese goods, continuing the effort to support American manufacturing that began during the Trump administration.

Difficulties faced by domestic drone makers in competing with DJI, coupled with a host of national security concerns, have prompted moves to crack down on DJI, a trend that is also affecting other Chinese tech companies and leaving them scrambling for alternative solutions .

“Chinese companies are thinking creatively and using every tool in their arsenal to find these divides and exploit all the legal and regulatory loopholes,” Singleton said. Their hope, he added, is that “it will take Washington years to identify and fill these gaps.”

David Montgomery contributed reporting from Austin. Tashny Sukumaran contributed reporting from Kuala Lumpur, Malaysia.

Leave a Reply

Your email address will not be published. Required fields are marked *