Drone makers are having a tough time competing with China’s DJI.
Parrot, the French drone maker, announced today it is planning to lay off one-third of its drone-related workforce — about 290 employees — after poor performance in its fourth quarter caused it to miss sales estimates by 15 percent.
Specifically, Parrot said margins are so low in the consumer drone business that it wouldn’t be able to generate “profitable growth ... over the medium and long term.”
This echoes other industry commentary that DJI has been undercutting the market with much cheaper-priced drones. Parrot isn’t alone in cutting back.
Chris Anderson, CEO of drone software firm 3D Robotics, estimated in an October interview with Recode that DJI dropped prices by as much as 70 percent in less than a year, which is a key reason his company stopped making drones altogether after it entered the market in 2015 with its Solo quadcopter. The company now focuses solely on drone software.
(3DR also had difficulty reaching its shipping deadlines and there were snafus with its drone’s GPS, as well as manufacturing delays with a critically important camera stabilization component, according to a report last year in Forbes.)
Parrot says it will simplify its product lineup — using lessons from its commercial drone business, where it expects to accelerate growth this year — focusing on the most profitable and promising markets. Consumer drones generated more than 80 percent of its €60 million ($63.1 million at a Dec. 31 exchange rate) in drone revenue during the fourth quarter of 2016. Parrot did not disclose the profitability of each segment.
One reason DJI can sell its drones cheaper is because, unlike Parrot and 3DR, it owns the factories where it makes the drones, at its headquarters in Shenzhen, China.
Parrot and 3DR’s pivot away from consumer drones may prove the Silicon Valley adage that hardware is hard. But making hardware that can fly — that’s even harder.
This article originally appeared on Recode.net.