00:54:59 · Ty Morse
[00:54:59] S0: You had to fast forward a couple years, and you guys do have this thing fully operational and is making a million drones a year. What does that business look like structurally versus the one that you have today?
00:55:12 · Olaf Hichwa
[00:55:12] S1: To build a million drones a year, you basically have to build a city. You have to build an entire ecosystem of components. And each little detail in that drone has a massive impact. You know, let's say you choose to use a chip in the drone and that chip is just $10. All of a sudden you have a $10,000,000 PO for just one year that you're waving around. You probably wanna do a few years of this. So there's a 30,000... $30,000,000 contract to be won for one chip in this drone. And there are hundreds of electronic components, probably thousands if you include all the SMT components in this system, you have to build a city of suppliers. I mean, lot of it should be vertical, but eventually, you know, someone's gotta sell you the sell you the raw materials probably, unless you're gonna open a mine. So you're building a massive ecosystem. And then internally, the kind of level of intention that has to be put into every part of the design at a million units per year, you assign, like, everything becomes a a challenge. Like just this, you know, this this this cable becomes a massive challenge. Like how do we how do we design this cable to be, you know, really compatible with a million unit per year run rate? How do we make sure that the motors are compatible? Each one of these almost becomes like its own little company with its own, you know, responsible individuals and folks that control the destiny of that part. So you you build a massive ecosystem with, like, areas, more specific areas of extreme ownership. I think that's the that's the best way to think about how to structure a million drone per year company.
00:56:56 · Ty Morse, Olaf Hichwa
[00:56:56] S0: Are there any lessons that you can take from a company like BYD in China? Where this is the only... This is the best example that I can think of of an entire city factory. [00:57:06] S1: Yeah. I mean, DJI's done it. [00:57:08] S0: Sky Factory. How big is their factory? [00:57:10] S1: It's it's this massive skyscraper and a bunch of buildings around it. There's an insane tour that I've probably watched 20 times on YouTube of a drone flying through their campus. It is it is mind boggling. But that's what it takes to, you know, build a million units per year. And it it took them over a decade. [00:57:32] S0: When you think of, like, Chinese production lines and factories versus the thing that you you guys have right here and in general, just United States factories, what are the biggest differences? Like, what enables them to be that much more efficient? [00:57:47] S1: So, you know, one one of the first things I did after getting back from Ukraine was going to China. [00:57:53] S0: You went to China? [00:57:54] S1: I went to China. [00:57:55] S0: Was this before getting blacklisted?
00:57:56 · Olaf Hichwa
[00:57:56] S1: This was before getting blacklisted, before getting sanctioned. But, yeah, I mean, I wanted to build drones. I was a professional drone racing pilot before this. And I wanted to see where the the drones were made. I had friends in China, I mean, sponsors that would send me free stuff. That's kind of the extent of the professionalism, but they would send me free parts. And I knew them. And I knew that they got into building drones for war. They didn't know that I was gonna get into this, but but I knew that. And I I DM'd them. And I was like, hey, I'm gonna be in Shenzhen. Do you think I could see your factory? And they were like, sure. They knew, you know, Sorin had a consumer business selling Chinese drone parts. I also sold Chinese drone parts. And they thought I was a customer. So they showed me around in detail. And they told me where every step of the process had quality checks and what the tolerances were. They were so happy to brag about their specific tolerances on their quality checks and the names of the high end machines they use to build these various parts and the different, you know, steps in the process for ensuring the best quality drone. And, you know, they were showing me drones that were destined to Russia. They showed me these production lines making 2,000 Russian kamikaze drones a day. And, honestly, insanely impactful trip. Right? Like like that... That's the end state. Or not the end state, but that's a... That's where we're going. One of the biggest takeaways there was that their manufacturing is pretty simple. It's a lot of people at desks doing pretty simple labor. And I think it's not exactly how we're gonna run our labor. I think we're gonna care a lot more about the workers. Like, you know, I'm sure you've seen the the images of the Foxconn suicide nets and the, like, you know, dorm rooms for only men or only women, seven days a week. Dorm room factory. Dorm room factory. The the production, you know, obviously the number of people and the scale was impressive, But I think we can do much better here. I think we have, you know, much smarter automation. And I'm sure that's changing in China, like it's moving away from manual labor and and towards automation. But I think we we can beat it by far. What I wanna copy from China and what I was most impressed with is actually not the production side.
01:00:30 · Olaf Hichwa, Ty Morse
I I don't think China is that advanced. They're advanced in the design side. You could literally go to this place, Huaqiangbei. It's like a bazaar, like a street market for electronics. And you could buy chips. Like a a dude will sell you a watermelon and a chip and a FEV drone jammer, but we'll we'll set that to the side. And you could prototype with that, and then you could buy a new chip same day. And you can go to a different guy down the street, and he will, in his, like, sketchy, like, you know, thousand square foot building, build you a printed circuit board with that chip. And you can go to another guy that will build you a CNC enclosure same day. And you have this, like, massive ecosystem that's all down the street from itself that allows you to iterate on products. And this is how they come out with an iPhone every year. This is how they kind of make super rapid progress on designs so that they're manufacturable. And I think that's the secret sauce. It it it is this industrial base, this city, this ecosystem that allows engineers to iterate at ridiculous speed. Like, you know, we spend six weeks waiting for boards, generally, for our for our radios. In China, that is one day. You get one day board spends. It is it is wild. And... [01:01:52] S0: How how are they that much faster?
01:01:52 · Ty Morse, Olaf Hichwa
[01:01:52] S0: How how are they that much faster? [01:01:54] S1: Well, it's just volume. Jiali Sheng, JLC, it's a it's a it's a large printed circuit board vendor. They they rib through boards. They they they make so so so many boards, and it's a light out... Lights out... They're they're winning in automation. It's a lights out automated production line. I I tried very hard to go. They would not show me that part. But the engineering infrastructure, being an engineer in China, it must... You know, you have a lot of luxuries. You maybe you have to deal with Big Brother, but you do have a lot of a lot of luxuries in how fast your design works. I think that is what is needed to build the million driven ecosystem. You need this city of industrial services almost, where you can go down the street and get your board made same day, get your camera made same day, get your lens for your camera cut same day, get your injected molded part done. That that ecosystem is so powerful, and I think that's what the kind of million drone company looks like to a certain degree. It's it's an ecosystem. [01:02:59] S0: I don't think it's fair to say that The US has, like, credible deterrence against a war against China trying to take Taiwan right now? And so if you had to fast forward a few years and say we actually are in a state where The US can credibly deter China trying to do that, what does that look like? Like, what does that require? [01:03:19] S1: I really like to think we we do currently, and and here's why. [01:03:27] S0: World