Drone Manufacturing Shifts to Non-Chinese Battery Cells

The NDAA drone battery rule is pushing U.S. drone makers to switch to non-Chinese battery cells now, well ahead of the 2028 deadline. On their third-quarter 2026 earnings calls on November 10 and 11, solid-state battery developer Factorial (FAC) and silicon-anode cell maker Amprius Technologies (AMPX) both described drone customers choosing new cell suppliers under the rule, with compliant cells winning orders and higher prices [1][2].

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Why a 2028 sourcing deadline forces supplier choices in 2026

A drone's flight time and payload depend heavily on its battery cells, the basic energy-storage units inside a battery pack. Cell makers sell cells to pack assemblers or drone makers, which build them into packs. Under the National Defense Authorization Act (NDAA) as updated in December 2025, batteries in new Department of War drone acquisition programs must meet two requirements by January 1, 2028: final battery assembly cannot be done by a "foreign entity of concern" (FEOC, a foreign company the U.S. restricts by name), and functional cell components cannot come from one [3]. Amprius management said the deadline is about 14 months away, depending on the program [1]. Factorial's CEO explained that qualifying a new cell maker takes months, so drone makers are picking their suppliers now [2]. Amprius added that several countries either prefer or require allied-source cells, so the same demand is not limited to the U.S. [1].

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Amprius's North America revenue and cell pricing turned up this quarter

Amprius's numbers show the switch most directly. Third-quarter revenue was $39.1 million, of which North America contributed $12.2 million, raising its share from 19% in the second quarter to 31% [1]. Pricing changed too. In the second quarter, the CFO said there was not much pricing difference between end markets [4]. In the third quarter, he said recent pouch-cell pricing had trended above what the company expected a little over a year ago, because there is almost no spare high-performance cell capacity in the market [1]. He estimated that the second- and third-largest competitors can do at most $80 million and $40 million of revenue a year, respectively, and both are capacity-limited [1]. Factorial is far smaller. This quarter it booked about $26,000 of first revenue from a U.S. drone maker; management said the customer moved faster than expected, bringing first revenue ahead of the original 2027 timeline [2].

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Compliant cell makers gain pricing power while downstream buyers absorb the cost

The rule concentrates purchasing power in a few non-Chinese cell makers. Drone makers used to be able to choose cells on price; for new programs they now choose from a very short list, which lets the companies on it raise prices and turn samples into paid orders faster. Capacity is following: Amprius said the Department of War is funding a $75 million retrofit that converts part of an existing factory from standard electric vehicle batteries to drone batteries [1]. Higher cell prices will land on pack assemblers and drone makers.

This view has clear limits. The pricing signal so far comes from Amprius alone, and Amprius still makes part of its cells through Chinese contract manufacturers; its third-quarter gross margin was 26.9%, held back by product mix and air freight [1]. Factorial's revenue is still very small, and Amprius's CFO expects supply and demand to be better balanced in three to four years [1]. Metrics to track include Amprius's fourth-quarter gross margin and North America revenue share, and whether any drone maker discloses higher battery costs on its earnings call.

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Companies exposed to the drone cell switch

• Enovix (ENVX): It makes silicon-anode drone cells at its own plant in South Korea. Management says this capacity is compliant with U.S. trade-agreement rules and expected to meet the NDAA, puts its drone opportunities above $100 million, and expects demand to outstrip supply quickly [5]. It sits on the same short list as Amprius; whether those opportunities become orders depends on future disclosures.
• KULR Technology (KULR): It buys compliant cells through cell-maker partnerships and performs NDAA-compliant pack assembly in the U.S. Management says drone customers are designing for the rules now [6]. Drone makers replacing Chinese packs could bring it assembly volume, but its third-quarter gross margin was only about 4%, so higher cell prices would press directly on its costs [6].
• Unusual Machines (UMAC): It supplies NDAA-compliant components for small drones and has closed its acquisition of Upgrade Energy to make drone battery packs in-house while sourcing cells [7][8]. Chinese packs leaving the market could widen its battery business, while scarce compliant cells could raise its purchasing costs.

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Sources

[1] Drillr · Amprius Technologies (AMPX) · 2026-11-11 · Earnings call

I think the main thing driving pricing right now is that there's no capacity out there from, you know, in the market. Either you are stuck buying a standard lithium-ion cell or you try to get a high-performance cell from a very short list of participants like us.

[2] Drillr · Factorial (FAC) · 2026-11-10 · Earnings call

[3] Drillr · Amprius Technologies (AMPX) · 2026-03-05 · Earnings call

[4] Drillr · Amprius Technologies (AMPX) · 2026-08-05 · Earnings call

[5] Drillr · Enovix (ENVX) · 2026-08-12 · Earnings call

[6] Drillr · KULR Technology (KULR) · 2026-11-10 · Earnings call

[7] Drillr · Unusual Machines (UMAC) · 2026-11-05 · Earnings call

[8] Drillr · Unusual Machines (UMAC) · 2026-08-06 · Earnings call

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