The drone industry has evolved over the past decades and the drone market is expected to have explosive growth. This report examines the major key trends of development for China's drone industry. It also discusses the competitive advantages of Finland as well as the gaps that Finland should strive to close in order to unlock the full potential of drone. The report concludes with an examination over the different existing and possible future opportunities for Finnish drone companies.

1. OTSIKKO
ALAOTSIKKO, KUUKAUSI VUOSI
CHINA’S DIGITAL LANDSCAPE AND RISING DISRUPTORS
MODULE 2.8
DRONE

2. AUTHORS
Dr. Edward Tse
Founder and CEO
Team Finland Future Watch Report, November 20172
Mr. Bill Russo
Managing Director and Auto Practice
Lead
Mr. Alan Chan
Associate

3. DRONE
TOPICS
Team Finland Future Watch Report, November 20173
1. WHAT IS DRONE? WHY NOW?
2. CHINA’S DRONE INDUSTRY AND INNOVATORS
3. FUTURE OPPORTUNITIES AND IMPLICATIONS FOR TEAM FINLAND

4. DRONE
Team Finland Future Watch Report, November 20174
WHAT IS A DRONE? WHAT ARE THE TYPES OF DRONE USAGE?
Source: Literature research, Gao Feng analysis
 A drone is a remote-controlled
vehicle that rolls or flies
 Technically referred as unmanned
aerial vehicle (UAV) or unmanned
aircraft system (UAS)
 Three core components:
- Flight control system
- Application processor
- Gimbal
 Physical characteristics:
- Micro/small multi-rotor drones
- Large multi-rotor and
helicopter drones
- Small fixed wing drones
- Large fixed wing drones
Definition of Drone
Type of Drone Usage
Civilian Uses Military Uses
Consumer Commercial

5. DRONE
Team Finland Future Watch Report, November 20175
AS OF TODAY, THERE IS ALREADY A LONG LIST OF EMERGING DRONE-BASED
SERVICES
Source: Literature research, Gao Feng analysis
Construction & Surveying Emergency Services
 Grid/pipeline inspection
 Public and private security
 3D terrain mapping
 Mapping of real estate
construction sites
 Science & research
 Automated parcel last-
mile delivery
 Aerial fire fighting
 Life-saving ambulance
drone
 Disaster relief
 A sport where pilots fly
drones around a race-
course using a first-
person view
 Flying drone taxi services
 Precision farming
 Soil and field analysis;
Planting; Crop spraying;
Irrigation; etc.
Drone Racing Agriculture
 Aerial cinematography
 Live broadcasting
Package Delivery Photography & Filming TransportationSurveillance
Drones + X

6. DRONE
THE DRONE INDUSTRY HAS EVOLVED OVER THE PAST DECADES AND ITS
RECENT DEVELOPMENT HAS CREATED TREMENDOUS OPPORTUNITIES
Key Milestones of Drone Historical Development
Team Finland Future Watch Report, November 20176 Source: Literature research, Gao Feng analysis
1898
Inventor Nikola Tesla patented a
drone
1995
General Atomics MQ-1 Predator
UAV, the first major military drone
2013
Amazon announced testing of
drone parcel delivery service
2015
Chinese companies account for 50% of
all drone companies in CES 2015
Driving Factors of the Recent Growth
1951
Ryan Firebee, the world’s first
jet-propelled drones
2010
Parrot AR.Drone, first drone for
consumer applications
announced at CES Las Vegas 2010
 Technology development:
- Falling cost of processor chips and
sensors
- Computer vision technologies and
aerial control systems that enable
drone services
- Dronecode Project: open-source
platform for unmanned aerial
system (UAS) developers
 Proliferation of drone start-ups and
a thriving VC ecosystem
 Gradual liberation of drone-related
regulations
 Consumption upgrade
 Growing demand from hobbyists

7. DRONE
Team Finland Future Watch Report, November 20177
THE GLOBAL DRONE MARKET IS EXPECTED TO HAVE EXPLOSIVE GROWTH
Source: IDC, FAA, Macquarie Research, Literature research, Gao Feng analysis
Global Drone Market Size
2017E-2021E, USD M
Global Drone Shipments China Drone Shipments
Comments
 The global drone market size
will exceed USD 78Bn in
2021E
 Commercial drones will be the
growth driver given their
widespread applications
 China will see the strongest
market growth

8. DRONE
Users
Team Finland Future Watch Report, November 20178
THERE IS AN EXPANSIVE ECOSYSTEM ACROSS THE VALUE CHAIN OF THE
DRONE INDUSTRY
Source: Literature research, Gao Feng analysis
Drone R&D
Spare Parts
Manufacturing
Systems
Development
 Spare parts R&D
 Product design
 Flight control systems
 Body materials
 Mechanical systems
 Communications systems
Assembly
Sales &
Distribution
Drone Services
Provider
 Maintenance
 Pilot training
 Financing
 Insurance Surveying
 Filming
 Agricultural services
 Etc.
 Social sharing
 Fan
communities
 Renting
User
Services
Consumers
Commercial
Drones
Aftersales
Services
Consumer
Drones
 Flagships
 E-commerce
 Offline dealers
Typical Value Chain of Civilian Drone Market

9. DRONE
Team Finland Future Watch Report, November 20179
GOVERNMENTS AROUND THE WORLD ARE WORKING ON ESTABLISHING
A REGULATORY FRAMEWORK FOR DRONES
Source: Literature research, Gao Feng analysis
Four key areas of restrictions,
regardless of country
 Drone weight: heavy drones
require approval for flying
 Drone application:
commercial drones face
stricter regulation compared
to consumer drones
 User certification: pilot
training and examination are
required for drone operators
 Flying zone: drone flights over
populated urban areas may be
prohibited
Low-altitude
traffic control
 Develop an air-traffic control
system to prevent collisions in the
skies
 To manage the traffic of small,
low-altitude drones with the
coordination of manned aircraft
to ensure overall airspace safety
Drone data
privacy
protection
 To address concerns over
confidential information and
civilian privacy
 To establish laws that protects the
usage of drone-collected data
Key Concerns (Examples)

10. DRONE
TOPICS
Team Finland Future Watch Report, November 201710
1. WHAT IS DRONE? WHY NOW?
2. CHINA’S DRONE INDUSTRY AND INNOVATORS
3. FUTURE OPPORTUNITIES AND IMPLICATIONS FOR TEAM FINLAND

11. DRONE
Wingsland
Shenzhen Smart Drone UAV
Xaircraft Technology
Team Finland Future Watch Report, November 201711
CHINA HAS A FAST-GROWING AND DIVERSE DRONE START-UP
ECOSYSTEM
Source: Gao Feng analysis
Drone OEM
Agriculture
Logistics
Others
Hubei Ewatt Aerospace
Hangzhou Hikvision
Digital Technology
Wuxi Hanhe
Aviation
Technology
Dajiang
Innovation
EHang
Yuneec
International Beijing TTA Technology
Surveillance/Security
Leading Chinese companies in each segment
Utilities
ZeroTech
PowerVision Robot China RS

12. DRONE
Team Finland Future Watch Report, November 201712
About the Company:
Founded in 2006 by Frank Wang based
in Shenzhen
Dominates nearly 70% of the global
consumer drone market
Valued at USD 10Bn
Flagship Phantom series
Premium distribution partnership with
Apple
With 1,500 R&D workforce pushing the
rate of new product launches
Latest hero products:
- $999 Mavic Pro drone: obstacle
avoidance feature and folding
arms and propellers
- $499 Spark: fits in the palm of a
hand, weighs less than a soda
can, and can be controlled with
hand gestures
CASE EXAMPLE
DJI flagship stores in Shenzhen,
Seoul, Hong Kong and Shanghai
10.0
6.5
3.0
0.8
0.2
CAGR: +181%
201620152012 20142013
DJI Sales Revenue
2012 – 2016, Unit: RMB Bn
Offline workshops
Fan events
“It doesn’t come off as a Chinese
company. From the design of the
aircraft, to their packaging, even down
to their website.”
- Wall Street Journal
DJI IS A CHINESE “UNICORN” AND THE GLOBAL MARKET
LEADER IN CONSUMER DRONES
Source: DJI, SCMP, Literature research, Gao Feng analysis

13. DRONE
Team Finland Future Watch Report, November 201713
JD.COM, CHINA’S SECOND LARGEST E-COMMERCE PLATFORM, IS
PIONEERING DRONE-BASED PARCEL DELIVERY SERVICE IN CHINA
Source: JD.com, SCMP, Literature research, Gao Feng analysis
About the Initiative:
An efficient drone delivery network to
support JD.com’s rural expansion
strategy
To reduce operational costs and
enhance the accessibility of JD.com’s E-
commerce services in remote areas in
China
To fly packages from its regional
distribution centers to its network of
local couriers throughout China’s villages
and smaller cities
Developing drones that can fly up to
100km per hour, delivering packages
weighing as much as 1,000kg
Battery cost is a major barrier to
operationalize the drone program
Timeline of Development
Dec 2015: Establishment of the drone business unit
May 2016: Establishment of the “JDX” innovation lab,
which covers the R&D of drones, autonomous cars and
automated warehouses
June 2016: JD.com’s first parcel delivery in Jiangsu
Province, targeting rural villages
Nov 2016: Trail operations in Beijing, Xi’an and Chengdu
during the “Double 11” Shopping Festival
Feb 2017: Collaboration with Shaanxi provincial
government to build “the world’s first low-altitude drone
logistics network”
June 2017: Announced to build 185 drone airports in
Sichuan and 100 in Shaanxi
CASE EXAMPLE

14. DRONE
Team Finland Future Watch Report, November 201714
FARMFRIEND IS AN AGRI-DRONE SHARING PLATFORM
Augmented Reality (AR)
Source: Shunwei Capital, Medium, Gao Feng analysis
About the Company:
FarmFriend ( 田管家农 ) is the “Airbnb
of drone services” – an agricultural drone
sharing platform connecting agricultural
drone operators with farmers that need
the drone's service
Raised RMB 50M Series A investment
from Gobi Partners in April 2017
Investors include GGV Capital, Gobi
Partners, Shunwei Capital Partners, Yunqi
Partners, ZhenFund
With over 1,000 drone operation teams
registered on its platform, and over 5,000
agricultural drones available
Operates in more than 10 provinces,
including the major agricultural regions
of Heilongjiang, Hubei, Hunan, Shandong
and Jiangsu
Business Model
Target pain points:
A worker spraying pesticide on the fields manually can
cover around 1.3 hectares of land in a day; today, with an
agricultural drone, 20 to 27 hectares of land can be
treated in a day
Agricultural drone services are of high-density and low-
frequency in nature
Solution:
A scheduling system that efficiently matches farmers
needing spraying services with drone pilots
Based on geographical and customer data collected,
FarmFriend aspires to offer customized and specialized
farming services
CASE EXAMPLE

15. DRONE
Team Finland Future Watch Report, November 201715
ZERO ROBOTICS IS A FORWARD-LOOKING ROBOTICS START-UP
BUILDING PORTABLE AUTONOMOUS FLYING CAMERA
Source: Literature research, Gao Feng analysis
About the Company:
Established in 2014 in Beijing
Hover Camera is the flagship flying
camera developed by the company
80 employees, with offices in Beijing,
Hangzhou, Shenzhen, and San Francisco
Closed USD 25M funding in 2016
 Meng Qiu Wang, CEO and
Founder
- PHD in Computer Science
from Stanford’s Artificial
Intelligence Lab
- Masters from Carnegie
Mellon University
- Former software engineer
at Twitter building AI-
based recommendation
algorithm
CASE EXAMPLE
 Hover Camera Passport - the
first Embedded AI-powered
mass-consumer “throw-and-
fly” camera
 USD 599 with 4K video shooting
capability
 Can orbit around the user and
spin 360 degrees to capture a
panoramic photograph
 The device lifts off the user’s
fingertips and follows the user
around
 The propellers are fully
enclosed in carbon fiber,
allowing users to grab the
device in mid-air

16. DRONE
Team Finland Future Watch Report, November 201716
GOING FORWARD, CHINA’S DRONE INDUSTRY WILL SEE THE FOLLOWING
MAJOR KEY TRENDS OF DEVELOPMENT
Source: Gao Feng analysis
Key future trends
1. Technological advancement
Artificial intelligence to strengthen drone capabilities in flight control, computer vision, data
processing, and predictive analytics
Smart drones with advanced features like object detection, gesture control, optical tracking,
contextual awareness, and obstacle avoidance
Longer flight time due to improved lithium-based battery and solar power capabilities
Lighter material and improved protection
2. New products for consumer drones
Portable compact selfie drones to take off due to convenience and less regulation
3. New business models for industrial drones
More specialized drone products for niche use cases
Leading brands will continue to expand their product portfolios
Large-scale roll-out of drone delivery services that revolutionize the logistics industry
4. Continuously evolving legal framework
Policymakers will be more proactive in developing legal guidelines on the requirements and
responsibilities of drone uses

17. DRONE
TOPICS
Team Finland Future Watch Report, November 201717
1. WHAT IS DRONE? WHY NOW?
2. CHINA’S DRONE INDUSTRY AND INNOVATORS
3. FUTURE OPPORTUNITIES AND IMPLICATIONS FOR TEAM FINLAND

18. DRONE
Campaigns Events
Team Finland Future Watch Report, November 201718
FINLAND HAS BEEN AN EARLY MOVER IN SUPPORTING THE
DEVELOPMENT OF ITS LOCAL DRONE START-UP ECOSYSTEM
Source: Literature research, Gao Feng analysis
 The “Drones – speed up
innovation campaign” in 2015
was aimed to accelerate the
booming drone-ecosystem
 Tekes’ mission was also to get
the big corporations to
cooperate in novel drone-
innovations
 The key European annual UAS
event, High Level Conference
on Drones 2017, was held in
Helsinki this year
 Organized by the Finnish
Transport Safety Agency
(Trafi) and the European
Aviation Safety Agency (EASA)
Testing & Research Platforms
 In Nov 2015, Tekes opened an
UAV testing center in Mikkeli
that aims to network UAV-
experts, authorities and
educators
 In May 2017, The
DroneKnowledge project
received significant Challenge
Finland funding from Tekes

19. DRONE
Team Finland Future Watch Report, November 201719
FOR EXAMPLE, SHARPER SHAPE IS A LEADING FINNISH DRONE SERVICE
SOLUTION PROVIDER FOR UTILITIES INSPECTION
Source: Sharper Shape, Gao Feng analysis
About the Company:
Sharper Shape is a “Drone Software as a
Service™” (DSaaS) company driven to automate
the entire process of drone-based utilities
inspections
It develops advanced aerial sensor systems and
technologies that powers the automatic
collection and analysis of unmanned aerial
inspection data
With US offices in North Dakota and Maryland;
international projects in India, France, Mexico
and Belgium
Pain Points:
Utility firms have had to conduct extensive
manual land surveys to ascertain where to lay
power lines as efficiently as possible
Involved using helicopters to collect data, which
is then analyzed by a team of workers
Some areas are accessible
Solution:
Uses a Octocopter drone fitted with eight rotors
and a LIDAR (light detection and ranging) laser to
recreate 3D digital models of the scanned objects
Example: Exporting Finnish UAV technologies to India
Formed a partnership with Sterlite Grid, India’s largest private developer of
independent transmission systems in Feb 2016
To provide Sterlite Grid UAV-based business solutions to reduce the delivery
time of projects and increase the uptime of power systems
CASE EXAMPLE

20. DRONE
Team Finland Future Watch Report, November 201720
POWERVISION, A CHINESE UAV TECHNOLOGY COMPANY, HAS
EXPANDED THEIR R&D BASE INTO FINLAND
Source: Literature research, Gao Feng analysis
About the Company:
PowerVision is a worldwide leader in
UAV technologies, products, and
services, covering multiple use cases
including agriculture, energy, the
police and rescue services
Founded in 2009, with 500
employees across China, the U.S.,
Canada, Australia, Germany, and
Finland.
Sold its first consumer drone,
PowerEgg, in North America, Europe
and China in 2016
About the R&D base in Finland:
PowerVision opened a new R&D unit in
Tampere in Oct 2016
With help of Finpro and Tampere Region
Economic Development Agency Tredea
Attracted by the local ICT expertise as well
as the Finnish university research
 “Finland has amazingly strong R&D resources
in the technology areas that PowerVision
need for researching and developing world
class drones and consumer robots. And
Finnish experts are very credible and loyal to
company. That’s also a plus.”
- Huber Hu, CEO of Powervision Oy
(Nov 2017)
CASE EXAMPLE

21. DRONE
Team Finland Future Watch Report, November 201721
FINNISH POLICYMAKERS ARE AWARE OF THE NEED TO CREATE A MORE
FRIENDLY ENVIRONMENT FOR DRONE INNOVATIONS
Source: CGTN, Literature research, Gao Feng analysis
 “Drones could create a huge
amount of new services. Rules for
the operations would only have to
be developed”
- Pekka Henttu,
Aviation Director at Trafi (Nov 2017)
 “From the perspective of
streamlining the regulations, it is
important that the requirements
are carried out in a way that keeps
the burden on administration as
light as possible, and makes the
threshold for entering the field as
low as possible”
- Anne Berner,
Minister for Transport and
Communication
(Nov 2017)
 “Our brand-new regulation on the use of
unmanned aircraft is the most liberal in
Europe, if not in the whole world…. The
regulation leaves room for experiments and
allows for the development of new business
activities”
- Kari Wihlman, Director General at Trafi
(Oct 2015)
Finland to create
friendly
environment for
drones,
DailyFinland,
Nov 2017

22. DRONE
Team Finland Future Watch Report, November 201722
TO UNLOCK THE FULL POTENTIAL IN DRONE, FINLAND HAS EXISTING
COMPETITIVE ADVANTAGES TO LEVERAGE AS WELL AS GAPS TO CLOSE
Source: Gao Feng analysis
Competitive Advantages in Finland
A sparsely populated country with
plenty of free airspace which makes
testing easier
Trafi has set liberal and business-
friendly legislations allowing
experimental drone projects.
Nearly 2,000 professionals in the field
of UAV in Finland and countless
enthusiasts
Long national tradition in the R&D of
wireless technologies, imaging, sensors
and location technologies and corporate
cooperation of the Finnish universities
Competitive Advantages in Finland
A sparsely populated country with
plenty of free airspace which makes
testing easier
Trafi has set liberal and business-
friendly legislations allowing
experimental drone projects.
Nearly 2,000 professionals in the field
of UAV in Finland and countless
enthusiasts
Long national tradition in the R&D of
wireless technologies, imaging, sensors
and location technologies and corporate
cooperation of the Finnish universities
Gaps to Close
Safety regulations: Ensuring secure
supervision of recreational and
commercial drone operations, while not
limiting the boundary for drone
innovations
Data privacy issues: Guidelines on the
processing and management of
confidential or sensitive private data
collected by drones
Cross-border collaborations: Gain a
better understanding of the overseas
demand for both consumer and
industrial drone applications, as well as
the international standards
Gaps to Close
Safety regulations: Ensuring secure
supervision of recreational and
commercial drone operations, while not
limiting the boundary for drone
innovations
Data privacy issues: Guidelines on the
processing and management of
confidential or sensitive private data
collected by drones
Cross-border collaborations: Gain a
better understanding of the overseas
demand for both consumer and
industrial drone applications, as well as
the international standards

23. DRONE
Team Finland Future Watch Report, November 201723
FINLAND SHOULD FURTHER LEVERAGE CHINA TO CAPTURE THE
EXPOLSIVE OPPORTUNITIES IN DRONE
Augmented Reality (AR)
Source: Gao Feng analysis
Tech giants are entering the drone market
Tech giants such as Tencent and Xiaomi are
entering the consumer drone market to compete
with professional drone makers
Globalization of Chinese drone players
Overseas expansion for R&D capabilities
Market expansion targeting Western consumers
More specialized commercial drone
applications
Increasing demand for sophisticated
technologies and applications
More advanced fundamental research on
drone technologies
More financial incentives and preferential
policies to promote ground-breaking research
From Finland to China From China to Finland
Opportunities for niche Finnish drone start-
ups to export relevant technologies to China
E.g. Finnish clean-tech startup Aeromon is using
drones to track industrial emissions
Opportunities for Finnish drone companies
to partner with Chinese tech giants
Co-brand and co-launch new drone products
Opportunities for Finland to host their R&D
centers and innovation labs
Position Finland as the global hub and test field
for pioneering drone-related innovations
Opportunities for Finnish researchers to
participate in cross-border research projects
E.g., Sino-Finnish collaborative research initiatives