As the largest American maker of consumer drones, 3D Robotics Inc. sees big opportunities in selling mini-helicopters with cameras, sensors and whirling propellers that buzz like angry hornets.
The Berkeley company expects to sell thousands of the pizza-sized drones — for about $1,000 each — at home and abroad this year. Tech-savvy customers want them for capturing wave-shredding surfing runs in the Pacific, monitoring oil and gas pipelines in remote regions, and other uses.
3D Robotics is out in front of dozens of California companies jumping into the nascent business of selling drones to consumers and commercial enterprises, just as companies in the state did earlier when the drone market consisted largely of one customer: the Pentagon.
Although military drones were born in Southern California and are still built here, 3D's drones will be built outside the country.
So far, many commercial and civilian drones are being designed here but made abroad, creating high-tech engineering jobs in the U.S. while the manufacturing is in low-cost countries like China and Mexico — underscoring the challenge of creating U.S. manufacturing jobs.
The epicenter of the fast-growing commercial drone business is in Silicon Valley, not Southern California, and the new players are quite different from the giant contractors that dominate the military drone market, such as Northrop Grumman Corp. or General Atomics Aeronautical Systems Inc.
They're more like the classic Silicon Valley stereotype: geeks working in garages.
"The aerospace industry isn't relevant here," said Chris Anderson, 3D Robotics' chief executive. "What we do is more like a smartphone with wings rather than a pilot and a plane."
Many of the commercial drone companies are so new that it's hard to predict where they will locate manufacturing operations, but they are unlikely to create thousands of well-paying factory jobs, like the aerospace industry of a bygone era.
Competition from Chinese manufacturers has already pushed 3D Robotics and some other American drone companies to make their hardware in other countries. Anderson's company has an engineering center in San Diego, but manufactures its drones in Tijuana and Shenzhen, China, where there is cheap labor.
The strategy mirrors that of Apple, which designs its iPhones in California but manufactures them in China and other countries.
3D Robotics' main competition is Chinese company SZ DJI Technology Co., the largest commercial drone manufacturer in the world. The firm makes the red-and-white quadcopter called the Phantom, which recently gained fame when one landed on the White House lawn.
"We're California. We're a high-cost state," said Colin Snow, a drone industry analyst in Redwood City. "Capital goes where it gets the highest return."
The makers of military drones also see huge potential in commercial sales.
"We think the commercial market has a chance to be much larger," said Steven Gitlin, a spokesman for AeroVironment Inc., the largest supplier of small drones to the military.
The company, which makes drones in its Simi Valley facilities, has seen sales decline as the military withdrew from Iraq and Afghanistan and is looking to commercial drones for growth.
How fast the drone business will grow could depend on when and how regulations are loosened.
It is still illegal to fly a drone for commercial purposes without a permit. Almost daily, pilots have reported drones flying dangerously close to their aircraft, and the
While the FAA continues to debate new rules for the operation of commercial drones that it proposed in February, the agency is issuing an increasing number of permits to companies that have shown regulators they can fly safely. So far, the FAA has issued 548 permits, including to companies using drones to film commercials and movies, along with more industrial tasks.
San Diego Gas & Electric Co. flies drones to help inspect high-voltage power lines throughout its network. U.S. farmers can now use 207-pound Yamaha helicopter drones to spray crops with pesticides — the same aerial spraying system that Japanese farmers have used for years.
Sales are already climbing among hobbyists, foreign users and companies that have gained exemptions to fly. Global sales of drones to consumers and companies are estimated to be $4.5 billion this year, up from $3.3 billion last year, according to Frost & Sullivan, a market research firm.
Commercial sales are expected to increase so fast that they could surpass those to the military in about five years, according to the firm's analysis. By 2020, global consumer and commercial sales could be $11 billion, it said.
Silicon Valley's deep-pocketed venture capitalists are pouring cash into drone start-ups. So far this year, venture capitalists have invested $172 million in drone companies, according to CB Insights. That's up from $107 million for all of 2014.
Jon Callaghan, CEO of True Ventures, an investment firm in San Francisco, said his company has provided more than $100 million in early capital for companies involved with drones.
"Once you see a larger number of these vehicles allowed into U.S. airspace, that will unlock a huge wave of investment," Callaghan said.
Northern California is the headquarters of six of the 10 American commercial drone companies that have attracted the most venture capital, according to CB Insights. They are creating high-paying work for engineers, including those designing ever more sophisticated software to operate the machines.
Computer engineers are also working on applications in which drones gather data through cameras and sensors and turn those data into information that farmers and other businesses can use to improve their operations.
For example, San Francisco start-up DroneDeploy has created software designed to enable farmers to spray or water their crops more efficiently. The system collects data that are used to generate real-time maps showing where fields may be too wet or dry.
Airware, another start-up in San Francisco, develops drone operating systems so customers can mix and match software to carry out various jobs, such as forestry and agriculture or surveying and mapping. Airware was founded in Newport Beach but moved to San Francisco after seeing where the industry was headed.
"Think of us like an Intel or Windows for the industry," said Airware Chief Executive Jonathan Downey. "Drones are used for a wide variety of applications, and we want to enable this diversification."
Developers already have created hundreds of kinds of drones in a variety of sizes, ranging from pocket-sized to one that Facebook is designing to have a wingspan greater than a Boeing 737.
3D Robotics is among the leaders in the fast-growing industry. Since Anderson co-founded the company in 2009, its four-propeller and six-propeller helicopters have gone from kids' toys to high-tech tools.
Before Anderson was CEO of 3D Robotics, he was editor in chief of Wired magazine. He began building drones with his children in the mid-2000s and soon started an online community called DIYdrones.com.
The company has grown to about 200 employees. Many are engineers who work on software, writing computer code and solving mechanical problems in a workplace familiar to other Silicon Valley start-ups: an open floor plan, free of cubicles or offices.
3D Robotics' drones can fly on pre-programmed routes and stream back video to users' smartphones or other devices.
The company uses open-source hardware and software, meaning it doesn't patent its technology and welcomes garage tinkerers. Customers often offer recommendations on how to improve the technology.
"Innovation often comes in the hands of customers," Anderson said.