Drone developer Neros is attempting to mass-produce small and attritable drones free of Chinese components—helping to address a major military supply chain vulnerability.

The Department of Defense’s Office of Strategic Capital (OSC) has announced a conditional loan commitment of up to $450 million to American drone manufacturer Neros—intended to help expand the company’s domestic production of small unmanned aircraft systems (SUAS) and their components.

The agreement supports the Trump administration’s efforts to expand American drone production and reduce reliance on foreign suppliers at a time when inexpensive drones are becoming increasingly important to modern military operations.

Why Neros Is Getting a Massive Pentagon Loan

Neros operates a manufacturing facility in Torrance, California. The proposed financing package would support an expansion of the company’s domestic manufacturing capability—specifically its plans to manufacture complete small drone systems, ground control systems, propulsion motors, flight-control electronics, radios and communications equipment, sensors, batteries, and other critical components. The objective is vertical integration, meaning Neros would manufacture more of the components that its own drones need, rather than relying on outside suppliers. The expanded facility could also supply components to other American and allied drone manufacturers. In its statement announcing the loan, the Pentagon emphasized the production of components compliant with NDAA procurement restrictions.

So why is the Pentagon willing to offer such generous financial incentives to improve domestic drone manufacturing? The announcement coincides with a growing concern inside defense circles about whether the United States is too dependent on foreign manufacturers for drone technology—just as drone technology is becoming increasingly relevant to the way modern wars are fought. China has established a dominant position in important segments of the global commercial drone industry, and has come to dominate related supply chains; even drones that are assembled in the United States often rely on foreign-made motors or batteries or electronics, creating a degree of vulnerability. Improved domestic manufacturing would enhance supply security and decrease vulnerabilities. Naturally, the Pentagon wants an industrial base capable of producing large quantities of affordable drones without foreign reliance. Neros’ proposed expansion could help meet this need.

The Pentagon Wants Cheap, Attritable, and Mass-Produced Drones

The war in Ukraine has demonstrated just how important inexpensive unmanned systems are. In the early days of the war, the Armed Forces of Ukraine relied heavily on medium and large drones—notably the TB2 Bayraktar, credited with helping to save the country from Russia’s invasion of northern Ukraine via Belarus. The drone’s impact on the war was so substantial that pro-Ukrainian artists commemorated it with a song. However, within months, sophisticated Russian anti-air systems had shot down many of the Ukrainian drones, leading to a culture shift in their use. In the years that followed, Kyiv shifted from deploying large and powerful but irreplaceable drones to tens of thousands of small drones which would cause negligible harm to Ukrainian operational readiness if lost.

Today, small drones are used by militaries around the world for reconnaissance, targeting, artillery spotting, and direct attacks. FPV drones pose a viable threat to much more expensive systems like vehicles and fortifications, at a fraction of the cost of many traditional systems that would have been used similarly by default in the past. This widespread drone use creates enormous demands, however, for both aircraft and components. Crucially, because these systems are disposable, the economics of military production are upended. Industrial bases must build the capacity to replace losses rapidly. That is where the Pentagon’s new financing initiative comes in, addressing that industrial challenge, with financial tools to support tech and industrial growth.

The Neros agreement speaks to a broader shift in American defense priorities. The Pentagon understands that future military competition may depend on drone manufacturing capacity—and is shifting money around to reflect that understanding.

About the Author: Harrison Kass

Harrison Kass is a writer and attorney focused on national security, technology, and political culture. His work has appeared in Tablet, City Journal, The Hill, The Spectator, and The Cipher Brief. He holds a JD from the University of Oregon and a master’s in Global & Joint Program Studies from NYU. More at harrisonkass.com.

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