Executive Summary
The escalating rivalry between drone giant DJI and camera specialist Insta360 has moved beyond product competition into a fierce battle for control over critical supply chains and sales channels. This conflict highlights deeper structural issues within China’s precision manufacturing ecosystem and poses significant questions for market competition and investor risk assessment.
Key takeaways include:
– DJI, leveraging its market dominance, is reportedly enforcing exclusive agreements with key suppliers, pressuring them to choose between its business and that of competitor Insta360.
– Insta360 has faced abrupt supply chain cutoffs, impacting core components like optical lens modules and structural parts, forcing rapid shifts to alternative suppliers and increasing production costs.
– The conflict has extended to retail channels, with instances of property management agreements explicitly blocking Insta360 storefronts in shopping centers where DJI is present.
– Legal experts debate whether these practices constitute an abuse of market dominance under China’s Anti-Monopoly Law, with outcomes potentially setting precedents for the tech hardware sector.
– For global investors, this supply chain exclusivity battle underscores the importance of evaluating non-financial risks, including supplier concentration and ecosystem dependencies, within Chinese technology equities.
The Hidden Frontlines: A Supply Chain Under Siege
In the high-stakes arena of consumer drones and action cameras, competition is no longer confined to specifications and marketing. A silent war is being waged deep within the supply chain, where component manufacturers are being forced into exclusive allegiances. The supply chain exclusivity battle between Shenzhen-based DJI Innovation Technology Co., Ltd. (深圳市大疆创新科技有限公司) and Insta360 Innovation Technology Co., Ltd. (影石创新科技股份有限公司) reveals a hardening of competitive tactics in China’s tech sector.
For suppliers, the choice is becoming stark: work with the market leader, or service its rising challenger. This dynamic is creating ripple effects that could reshape manufacturing ecosystems and influence the pace of innovation.
Exclusive Pressures Intensify
The situation escalated markedly in 2024. According to Zhou Guangtai (周广太), Insta360’s head of supply chain, what began years ago as informal verbal requests from DJI to certain structural component makers evolved into a systematic campaign by the third quarter of 2024. Core suppliers were explicitly told they could not supply Insta360, though they could work with other clients. Insta360 founder Liu Jingkang (刘靖康) detailed in an internal letter that in the six months before the launch of its ‘Antigravity’ drone, over 30 core suppliers across optical lenses, structural parts, screens, batteries, and chips suddenly faced ‘exclusive’ pressure.
This supply chain exclusivity has tangible consequences. One optical lens module supplier, after reaching the design verification stage with Insta360 and having molds paid for, was forced to halt cooperation. Insta360 waited two years to recover its mold costs. Another chip supplier designed a custom chip for Insta360 only to be blocked from shipping it, forcing a costly and time-consuming switch to an alternative solution.
Strategic Implications for Hardware Innovation
The targeting of specific component categories is strategic. Optical lens modules have been a primary focus of this supply chain exclusivity. The barrier here is not raw capacity but access to high-precision, reliable production lines that meet the stringent requirements of leading brands. As one supplier employee explained, while the technology for assembling these modules is relatively standardized, the capital investment for the precise testing equipment and stable, 24/7 production environments is prohibitive for smaller players, creating a bottleneck.
This pressure extends beyond primary suppliers to secondary ones, such as motor and lens sheet providers. For a company like Insta360, which previously relied on a ‘just-in-time’ procurement model within China’s manufacturing clusters, these disruptions force a fundamental shift toward building a more vertically integrated and secure supply chain—a move that requires significant capital and changes its operational DNA.
The Supplier’s Dilemma: Calculation, Risk, and Survival
Caught between two tech titans, component manufacturers are engaging in complex risk-reward analyses. The decision is rarely a simple one, as it involves weighing immediate revenue, long-term relationships, and the fear of retaliation.
The Economics of Choosing Sides
For many suppliers, DJI represents a colossal and irreplaceable revenue stream. One lens module supplier disclosed that DJI is among its top five clients, and losing its business could slash company revenue by over 10%. Another supplier with annual revenue exceeding 10 billion yuan sees over one-fifth of its income come from DJI; facing an exclusive ultimatum, it must consider a potential 500 million yuan revenue hit.
However, Insta360 represents growth. One supplier noted that while DJI’s orders for a specific component are in the millions, Insta360’s orders, though smaller at 500,000 units this year, are projected to double next year. Some suppliers are adopting a wait-and-see approach, monitoring the market performance of Insta360’s drone line before committing fully to an exclusive relationship with DJI. This supply chain exclusivity battle forces them to bet on which company will dominate the future.
Operational Workarounds and Their Limits
Some suppliers desperate to maintain both relationships have contemplated creative workarounds, such as setting up shadow companies to handle Insta360 orders covertly. However, as one supplier noted, the industry circle is too small; even transferring employees to a new factory could raise suspicions. The fear of detection and subsequent punitive action from DJI, often communicated orally rather than in writing to avoid legal scrutiny, acts as a powerful deterrent.
The core issue is that in segments like custom structural parts and specialized modules, the number of suppliers capable of meeting the technical and quality benchmarks is limited. When the dominant player in the downstream market claims exclusive rights to these top-tier suppliers, it creates a significant barrier to entry and scaling for competitors, directly impacting their cost structure and time-to-market.
From Factories to Storefronts: The Channel Conflict Erupts
The supply chain exclusivity battle has a very public counterpart in the fight for retail shelf space and consumer mindshare. What was once subtle competition has erupted into open conflict in sales channels, particularly in traditional photography equipment markets.
The Case of the Dismantled Storefront
In November 2025, Insta360 dealer Zhang Junqiang (张均强) watched as a store sign he had invested over 1 million yuan to install was forcibly removed from a mall in Hunan Province. The reason was not a lease violation but a clause in a supplementary agreement between the mall management and a DJI dealer. The agreement stated that during the DJI dealer’s lease term, the mall would not “introduce or permit any third party to open a brand专卖店 for brands that have a strong competitive relationship with DJI products,” explicitly naming Insta360 as such a brand.
Li Qingchi (李庆篪), Insta360’s head of sales in China, describes this as an escalation. Earlier friction involved DJI sales teams requesting dealers to remove social media posts featuring Insta360 products. Now, it involves formal property-level agreements blocking market access. Insta360 has faced similar barriers in premium shopping malls across China, with one national commercial real estate company reportedly issuing directives that projects hosting DJI cannot admit Insta360.
Redefining Retailer Relationships
The photography equipment channel, historically a cooperative space where Canon, Sony, and Nikon dealers operate side-by-side, is being reshaped by this zero-sum mentality. DJI successfully integrated into these channels years ago by offering subsidies for store renovations and dedicated sections. Now, as Insta360 seeks to expand its own retail footprint, it is encountering resistance fueled by its rival’s influence over channel partners and landlords.
While the Hunan market regulator initially declined to pursue the case as a monopoly issue—noting other Insta360 dealers operated normally in the same mall—the incident forced a revision. The supplementary agreement was voided, and Zhang was permitted to reinstall his sign. However, the event signals a new normal where market access disputes could become a recurring cost and operational headache for challenger brands.
Legal Scrutiny: Navigating China’s Anti-Monopoly Framework
The critical question for regulators, companies, and investors is whether these exclusive practices cross the line into anti-competitive behavior. China’s Anti-Monopoly Law (反垄断法) provides the legal backdrop for assessing such supply chain exclusivity arrangements.
Defining Market Dominance and Abuse
Wei Shilin (魏士廪), Vice Director of the Competition Law Committee of the Beijing Intellectual Property Law Research Association, explains that the illegality of “pick-one” behavior hinges on whether a company abuses its market dominance by imposing unreasonable trading conditions that exclude or limit competition. Determining market dominance involves analyzing factors like market share, control over procurement markets, and the competitive landscape.
DJI’s undisputed leadership in the consumer drone market—often cited with a global market share well over 70%—places it under scrutiny. If its actions are found to leverage this dominance to lock up essential suppliers or retail channels, thereby raising costs and barriers for competitors like Insta360 without objective justification, it could face regulatory action.
The “Justifiable Reason” Defense
A key argument from the DJI perspective, as voiced by one of its R&D mid-level employees, is protection of joint innovation. The employee contended that DJI has invested years and resources in cultivating certain suppliers, jointly elevating technology and performance. Allowing those suppliers to immediately turn and supply a competitor could be seen as free-riding on DJI’s R&D investments. Under the Anti-Monopoly Law, such a rationale could potentially be defended as a “justifiable reason” if the company can prove the behavior is necessary, proportionate, and ultimately benefits innovation and consumers.
Wei Shilin emphasizes that the defense is context-specific. The burden of proof lies with the company asserting it. Regulators would weigh whether the pro-competitive effects (like incentivizing R&D investment) outweigh the anti-competitive effects (like stifling rival innovation and consumer choice). This legal ambiguity is at the heart of the current supply chain exclusivity battle.
Investment Implications: Assessing Risk in Chinese Tech Equities
For institutional investors and fund managers with exposure to Chinese technology hardware stocks, this conflict is a case study in non-financial risk. It underscores the need to look beyond balance sheets and evaluate ecosystem vulnerabilities and corporate governance practices.
Beyond Product Launches: Systemic Supply Chain Risks
The Insta360 experience demonstrates how quickly a company’s operations can be disrupted by supply chain exclusivity pressures, even if it has a compelling product pipeline. Investors must assess:
– Supplier concentration risk: How reliant is a company on a single source or a small group of suppliers for critical components?
– Counterparty power: What is the balance of power between the company and its key suppliers? Can suppliers easily be replaced?
– Vertical integration strategy: To what extent is the company investing in backward integration or cultivating a diversified, loyal supplier base to mitigate these risks?
For a challenger like Insta360, the need to rapidly develop ‘Plan B’ suppliers increases procurement costs and operational complexity, potentially squeezing margins. For DJI, aggressive supply chain tactics, while possibly securing short-term advantages, carry reputational and regulatory risks that could impact long-term valuation.
Broader Market and Sector Considerations
This battle may be a bellwether for other segments of China’s tech hardware industry, where a dominant player emerges. Similar dynamics could unfold in areas like electric vehicle components, robotics, or advanced manufacturing. Investors should monitor regulatory sentiment closely. Recent years have seen China’s State Administration for Market Regulation (国家市场监督管理总局) take a more assertive stance against anti-competitive practices in the internet platform economy. Whether this scrutiny extends deeply into the hardware manufacturing supply chain remains a key watchpoint.
Furthermore, environmental, social, and governance (ESG) focused investors may view coercive exclusive practices as a governance concern, related to fair competition and ethical supplier relationships. This could influence capital allocation decisions from certain funds.
Synthesis and Forward-Looking Guidance
The supply chain exclusivity battle between DJI and Insta360 is more than a corporate rivalry; it is a stress test for China’s innovation ecosystem. It pits the imperative for market leaders to protect their investments against the need for a competitive landscape that fosters new entrants and continuous innovation. The outcome will depend on a complex interplay of corporate strategy, supplier courage, and regulatory interpretation.
For Insta360, the pressure has been a brutal catalyst for building a more resilient and self-reliant supply chain—a painful but potentially strengthening process. For DJI, the strategies employed to maintain its edge will be judged not only by their effectiveness but by their compliance with evolving legal standards and their impact on the industry’s health.
Global investors are advised to incorporate supply chain dynamics into their due diligence frameworks for Chinese tech holdings. Key actions include engaging with company management on their supplier relationship strategies, monitoring regulatory announcements from bodies like the State Administration for Market Regulation, and diversifying portfolios to account for ecosystem-specific risks. The evolution of this supply chain exclusivity conflict will offer critical insights into the maturity of China’s capital markets and the rule of law in its business environment, factors that ultimately underpin long-term investment confidence.