For decades, the United States made a costly trade when it came to manufacturing. We let other countries make the parts, and in return, things got cheaper. But we never checked the cost of cheap. The jobs, the skills, the ability to make what we depend on, sold for pennies on the dollar. One industry in America has responded to this bad deal quicker than the rest. Drones. Long before the rules changed, one assumption was already in motion. That this trade wouldn't last forever. This film begins when America decided that particular bargain just wasn't going to work anymore.
Administration rejects the offshoring model, and we have embraced a new model. It's called the American model. The US is nowhere near China in terms of capability of being able to manufacture drones. I don't even know what it would be estimated at because I don't know that there's a supply chain for more than 50,000 to 100,000 drones outside of China yet.
In June, President Trump issued an executive order unleashing American drone dominance. We will bolster the US drone manufacturing base by producing thousands of American-made products, prioritizing buy American. Between the last two administrations, the mandate has been written. But why drones? Why now?
We are launching now a US manufacturing of critical drone components. And we're going to use these parts on not only the drones that we build, but also to support the drone manufacturing for any drone company that wants to use American-made NDAA compliant drone parts. So today, I'm rescinding restrictive policies that stifle production, and this will unleash American manufacturing and the ingenuity of our warfighters.
Here at UMAC, we are setting up these processes here and this factory looks and feels like a Chinese motor factory. It's a little bit more comfortable. It's better lit. It's cleaner. It smells great.
This is the story of how one man's assumption predicted a mandate for a nation and the start of a new chapter in American industry.
So, we've made the assumption and we live by this assumption that the US drone industry is going to want a redundant supply chain with a significant amount of those components coming from outside of China. We made that assumption, so we're building capacity in advance of demand with the expectation that the demand will show up before we're even done building up capacity.
I'm talking to Jeff about like the whole build-up and it's like we just hit forklift scale. Like we're getting a forklift. We're getting a forklift. A forklift. Forklift. We need one.
We're Unusual Machines and we made these motors in America.
But first, a note on how we got here. For nearly 80 years, America built things. We built them better. We built them stronger and the world watched.
As the year 1947 begins, the state of our national economy presents great opportunities for all. We have virtually full employment. Our national production of goods and services is 50% higher. But somewhere in the 1970s and 80s, we made a choice. We decided manufacturing was someone else's problem. Someone else's future. Even those statistics don't tell the whole story. The human price we've paid. Farmers facing foreclosures, businessmen staring at bankruptcy, iron workers in Steubenville and auto workers in Detroit and black teenagers in New York standing in unemployment lines.
For those of you in the audience who are business people, pretty simple. If you're paying $12, $13, $14 an hour to factory workers, and you can move your factory south of the border, pay a dollar an hour for labor, hire young 20s. Let's assume you've been in business for a long time. You've got a mature workforce. Pay a dollar an hour for your labor, and you don't care about anything but making money, there will be a giant sucking sound going south. So, even though we offshored and went someplace else before, now it turns out we're better off going ahead and manufacturing here.
The United States must end its dependence on Chinese manufacturing. We can't run our military, as things stand right now, without goods from China. We can't. China's producing our pharmaceuticals for us. They could cut them off, you know, at any time. And so, that's the change that really needs to be made. For the last part of a century, we have outsourced ourselves to the point that now change is unavoidably necessary. But how does a nation sell out its manufacturing base in the first place? Well, what most people won't tell you is it wasn't some overnight heist. It was actually more like an auction. And America, well, we couldn't get rid of it fast enough.
So, offshoring really started in American manufacturing maybe 40 years ago when people realized the labor disparity was very different. If one company is having a lower cost basis by offshoring and you don't do it, you're going to lose in the marketplace. So, once people started moving production to Japan and Taiwan and then from Japan and Taiwan to China over the years. Everyone had to follow suit or lose in the marketplace.
That was the headline. But here's the thing, the real advantage wasn't the labor cost. The Chinese government in the mid-1980s changed how they approached working with the West and they created the free trade zones and really emphasized bringing in manufacturing. Shenzhen was a very tiny city then is now the center of consumer electronics in the world. And once you start to become a center for manufacturing, it snowballs. So, you know, China maybe started, but now all the different parts vendors are there where the finished phone vendor is and then all of it builds out from that. And it's turned Shenzhen and Beijing and Shanghai into world-class cities with these huge manufacturing industries.
The guy who winds motors? Downstairs. The magnet supplier? Next door. The injection mold shop? Across the street. It was like Amazon Prime for factory owners. Except instead of two-day shipping, it was two-hour prototyping.
The main difference in between the US manufacturing and Chinese manufacturing is the level of detail that these Chinese factories have in setting up processes. They're really just pattern matching. CNC machine shop that knows how to make precision shaft. They know everything about making shafts. So, the timeline for them to get from zero to one is really much shorter than a machine shop that is brought this project and they have to learn about the tolerances of shafts, the types of sort of like cutting tools or the fixturing methods for that specific product type.
The numbers tell the story. Between 2002 and 2022 alone, America lost 45,000 manufacturing firms. American jobs shipped abroad and once mighty cities now hollowed out and empty.
I grew up in Michigan and a lot of my family worked in the automotive industry, particularly at GM and I really remember the wealth destruction and some of the damage being done from offshoring of the automotive industry. I lived outside of Flint, which really suffered quite a lot and then the city of Detroit actually was one of the early maybe victims of offshoring as manufacturing left for a lot of the auto parts. So, while you see a lot of benefit overseas in places like Shenzhen or Beijing, there are places where the economic devastation domestically was really bad. Not only did we lose the knowledge, we lost the suppliers and probably the most unfortunate, we lost the muscle memory of making things. And for a long time, that just seemed fine.
A valid question you might be asking yourself right now is where do drones come into play in all this? How relevant are these things to begin with and is it enough to focus our attention?
I think when you stop and actually think about the use cases of drones, there's an innumerable number and people are very creatively finding new ones all the time to the point where you start to realize how you might not notice the technology yet, but you'll look around and all of a sudden it'll be there. We're just about at that flipping moment where you'll see it everywhere.
Let me show you something about the drone market. 90% of all commercial drones come from China. One company, DJI, controls 80% by itself. The motors? China. The batteries? China. Flight controllers? China. You starting to get the picture? Drones look a lot like integrated circuits, like chips, in that it doesn't make sense to have the supply chain centered in exactly one spot in the entire world.
Drones now, with the conflict in Ukraine, have really moved from in general perception from toys to tools. And these tools are really important, not just for defense, but for everything else.
When Russia invaded Ukraine, drones went from expensive toys to essential military hardware. Basically, overnight, forever changing how wars will be fought. They have become a battlefield innovation as profound as the invention of the very tanks drones help hunt today.
I think it's a matter of national security to have supply chains for all critical technologies that are diversified. I look at it as a national security to have integrated circuit fabs in multiple places because whether it's for geopolitical reasons or environmental reasons, if you lose the center of supply for any of these critical technologies, it sets you back so far.
The supply chain obstacles are everywhere, right? We're living in a post-COVID world where supply chains around the world in every industry had that shocking moment of hey, these are the consequences if you're not running your supply chain efficient, right? So, you saw it in healthcare, you saw it in automotive, you saw it in tech. So, really onshoring our supply chain and really having US-based suppliers will actually help us move more quickly on the orders that we see ahead of us, right?
Drones as the same thing, and so what we're trying to do with Unusual Machines is create redundant different supply chains for a of the components for this critical technology category.
Ukraine is set to be capable of producing 4.5 million drones in 2025. A massive ramp-up from the nearly non-existent market that was just a few years prior. The United States, 20,000 to 30,000 drones a year. The ability to create capacity can be done. But we have a big gap to fill.
The US is nowhere near China in terms of capability of being able to manufacture drones. I don't even know what it would be estimated at because I don't know that there's a supply chain for more than 50,000 to 100,000 drones outside of China yet.
In a Taiwan scenario, the US would burn through precision munitions in eight days. Eight days. Imagine going to war with a country that makes all your ammunition. Or you were a race car driver that had to let the other team make your race car. That's where we're at with drones, and it's not ideal, to say the least.
When Allan Evans says he's bringing drone manufacturing back to America, what he's really saying is, 'I'm going to rebuild an entire industrial ecosystem that took China 30 years and billions of dollars to create.' A daunting task that has never been done in America before with drones. Manufacturing for small drones was never in the US. If you look, consumer electronics was moved overseas, maybe starting 1980 to Japan and then ultimately to China. And toys were moved overseas, too. And so, the small drone industry really was always in China because it was this combination of phones and toys that became drones.
And really, so what we're doing instead of bringing drone manufacturing back, we're bringing it here for the first time. A drone motor isn't a thing. It's an assembly of things. And making anything at scale has its unique set of challenges. Fully assembled rotor assembly. It's got the bell housing, the flux ring, the shaft, and the magnets. And the last thing that we need to do to complete this is to actually balance it.
I have a favorite analogy for manufacturing. Everybody's probably baked a dozen cookies. Probably really good cookies. They're delicious. That is the prototyping. That's the engineering phase in designing anything. Now go bake 12,000 cookies. Don't burn any of them. Oh, and you need to bake them in under a week.
Now when you look at the manufacturing of a thing, when you look at the manufacturing of a drone for instance, there's slices all the way along in the supply chain. So you have the end drone that gets put together. Okay, the next slice are the subassemblies. So somebody's making the camera, somebody's making the motor. We saw how motors get built. Now we can see them actually mounted to a drone. This is our Rotor Riot CL2 7 airframe, and we have our 2807 series motors bolted to the arms and wired up to our made in the US ESC and flight controller combo.
You need to create the demand at a final part here, and then you get the next slice. So we're that second slice for drones. That's right. Slices upon slices. The supply chain with each link is required to end up at the final product. Each component needs a supplier. Each supplier needs materials. So on and on.
There are entire companies built around just making the magnets. So there are huge global teams that are doing the actual mining, and then sintering the materials together, and then cutting it, gluing it back together, cutting it again, plating it, shaping it, magnetizing it. This is an entire operation bigger than this entire motor factory just to make the magnets.
I think that the challenge is always going to be supply chain when you have to rely on other countries for the supply of your raw materials. You know, we don't mine and refine the magnetic substrates that actually go into making magnets here in the US. So, you know, so for any company who is setting up US manufacturing, part of it is setting up all of your sub-suppliers, figuring out where you're sourcing all these parts from. And that's the task of any supply chain team is to figure out where you can get something at the quantity that you need it that meets all of the quality standards.
That's why it's going to continue to be important, right? We're building the supply chain with cost in mind, with quality in mind. And when you put those two things at the forefront of your supply chain, you'll yield really good results. And we would love to buy these magnets from the US if we could. If there was a US based manufacturer for magnets that meet the size requirements that we have in these motors, we would buy those right now from that supplier.
So, for us, the supply chain challenge becomes how do we move towards a US-based full manufacturing process when the suppliers for the components simply don't exist?
A problem many people who have looked into this before will tell you, when you hear 'Made in America,' the underlying question is which part was made in America? Magnets are one example of the vast deficit we've created in our manufacturing supply chain. To start making things in America, it will require us to buy things outside our borders for now to assemble here. None of that happens without money and time. And if you're going to spend all this time and money, it's worth it to make sure you have a return at the end of it all waiting for you.
If you're going to onshore, you have to first understand why you're onshoring. You have to understand your competitive spectrum. So, when we decided to onshore, we said to ourselves, 'All right, people are going to buy our stuff if we're 20% or more within 20% of the pricing from our Chinese competitors.' We just made that a hard rule. We said if we're more than 20% more expensive, nobody will pay the domestic premium. And we started with that and then we looked at how to onshore because you can't just copy what other people are doing. You have to do it new. You have to take some of that American innovation and use it in how you configure your manufacturing or in the tools you use.
All of this effort seems like a lot to go through for a maybe. But that is the beauty of companies like Unusual Machines. This isn't a maybe return on investment to them. This is the assumption.
You know, when you're a startup like us, when you're just going after, you have to make some assumptions. Otherwise, the big companies, other people would already be there. So, we've made the assumption and we live by this assumption. This entire company was founded on an assumption that drones are going to matter, that there is going to be high demand for them, and that drone manufacturers were going to need parts. So, we put Unusual Machines together to meet this need that we forecasted.
Unusual Machines is speculating that there's an unmet need in US manufacturing. So, in the same way, we see ourselves as our values, we think there should be a domestic supply chain for drones.
December 2023, Congress passes the American Security Drone Act starting January 2026. No federal dollars can be used to buy or operate a Chinese drone. And just like that, an entire market gets created by legislative decree. This is where our story gets interesting.
If you look back during the Biden administration, there was the American Security Drone Act. That said the US government won't buy or fly Chinese drones. US government buys a lot of drones. So that alone creates a big enough marketplace to justify it. 750 million was allocated to small drones and small drone parts. Like that's a pretty big marketplace. And then when they say, 'Hey, you can't use parts from China.' They've now created a marketplace where if we're right and if we're successful, our investors can see a return. And because of that, I think as an investment thesis, that's going to be a winning high-level investment thesis.
I also think with the conflict in Ukraine and the shift to drones, you're seeing drones at being identified as a critical technology, but you're also going to see a defense investment super cycle over the next 3 to 5 years.
If you think in terms of you had a $12.8 million defense order from Strategic Logic in September. Then October I mean what the hell you I mean time to take a vacation, pal.
The global drone market was $73 billion in 2024 and is projected to reach $163 billion by 2030. But here's what makes Unusual Machines' strategy unique. They're not just trying to build complete drones. They're not competing with the big defense contractors at all, really. They're selling the components, the motors, the flight controllers, the cameras, the goggles, the building blocks that every drone manufacturer desperately needs and can now only be reliably sourced from America and their trade partners.
We're seeing a huge demand. We even recently got parts orders from the 101st, so one of the army divisions, because they're interested in trying to build some drones inside the army to understand them better. So yeah, we're getting orders from a bunch of different groups. I think four or five very significant customers. Red Cat with their Fang drone. We announced I think near a million-dollar order there, another 1.6 from an undisclosed customer.
So, now that the market has been set to focus on American-made parts, Unusual Machines could scale to 200,000 motors annually and still not meet demand. The market doesn't need convincing. It's been waiting for this. But meeting the scale of such a demand requires planning and forethought.
Yeah. So, we're in the Henry Ford era of drones, right? Where everyone's learning how the supply chain is going to actually function, right? And how fast you can actually build them with quality in mind. This whole building is dedicated to drone motor production. It's 17,000 square feet of specialized machinery and specialized workforce, all just focused on making small drone motors.
We have another facility that's doing full assembly of drone parts into finished FPV drones. Okay, so the building that we were at before, which is like the 6,900 square foot place, we're doing a lot of the operations out of there. We're moving operations out and we're just going to dedicate that space to drone assembly. And all the warehousing and fulfillment, inbound, outbound, everything, the whole fulfillment center is coming to this new building, which is just starting to have stuff arrive. So, we've got 25,000 square feet of new space that we got to fill with drone parts. So, I think we'll fill up a 25,000 square foot fulfillment center probably within the next 6 to 12 months. And that is in and out, right? So, that's raw material, that's finished drone builds.
When you put everything together, it has to come together correctly, and the system has to operate smoothly after that. Controlling the flow of your supply chain and your manufacturing process is a carefully choreographed dance that takes trial and error to perfect.
