DJI vs. TikTok: The Chinese Drone Giant Tried a US Strategy First, Then Abandoned It for Shell Companies

TikTok just pulled off what many considered impossible. On Thursday, ByteDance agreed to spin out a U.S. TikTok entity where non-Chinese investors will own approximately 80 percent of the American app. ByteDance keeps just 19.9 percent. The deal effectively neutralizes the national security concerns that had lawmakers demanding a sale-or-ban for years. Meanwhile, DJI sits frozen out of the American market, its shell company strategy in tatters, with no path forward for new products.

The contrast is striking. But what most coverage misses is that DJI actually tried a legitimate US-based approach years before the shell companies. It didn’t work. That failure shaped everything that followed.

READ MORE: DJI’s Shell Company Gambit Backfired Spectacularly, And The Entire Drone Industry Paid The Price

The TikTok template: What ByteDance actually agreed to

The TikTok deal creates an American entity where non-Chinese investors, including Oracle, MGX (an Emirati investment firm), Silver Lake, and Michael Dell’s investment entity, control approximately 80 percent ownership. ByteDance retains 19.9 percent. The new venture will license TikTok’s algorithm from ByteDance and retrain it on American users’ data. Non-Chinese investors will have final say over content moderation.

This structure directly addresses the national security concerns that drove the 2024 federal law: American control over data, American oversight of the algorithm, and American decision-making on content. The 19.9 percent ByteDance stake falls below the threshold that would trigger most foreign ownership restrictions.

The deal took nearly a year to finalize after TikTok briefly went dark in January 2025, and required President Trump to extend the ban deadline four separate times. But it worked.

DJI’s forgotten 2019 attempt: US assembly and “Government Edition” drones

Here’s what most people don’t remember: DJI tried a version of the TikTok playbook six years ago.

In June 2019, amid the first Trump administration’s trade war with China and just weeks after Huawei landed on the Commerce Department’s export blacklist, DJI announced it would repurpose a warehouse in Cerritos, California to assemble drones domestically. The company also unveiled “Government Edition” features that saved data collected by the drone only on the device itself. No wireless data transfer. Information could be extracted only after the drone landed.

Mario Rebello, then DJI’s vice president of North American operations, was explicit about the goal. By assembling drones in the United States, DJI could file for certification that its devices met Trade Agreement Act requirements, allowing government agencies to purchase without waivers.

“We are getting caught up in geopolitical issues of the day,” Rebello told the New York Times. “There is a lot of fear and hype, and a lot of it is not true and misleading.”

The Cerritos facility focused on higher-end industrial drones used by emergency responders and for infrastructure inspections. DJI was making a good-faith effort to address security concerns through transparency and domestic operations.

It wasn’t enough.

Why US assembly failed where TikTok’s restructuring succeeded

The fundamental problem is that TikTok is software and DJI makes hardware.

ByteDance could reduce its stake to 19.9 percent and license the algorithm because code can be separated from its creator. Change who controls the servers, who trains the algorithm, and who makes content decisions, and you’ve addressed the core security concerns. The “product” is data flows that can be rerouted through American-controlled infrastructure.

A drone is physical. It has components manufactured in specific facilities, using specific technologies developed under specific government oversight. Assembling a drone in California doesn’t change where the flight controller was designed, where the OcuSync transmission module was manufactured, or where the gimbal’s firmware was written.

DJI’s 2019 “Government Edition” addressed data transmission concerns. But regulators’ worries extended beyond data. The Department of Homeland Security’s May 2019 warning expressed concerns that Chinese-made drones could be used to collect sensitive data through their cameras, mapping technology, and infrared scanners. The concern wasn’t just what data leaves the drone. It was what data the drone collects in the first place, and whether that collection capability could be exploited.

You can’t solve a hardware supply chain problem with a software feature. And you can’t solve it by assembling foreign components in a California warehouse.

The counterargument: Is TikTok’s deal actually more transparent?

Here’s where the comparison gets uncomfortable. If we’re being intellectually honest, TikTok’s “divestiture” has its own shell game qualities.

ByteDance still controls global algorithm development. The U.S. TikTok will license that algorithm and “retrain it on American users’ data,” but the underlying recommendation engine remains ByteDance intellectual property, maintained by ByteDance engineers, improved through ByteDance R&D. If 80 percent American ownership “fixes” TikTok’s security risk, why wouldn’t 80 percent American ownership of a hypothetical “DJI USA” entity fix the drone risk?

The answer reveals a regulatory inconsistency. For TikTok, American oversight of data handling and content moderation was deemed sufficient. For Drones, American oversight of anything short of component manufacturing is deemed insufficient. The goalposts moved.

DJI would likely argue that companies like Anzu Robotics or Cogito aren’t “deceptive shells” but legitimate licensing agreements, no different in structure from ByteDance licensing its algorithm to an American-controlled TikTok. If the US government refuses to audit DJI but allows Boeing and Apple to use Chinese components freely, DJI’s pivot to third-party branding becomes a rational business response to irrational policy.

That argument has merit. But it didn’t matter.

The FCC’s 2025 action confirmed that the rules changed

The FCC’s December 2025 action validated what DJI’s failed 2019 experiment had already demonstrated. The agency didn’t just target DJI by name. It added all foreign-made drones and UAS critical components to the Covered List. The language specifically addresses supply chains, not corporate structures or assembly locations.

The FCC fact sheet states that reliance on foreign-made UAS “unacceptably undermines the U.S. drone industrial base.” That’s the tell. It’s not purely a security argument. It’s an industrial policy argument dressed in security language.

Under the policy, new foreign-made aircraft and related components face authorization requirements regardless of where final assembly occurs. Even if a drone is assembled in the United States, it will be banned if it contains certain foreign-made components: batteries, motors, flight controllers, sensors, cameras, and more.

This is exactly why DJI’s Cerritos operation couldn’t solve the underlying problem. The company’s core value proposition is vertical integration. DJI designs its own gimbal systems, flight controllers, transmission technology (OcuSync), cameras, batteries, and software ecosystem. That integration is what makes DJI products work so well. It’s also what makes them impossible to separate from Chinese manufacturing in any meaningful way.

DJI was fighting the 2019 war in a 2026 reality. In 2019, “Government Edition” software security was the goal. By 2026, the goal had shifted to “Industrial Base” manufacturing origin. The game changed while DJI was still playing by the old rules.

The government ran out the clock deliberately

There’s another factor that deserves more attention: the audit that never happened.

The FY2025 NDAA required a security audit by December 23, 2025. DJI sent letters to five agencies (DHS, DoD, FBI, NSA, ODNI) requesting initiation of the mandated review. The company said it had “nothing to hide” and welcomed scrutiny.

Adam Welsh, DJI’s Head of Global Policy, wrote to Defense Secretary Pete Hegseth: “We stand ready to work with you, to be open and transparent, and provide you with the necessary information to complete a thorough review.”

No federal agency even began the audit.

The government didn’t reject DJI’s offer. It simply ignored it, running out the clock until the automatic ban triggered. This wasn’t regulatory process. It was regulatory sabotage. Any strategy DJI might have pursued, transparent or otherwise, became irrelevant when the government refused to engage with the process Congress had mandated.

Compare that to TikTok’s experience: months of public dealmaking, multiple deadline extensions, direct presidential involvement, and ultimately a successful compromise. The difference in treatment is stark.

The shell company strategy still made everything worse

Even acknowledging the regulatory double standards and the audit sabotage, DJI’s shell company pivot was a strategic catastrophe.

Understanding the 2019 attempt changes how we evaluate the later strategy. The company didn’t start with deception. It started with transparency. It opened a US facility. It created air-gapped data systems. It sought Trade Agreement Act certification. When that failed, and when the government refused to conduct the mandated audit, DJI pivoted to workarounds.

Security researcher Konrad Iturbe documented at least nine suspected DJI shell companies submitting FCC applications: Skyany, Skyrover, Cogito, Spatial Hover, Jovistar, Fikaxo, Lyno Dynamics, and others. These entities filed paperwork for drones containing DJI logos on controller diagrams, identical OcuSync frequency signatures, and battery specifications matching unreleased DJI models.

The scope of the final FCC restrictions went far beyond what anyone anticipated precisely because lawmakers felt they had no choice but to make the ban comprehensive enough that DJI couldn’t evade it through corporate restructuring, Malaysian manufacturing, or shell company distribution. Every Skyany, every Skyrover, every Fikaxo filing reinforced the narrative that DJI couldn’t be trusted. That narrative shaped the policy response.

The result was a blanket ban on all foreign drones, not just DJI. Autel, and every other foreign manufacturer, got swept up in restrictions designed to close loopholes DJI had exploited.

READ MORE: DJI Shell Game Exposed: Security Bot Catches DJI’s Fikaxo Proxy Before Congressional Deadline

DroneXL’s Take

The TikTok deal demonstrates that Chinese tech companies can find paths forward in the American market when regulators are willing to engage. ByteDance got four deadline extensions, direct White House involvement, and a negotiated settlement. DJI got silence, a deliberately ignored audit mandate, and a blanket ban.

Was DJI treated fairly? No. The government’s refusal to conduct the congressionally mandated audit was regulatory malpractice. The inconsistency between how TikTok’s algorithm licensing is treated versus how DJI’s component sourcing is treated reveals that “national security” has become a flexible concept, applied differently depending on political convenience.

Did DJI make its situation worse? Also yes. The shell company strategy transformed DJI from a company fighting unfair restrictions into a company that appeared to be evading legitimate oversight. You can argue that DJI’s workarounds were no different structurally from ByteDance licensing its algorithm. But perception matters in politics, and the perception of deception gave legislators cover for the most comprehensive foreign drone ban imaginable.

I’ve covered this industry since 2017. I remember when DJI announced the Cerritos facility and thought the company was doing the right thing. The failure of that transparent approach should have signaled that no amount of accommodation would satisfy regulators whose real goal, as the FCC eventually admitted, was protecting the “U.S. drone industrial base.”

The lesson isn’t that DJI should have tried harder to be TikTok. The lesson is that hardware and software face fundamentally different regulatory frameworks, and that those frameworks can shift mid-game from “data security” to “supply chain origin” without warning. DJI was fighting yesterday’s battle while the rules changed around them.

Looking forward six months: TikTok will complete its transition to American majority ownership, its users will notice nothing different, and ByteDance will collect licensing revenue from the world’s most valuable social media algorithm. Meanwhile, DJI’s existing U.S. inventory will continue depleting, the secondary market for used drones will inflate, and American pilots will fall increasingly behind their counterparts in Europe, Canada, and Asia who still have access to the world’s best consumer drones.

Two companies. Two regulatory battles. Two very different products. One rigged game. Two different outcomes.

Editorial Note: AI tools were used to assist with research and archive retrieval for this article. All reporting, analysis, and editorial perspectives are by Haye Kesteloo.