--- title: "Drones – The Booming \"Physical AI\", Rare Earths Still Key" type: "News" locale: "en" url: "https://longbridge.com/en/news/280260080.md" description: "The global drone market has doubled in five years to $40 billion, with Barclays forecasting it to expand to $250 billion by 2035. The true constraints of this revolution have moved beyond defense budgets to AI computing power, energy grids, and critical minerals. China is a dominant supplier of 40 out of 52 critical minerals, with rare earth concentration exceeding 90%. Beyond military demand, agricultural spraying reduces costs by 70%, warehousing inventory takes 50% less time, and drone delivery takes an average of 19 minutes, pushing this industrial transformation deeper into civilian applications" datetime: "2026-03-24T05:38:19.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280260080.md) - [en](https://longbridge.com/en/news/280260080.md) - [zh-HK](https://longbridge.com/zh-HK/news/280260080.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/280260080.md) | [繁體中文](https://longbridge.com/zh-HK/news/280260080.md) # Drones – The Booming "Physical AI", Rare Earths Still Key Drones are evolving from "battlefield tools" into a broader industrial chain. According to Zhuifeng Trading Desk, Zornitsa Todorova, an analyst at Barclays' Thematic FICC Research, stated in a recent report that the global drone market size has doubled in the past five years from approximately $20 billion in 2020 to over $40 billion in 2025, with projections to reach $50 billion in 2026 and $250 billion by 2035. Barclays highlighted the most overlooked "true constraints" of this business: "Constraints are increasingly extending beyond defense budgets – reflected in AI capital expenditures, energy, and critical mineral sectors." While individual drone prices are indeed falling – with expendable drones commonly priced between $20,000 and $50,000 – the true costs and bottlenecks for large-scale operations and sustained supply are increasingly shifting to computing power, power supply, and critical minerals, with rare earths remaining key. Barclays views drones as a typical form of "AI in the physical world." Defense budget expansion is only one aspect; the other three – AI capital expenditure, energy and power grids, and critical minerals – are tying defense capabilities to broader investment cycles, inflation, and industrial policies. Furthermore, military demand acts as an accelerator but may not be the ultimate endpoint. Barclays expects the civilian share to increase from the current approximately 55% to about 65% by 2035. Agriculture, warehouse inventory management, and last-mile delivery are becoming new main battlegrounds for growth: drone spraying can reduce costs by about 70%, shorten operating time by over 90%, and decrease water usage by about 90%; in warehouses, inventory processes can be reduced by 50%; for delivery, large-scale operational cases have already achieved an average delivery time of 19 minutes. ## **Drones Entering a Phase of "Explosive Growth in Patents and Revenue"** Barclays uses two sets of data to define "takeoff": market revenue expansion and soaring innovation density. Global drone patent grants grew from less than 200 in 2014 to nearly 8,000 in 2024 (a 45-fold increase), driven primarily by defense R&D investment and rapid expansion of commercial applications. Measuring market size itself is not easy – many companies do not disclose revenue by product line. Barclays' approach is to aggregate estimates from company disclosures, industry research, and presentation materials. They note that forecasts from various sources show high convergence for 2024-2025, with a standard deviation of about $5 billion. In a broader framework, Barclays categorizes drones under "Physical AI," which includes humanoid robots, autonomous vehicles, advanced industrial automation, and drones. This sector is collectively projected to become a trillion-dollar opportunity by 2035. Drones are positioned as the second-largest segment, estimated between $150 billion and $350 billion, with a baseline scenario of $250 billion; autonomous vehicles are the largest segment (approximately $250 billion to $550 billion). ![Image](https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/863747ac-91ef-47eb-9e17-1dfd5ade0996.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) ## **Growth Primarily a Defense Story: Low-Cost, Expendable, and Swarm Tactics Become the New Standard** The report's conclusion is straightforward: defense demand is the primary growth driver for the drone market, accounting for about 40%-50% of related revenue and contributing "more than half" of recent growth. It uses battlefield data to illustrate that "scale" is becoming the norm: Ukraine's drone production surged from approximately 800,000 units in 2023 to nearly 5 million in 2025, with about 2 million being FPV small systems; in the initial weeks following the outbreak of conflict in the Middle East in 2026, nearly 2,000 drone strikes were recorded. In defense scenarios, Barclays broadly categorizes drones into two ends: > - **High-value specialized platforms**: Units can cost millions of dollars, offering long endurance, high performance, and multi-mission capabilities. > > - **Low-cost, highly scalable platforms**: Primarily for short-range, limited-endurance, common expendable missions, typically priced below $50,000. > The key change is that low-cost platforms are achieving scale "quickly and densely" increasingly by relying on AI to transfer capabilities from hardware to software – such as navigation, obstacle avoidance, and coordination – shifting swarm operations from "labor-intensive" to "model-driven." ## **Individual Drones Being Cheap Doesn't Mean Systems Are Cheap: Defense Spending Shifting Towards Computing Power and Software** The report emphasizes a structural shift: Physical AI is moving defense spending from traditional "platform and personnel" components to R&D, computing power, data, and software, while also tending to reduce operational and personnel costs. This places defense systems at the intersection of "four accounts": **defense budget + AI capital expenditure + energy + minerals**, with the latter three becoming new constraints. Defense budgets themselves continue to rise: SIPRI data shows global military expenditure reached $2.7 trillion in 2024; UN projections suggest that if trends continue, it could reach $3.5 trillion by 2030 and exceed $4.4 trillion by 2035. Under a more aggressive scenario where military spending accounts for 5% of global GDP, it could reach $6.6 trillion by 2035. Structurally, NATO members' spending on "equipment and related R&D" has increased from 24% in 2014 to 30% in 2025 (with NATO's total expenditure around $1.5 trillion in 2025), which Barclays sees as an early signal of a "tilt towards infrastructure and equipment." The report also notes a surge in electricity demand. The IEA estimates that data centers already consume about 1.5%-2.0% of global electricity; this proportion is expected to rise to 4.4% by 2035, approximately 1600 TWh. The more pressing issue is localized constraints rather than national averages: AI data centers have an energy intensity comparable to heavy industries like aluminum smelting, but demand is highly concentrated. In the U.S., for example, nearly half of data center capacity is concentrated in five regions. Barclays believes the problem is not whether "the nation has enough power generation," but "whether power can be reliably delivered to nodes where demand is emerging," such as Northern Virginia (PJM), Texas, and parts of the U.S. Midwest. ## **Critical Minerals Are Not Just a Cost Item, But a Boundary for Strategic Autonomy** The drone hardware stack's reliance on critical minerals spans the entire supply chain: > - **Propulsion systems**: High-performance motor magnets require rare earths (such as Pr, Nd, Sm, Dy) as well as nickel and copper. > > - **Structural frames**: Aluminum, titanium, magnesium, and tantalum are used for lightweighting and strength. > > - **Communications and navigation**: Beryllium, gallium, germanium, and indium are used in fiber optics, sensors, radar, and imaging. > The report identifies 52 critical minerals, with China being the dominant supplier for 40 of them. The concentration of rare earths is even more extreme: rare earths include 17 elements, 14 of which are classified as critical minerals, and China's supply share for these 14 exceeds 90%. While supply chain "de-concentration" is progressing, Barclays' outlook is cautious: over the next five years, planned new rare earth mining capacity outside China is expected to exceed 50,000 tons/year, separation capacity over 40,000 tons/year, and magnet/alloy capacity at least 70,000 tons/year. However, very few projects have reached final investment decisions (FID); rare earth mining typically takes 10-20 years from exploration to commercialization, and the gaps in midstream and downstream technology and experience are particularly difficult to bridge. ## **After Military Incubation, Civilian Use Will Tell the Full Story** The report places the "ultimate demand" for drones on productivity improvement, rather than solely on defense cycles. Following the path of "military first – cost reduction – civilian diffusion," it outlines three categories of applications: > - **Agriculture**: By the end of 2024, DJI estimates its global active fleet of agricultural drones to be around 400,000 units (compared to about 80,000 in 2020). If extrapolated at the same growth rate, the agricultural drone fleet could reach nearly 3.5 million units by 2035. Case studies in spraying show that costs can be reduced by about 70% compared to manual backpack spraying and by about 50% compared to tractor spraying; time can be shortened by over 90%, and water usage reduced by about 90%. > > - **Warehouse inventory**: After UPS Supply Chain Solutions introduced Verity autonomous drones at its "Velocity" warehouse in Kentucky, inventory process time was reduced by 50% within months. > > - **Last-mile delivery**: Since Alphabet's Wing and Walmart began their collaboration in Dallas-Fort Worth in 2023, they have achieved thousands of deliveries per week, with an average delivery time of under 19 minutes, connecting 18 Walmart Supercenters in a "hub-and-spoke" model. > > > ![Image](https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e5afac74-c032-43fa-893d-456fbae00be5.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) ### Related Stocks - [AVIC UAS (688297.CN)](https://longbridge.com/en/quote/688297.CN.md) - [Tianhong CSI Robot ETF (159770.CN)](https://longbridge.com/en/quote/159770.CN.md) - [China Merchants CSI Robot ETF (560770.CN)](https://longbridge.com/en/quote/560770.CN.md) - [ChinaAMC CSI Robot ETF (562500.CN)](https://longbridge.com/en/quote/562500.CN.md) - [Fullgoal CSI Rare Earth Industry ETF (159713.CN)](https://longbridge.com/en/quote/159713.CN.md) - [A GX AI TECH (03006.HK)](https://longbridge.com/en/quote/03006.HK.md) - [Harfor CSI Artificial Industry ETF (515980.CN)](https://longbridge.com/en/quote/515980.CN.md) - [E Fund SSE STAR Artificial Intelligence ETF (588730.CN)](https://longbridge.com/en/quote/588730.CN.md) - [Harvest CSI Rare Earth Industry ETF (516150.CN)](https://longbridge.com/en/quote/516150.CN.md) - [Huatai-PB CSI Rare earth industry ETF (516780.CN)](https://longbridge.com/en/quote/516780.CN.md)