At a manufacturing plant near Salt Lake City with a big American flag on the wall and work stations crammed with tools and parts, dronemaker Vector Defense Inc. is in expansion mode.

The Bluffdale, Utah, company makes a few hundred small, expendable military quadcopters (drones with four propellers) a month and is ramping up to thousands after winning another Pentagon contract in September.

“We need to win on volume,” said Chief Executive Officer Andy Yakulis, who said his product is like ammunition, “a mortar round or a bullet or a hand grenade that just happens to fly.”

The U.S. military is counting on companies like Vector to help close a drone gap. The Pentagon is buying drones by the thousands even as Chinese and Russian manufacturers crank them out by the millions. As they try to catch up, U.S. drone makers must navigate formidable supply chain challenges, rapidly changing battlefield demands and the Pentagon itself, an institution more used to acquiring expensive submarines and fighter jets than cheap expendable drones.

That production shortfall captures the central challenge facing the Trump administration’s push to expand uncrewed aerial vehicle (UAV) production. The Pentagon has committed about $1.1 billion to its Drone Dominance program, a four-stage competition that uses increasingly tougher tests and larger orders to determine which companies can manufacture drones in large numbers.

Defense Secretary Pete Hegseth launched the Drone Dominance program in July last year, the latest effort to rapidly expand the American drone manufacturing base.

“We're starting from basically zero,” said Travis Metz, acting director of the Pentagon’s Defense Innovation Unit. “We actually have a very vibrant sort of entrepreneurial set of companies that do drones, but none of them have any scale in the U.S.”

The Drone Dominance program has a goal of purchasing about 250,000 drones by the end of 2027, Metz said.

Still, U.S. companies won’t be producing in the numbers a future war could demand. Russia is expected to manufacture 7.3 million small expendable drones this year, according to Ukrainian intelligence, and China has the ability to surge production rapidly to as many as 500,000 devices a month, according to a Bloomberg Intelligence report published in February.

Ukraine will produce 10 million drones this year and plans to double that figure, President Volodymyr Zelenskyy said during a speech in July.

The Defense Department’s proposed budget for next fiscal year (which is awaiting congressional approval) would vastly increase spending on drones. It includes about $55 billion for autonomous warfare development, of which roughly $17 billion would buy uncrewed systems, according to a Bloomberg Intelligence report.

However, future funding may be at risk after the midterm elections if the Democrats take control of one or both chambers of Congress. Hegseth will likely face a bipartisan push for his ouster from members of Congress who want to hold him responsible for the Iran war and other issues.

U.S. drone makers have benefited from an influx of money from the private sector. More than $60 billion in capital flowed into more than 220 U.S. companies from the start of 2025 through the end of September, according to the Association for Uncrewed Vehicle Systems International. The recipients include companies focused on aerial and maritime drones, counter-drone systems, ground robotics, autonomous vehicles and space autonomy.

More than 80 companies, most of them military producers, have announced new or expanded manufacturing facilities totaling more than 15.8 million square feet during that time, according to the association.

From a new facility in Salt Lake City, AeroVironment Inc. by next year is targeting a monthly output of 400 Switchblades, a type of kamikaze UAV that can loiter over an area before engaging a target.

For companies in Utah and other emerging drone-industry hubs such as Southern California, Huntsville, Alabama, and central Ohio (where Anduril Industries Inc. earlier this year opened a large defense industrial park) assembling the UAVs isn’t necessarily the hardest part.

China is the dominant suppliers of many key parts needed to build drones, including batteries, brushless motors and propellers, experts say. The U.S. is imposing increasingly strict guidelines on military drone manufacturers that prohibit or restrict the use of Chinese components — posing supply chain challenges for U.S. drone manufacturers.

At Teal Drones in South Salt Lake, which makes 1,000 Black Widow short-range reconnaissance drones and 2,000 Fang first-person view drones a month, rows of brushless motors, cameras and other parts await assembly on the factory floor.

Along with radios and batteries, motors and cameras “are the most expensive parts on drones,” said Chris Ericson, chief operating officer of Teal’s parent company, Red Cat Holdings Inc. “You can buy them cheap in China.” Like other military vendors, Teal instead pays a premium for parts compliant with U.S. rules.

U.S. drone makers have sought new sources domestically and among American allies while trying to ensure that subcomponents aren’t sourced in China, but securing supplies while maintaining quality and keeping prices down is difficult.

California-based Skydio Inc. has effectively eliminated direct dependence on China, said CEO Adam Bry, who warned that completely removing Chinese parts from a modern electronics supply chain is far more challenging.

“Anybody who says their dependence on China is purely zero is probably deluding themselves,” he said, because companies can have suppliers that are several layers removed from the original manufacturers.

Beside the supply chain challenge, drone technology is changing almost as quickly as the Pentagon wants production to grow. In Russia’s war on Ukraine, where both sides continuously develop countermeasures to address UAVs, drone software and components can require updates within a matter of weeks.

“Drone technology is uniquely challenging right now because the solutions needed are rapidly evolving, but they’re being called for at mass scale,” said Stacie Pettyjohn, senior fellow and director of the defense program at the Center for a New American Security.

Another potential obstacle is the Pentagon itself, where high costs, long development cycles and structural inefficiencies “impede its ability to acquire and deploy innovative technologies with speed,” the Government Accountability Office concluded last year.

Under the Pentagon’s traditional acquisition cycle, programs develop weapons systems to meet fixed requirements set years in advance, the GAO said. “This risks delivering a system — sometimes decades later — that is already obsolete.”

The Biden administration tried to overcome this problem in August 2023 with the Replicator initiative. The program targeted production of “multiple thousands” of autonomous one-way attack drones within 24 months but only produced several hundred, according to a person familiar with the matter who asked not to be named to discuss a sensitive matter.

Michael Horowitz, who was deputy assistant secretary of defense for force development and emerging capabilities in the Biden administration, said the dollar amounts for Replicator were too small and bureaucracy got in the way. “The challenges that Replicator faced show how difficult it is to get a large institution like the Pentagon to change its way of doing business,” he said.

Still, the Trump administration has adopted some parts of the Replicator initiative and unveiled other initiatives to spur defense technologies, including drones.

President Donald Trump in June 2025 issued an executive order to encourage domestic drone production, and in August imposed tariffs of as much as 100% on imported drones and their components, accelerating efforts to cut off China as a supplier.

U.S. efforts to mass produce drones primarily involve small, low-cost UAVs that are expendable during a mission. But the Defense Department is buying many types of systems, including sea drones and collaborative combat aircraft, a jet-powered drone that flies alongside fighter jets and is projected to cost roughly $20 million each once produced at scale.

The Drone Dominance program pits manufacturers against each other in a series of tests and production requirements. After each round, the Defense Department awards contracts to the best performers.

In the first phase, which focused on one-way attack drones, the Defense Department in March selected 11 out of about two dozen vendors to receive $150 million for 30,000 drones, to be delivered over five months. However, only three companies listed on an online leaderboard had delivered all drone orders by mid-September.

The average cost of drones purchased in the first stage was $5,000, a figure that is expected to go down as the volume of purchases increase, according to Pentagon officials.

One of the winners, Torrance, California-based Neros Inc., also won a U.S. Army contract in June worth as much as $500 million for small first-person-view drones, according to government contracting data. Neros has significantly increased production, said company spokesperson Reese Hamilton.

In Drone Dominance’s recent round for 60,000 drones, the Pentagon chose 10 winners in mid-September, including Utah’s Vector.

To help military units choose the right equipment, the Army opened an online drone marketplace in March where units can place orders and soldiers can leave reviews, much like shoppers on Amazon.com.

More than $850 million flowed through the marketplace, which the Pentagon in August expanded to also serve other military branches, said Col. Danielle Medaglia, the Army’s uncrewed aircraft systems project manager. However, the Army has purchased just 450 small drones so far through the marketplace from 21 unique vendors.

Separate from the market, the Army has received deliveries of 8,500 small drones through the Pentagon's Drone Dominance Gauntlet and other service-specific programs in fiscal 2026.

The Pentagon is also trying to address obstacles in production of raw materials and components, providing conditional loans to companies such as Huntsville-based Performance Drone Works LLC. The startup has received $820 million of Defense Department loans and has a goal of expanding capacity at its Huntsville facility to be able to produce 1 million critical drone components a year by the end of 2028. The company’s facility now has the capacity to manufacture 10,000 complete drone systems annually.

Last year, the Army launched a plan to establish a factory network using its aging industrial base with a goal of 10,000 UAVs per month using methods such as 3D printing, but is now focused on components, according to Jon Strzelec, Army Materiel Command’s advanced manufacturing lead for small drones.

The program has a target of 50,000 brushless motors by the end of fiscal 2027.

The efforts to mass produce drones and reform Pentagon acquisition drew praise from Horowitz, the former Biden administration official. “We will see on implementation,” he said.

Trent Emeneker, a retired Marine aviator who played a leading role in Pentagon efforts to vet manufacturers from 2020 to March of this year, took a more pessimistic view. “If we are in a major combat scenario, we need to make a million a month,” he said. “That’s the scale we need to produce. We need to do it yesterday.”

The Trump administration’s initiatives are “several big steps in the right direction,” said Jan Osburg, adjunct senior engineer at Rand Corp. and lead author of a paper published earlier this year on year on what the U.S. needs to do “to fully realize the promise of the drone revolution.”

“It’s going to be both a sprint and a marathon,” he said. “At least the runners have realized the starting gun has been fired.”

Utah’s pitch centers on affordability, an educated workforce, a robust venture capital environment and deep military roots.

At Vector, Yakulis’ co-founders include two former Navy Seals and George Matus, who started building drones in high school and founded Teal before becoming Vector’s chief technology officer. Matus has endured hype cycles for drones before but is optimistic that this time, the U.S. can ramp up production.

“What we’re seeing now,” he said, “is finally a lot of demand, like real demand, hitting companies like us.”

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—With assistance from Katrina Manson.

©2026 Bloomberg News. Visit at bloomberg.com. Distributed by Tribune Content Agency, LLC.