FCC drone ban delivers early Christmas gift to U.S. companies

On Monday, the Federal Communications Commission announced it is adding China’s DJI, Autel, and all foreign-made drones and components to its roster of companies deemed national security risks, barring approval of new drone models for import or sale in the U.S. Commenting on the news, Needham said “Santa came early this year,” bringing a true gift to the U.S. based drone component ecosystem. The firm notes that the FCC went a step further by also explicitly banning foreign sourced drone components, something that was not anticipated. Aside from seeing this policy shift as broadly positive for the U.S. unmanned ecosystem and companies under coverage such as Ondas (ONDS), Red Cat (RCAT), Draganfly (DPRO), and AeroVironment (AVAV), Needham says the ruling is a significant positive inflection for the U.S.-based drone component manufacturers such as Unusual Machines (UMAC).

DRONE BAN: The Federal Communications Commission said on Monday it was adding China’s DJI, Autel and all foreign-made drones and components to a list of companies determined to pose unacceptable risks to U.S. national security and would bar approvals of new types of drones for import or sale in the United States, Reuters’ David Shepardson reports. The addition to the FCC’s “Covered List” means that DJI, Autel and other foreign drone companies will not be able to obtain FCC approval to sell new models of drones or critical components in the United States, which is required, the author notes.

In a public notice, the FCC said that, following a National Security Determination by an Executive Branch interagency group, unmanned aircraft systems and key components manufactured abroad have been added to its “Covered List” over national security concerns. The designation applies to new products and future authorizations, while previously approved or legacy UAS equipment may still be sold and flown in U.S. airspace.

EARLY CHRISTMAS GIFT: “Santa came early this year,” Needham told investors, with the FCC Public Safety and Homeland Security Bureau formally adding uncrewed aircraft systems produced in foreign countries to its “Covered List,” which the firm widely anticipated given the looming December 23rd deadline. However, Needham notes that the FCC went a step further by also explicitly banning foreign sourced drone components. This was not anticipated, and the firm believes this ruling is a significant positive inflection for the U.S.-based drone component manufacturers such as Unusual Machines.

While it will take time for foreign complaint drones and components to weed their way out of the market, Needham believes this dramatically expands the total addressable market for the U.S. unmanned ecosystem in the coming years. When combined with the $2B Drone Dominance initiative and the now signed FY26 NDAA, the firm believes the regulatory framework sets the stage for record setting unmanned procurement activity in 2026.  Overall, Needham sees the policy shift as broadly positive for the U.S. unmanned ecosystem and companies under coverage such as Ondas, Red Cat, Draganfly, and AeroVironment.

PRICE ACTION: Shares of Red Cat are trading up more than 4% on Tuesday at $9.64. Also higher are shares of Unusual Machines, having gained almost 9%.