The lower price and high impact of drone warfare is pushing down the financial costs of aerial bombardment, forcing a rethink from militaries and governments.
At the same time, the blistering pace of drone innovation is also disrupting traditional defence manufacturing by lowering the barriers and opening the door to favour smaller, more nimble companies.
Drones have come to define the Ukraine-Russia conflict and their effects are playing out daily in the Middle East. Salvos of drones are overwhelming conventional air defence systems; swarms of cheap drones are being shot down with expensive Western-made missiles; and inexpensive small drones are taking on tanks.
In the process, long-standing practices of how defence gear is designed, built, and sold are being repriced at a lower cost, much in the way computers, once the province of university labs in the 1960s, became ubiquitous PCs in the 1990s, then laptops, and iPhones.
In the defence world, this has created a gap in capabilities between drone-savvy militaries and ones relying on high-tech, expensive weapons of the past.
The US, for instance, has been hamstrung in defending its Middle East bases because it doesn’t have enough drone interceptors.
Nations quickly building stocks of drones to meet government-directed goals are practicing what Ukrainian analyst Lesia Bidochko describes as “drone Keynesianism”.
Economist John Maynard Keynes believed governments could solve economic problems through massive, sustained spending on production. For companies, the goal shifts from marketing complex and elegant systems to fielding drone units that can deliver on a battlefield.
Today, for example, Ukraine incentivises 500 small suppliers to work fast and respond to near-daily changes on the battlefield.
The government creates the market, allowing small companies to focus on rapid innovation while literally “under fire”. The US is looking to emulate this model through its “Drone Dominance” program.
Jay Guthrie, a British ex-service member who has spent time in Ukraine, said drones can be simultaneously “low cost” to build and deploy and “high impact” in what they destroy.
At the same time, large legacy defence companies can’t produce drones at the speed or cost needed to be effective on a modern battlefield, he said.
Major Western defence companies are “all looking at the 100 per cent solution” made up of “a really shiny drone that looks really pretty when it takes off”.
“But in reality, at the end of the day, it’s going to end up a big lump of plastic anyway, so it doesn’t need to be shiny. Just robust enough to get to the target,” he said.
Iran pioneered the strategy of building cheaper drones that could seek to overwhelm Israeli and US defences. Iran built thousands of Shahed drones, costing a fraction of the price of US interceptor missiles. The Ukrainians played catch-up after Russia expanded its war against Kyiv in 2022.
The rise of drones is also changing the big business of defence procurement because drones can be produced quickly and at low cost by smaller companies rather than the traditional corporate giants, which rely on long-lead times, that supply militaries.
While there some large-scale makers of civilian drones, smaller nimble drone players have been driving much of the disruption in the defence sector.
Guthrie notes that it takes Western-based defence companies 18 months to two years to incorporate major innovations into a product, but takes Ukrainians or (Iranians) only a couple of weeks.
The technology of drones – cheap electronics, 3D-printed parts, rapidly updated designs – is transforming part of the defence industry dominated for decades by major companies known as “prime subcontractors”.
Companies such as Boeing, Lockheed Martin, Airbus, and Thales act as systems integrators, which manage “complex supply chains and manage risk around delivery of major projects”, he said.
The prime contractors can see the shift. Some are learning from it. Boeing, for instance, is trialling an ultra-low cost guidance system, which could be used on drones and missiles, “to dramatically reduce per-unit costs and enable precision munition employment at scale across programs”.
Guthrie, who works for UK-based Merlin Power Defence, said that at issue is the scale of the companies doing the production.
“What you need is a load of mini primes, where you build that framework agreement (with the defence departments), but there’s still the man-in-the-shed mentality,” where new features can be tried quickly.
The learning curve around drone economics is steep, and Guthrie said that, typically, nations’ defence departments stick with the primes “because it’s easy” and the framework for contracts is already in place.
But the prime contractors have “many investors and the need to return an investment”. So what is a $10 drone becomes about $200 because everyone has a “piece of the pie”, said Guthrie.
Small and medium enterprises, he says, are more agile. They can build. They can innovate. They’ve got fewer people on their shoulders saying: “You need to make a big profit out of it”.
Melbourne start-up Freespace Operations uses ArduPilot, an open-source autopilot system to guide its drones, says co-founder chief technology officer Leonard Hall.
“This whole industry is based on that simple factor,” Hall said.
Freespace Operations doesn’t build combat drones, but drones designed to lift equipment, some used for defence, to “last for years”. Hall said that if not for open-source autopilot code, it would cost $100 million to code the autopilot before his company’s drone could be tested.
Instead, “open source allows small companies to share the developmental burden of the impossible task”.
To take advantage of the rapid development once it’s done. “It’s really a first-to-market enabler.”
Such speed is key. CEO and co-founder Ken King said his company’s growth since 2019 has essentially followed a Moore’s law “type of trajectory”. (Moore’s law is the idea that the number of transistors on computer chips doubles roughly every two years.)
In conflict, even contenders to be the new defence prime contractors face a challenge in producing enough drones, cheaply enough. Anduril’s Bolt-M kamikaze drones run an estimated US$26,000 to $40,000 apiece including the required support system, far above the price tag of units in use in Ukraine.
“First-person view drones have pretty high attrition rates due to reliability or jamming,” said a spokesperson for Anduril. “Bolt is designed to be much more reliable, resilient, and to bring the firepower necessary to actually take out targets with one shot.”
The speed of the innovation also makes drone manufacturing an unpredictable industry.
CEO and co-founder of US-based Bravo Ordnance Devan Plantamura said that currently in conflict “first world countries cannot afford to use” the high-end missile technology they’ve created, such as Patriot missiles.
At the same time, increasingly, the global industry is “commoditising drones”, he said, making them a product bought on price rather than specific brands. That makes for a rapidly shifting landscape.
Capabilities change, too. Plantamura said that once countermeasures are developed to beat the Shaheds, for example, the price of Shaheds could rise as they’ll need “more technological advancements”.
“So it’s a game of cat-and-mouse that’s going to go on for the next 10 to 15 years.”
In this world, production capability is everything.
Anduril founder Palmer Luckey last year said that “a country can only mass manufacture arms if it designs arms that can be mass manufactured by the industrial base it already has. The current defence industry has not been done this way”.
Guthrie said: “It’s a huge cultural change”. One he doesn’t see democracies are ready for.
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Chris Zappone is a senior reporter covering aviation and business. He is former digital foreign editor.Connect via X, Facebook or email.From our partners
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