Supply chain gaps
NATO and allied defence companies
can close in Ukraine
For component and material makers. Ukraine now makes finished drone parts. The Chinese dependency has moved upstream, into the sensor dies, cells, magnets and materials inside them. We name suppliers outside China and the routes to close each gap.
What we set out
to answer
Our research team, led by Maksym Kovalenko, read Ukraine's drone supply chain at three layers: the finished part, the sub-component inside it and the materials behind it. Then we looked for who outside China can supply each layer.
What is inside
Eight findings.
The gap moved upstream
Ukraine makes finished parts. The dependency moved upstream
China supplied 38% of Ukraine's drone component imports by value in H1 2025, according to the Ukrainian Council of Defense Industry and Snake Island Institute.
The deepest chokepoints are materials and sensor dies
China holds about 91% of rare-earth separation and refining and 94% of sintered magnet output. Ukraine makes no thermal sensor dies.
One tier up, China's share rises
China produced 99% of primary low-purity gallium. No Chinese rule aimed at Ukraine was found. The Ukraine-specific friction is allied licensing: the EU001 general authorisation excludes Ukraine.
Non-Chinese supply costs more and is small against Ukrainian volume
A year of EU thermal camera output would cover 3 to 4 months of Ukrainian need, at 4 to 5 times the cost, Odd Systems says.
Chinese dependence also runs outside the component classes
Chinese parts reach Ukraine via third countries, and the Chinese distributor LCSC stopped taking orders from Ukraine.
Origin is paid for only in specific channels
SAFE-financed procurement caps components from outside the EU, EEA EFTA and Ukraine at 35% of component cost. No public tender was found paying more for China-free parts.
Grants fund prototypes and assemblies
Brave1 pays component makers up to UAH 8M per grant, about USD 180,000. No drone-material call was found.
Small jet engines depend mainly on European supplier capacity
PBS, one of a few European suppliers, says its capacity is at its limit. One interceptor in Ukrainian service flies on Chinese engines.
of 30 Ukrainian manufacturers polled would drop Chinese sourcing for competitive alternatives. All but one still import some Chinese components.
In our conversations with Ukrainian makers, the wish to switch comes up almost every time. What holds them back is doubt that a partner can match the price, quality and volume.
Neither Ukraine nor Europe can yet replace Chinese suppliers on scale, speed and price, says Vita Holod of Ukraine's National Academy of Sciences.
What Ukrainian producers
already make
Share of each component group made in Ukraine, from interviews with manufacturers.
Alternatives exist but cost more. Price gaps respond to procurement terms and tax parity.
Non-Chinese makers lack the volume or specification needed. These gaps close with capacity backed by multi-year purchase commitments.
The chokepoint sits upstream of a part Ukraine already makes. It closes only when a non-Chinese material chain exists.
Seven chokepoints.
Who can close each one
| Component class | Made in Ukraine | Chokepoint layer | Why China wins | Who can close it |
|---|---|---|---|---|
| 4.1NdFeB magnets and motors | Motors; no magnet production found | Magnets, rare-earth feedstock | Material | Non-Chinese magnet chains on prepaid offtake |
| 4.2Battery cells, packs and BMS | Packs; no cell production found | Cells; cathode and anode inputs | Material and price | Korean and Taiwanese cells; non-Chinese material chains |
| 4.3Thermal imaging cores and cameras | Camera assembly; no die production | Microbolometer die | Capability at volume, then price | European core makers on multi-year commitments |
| 4.4Optical fibre | Spool winding; no fibre drawing | Fibre, preform, drawing capacity | Capability and price | Non-Chinese fibre makers; a licensed drawing plant |
| 4.5Video and control radio links | Analogue links, ELRS receivers; digital near absent | Chips; finished digital links | Price and scale | Ukrainian makers on non-Chinese RF silicon |
| 4.6Flight controllers, ESCs and compute | Boards on non-Chinese microcontrollers | Finished stacks; discretes and passives | Price and tax | Ukrainian board makers, with tax parity |
| 4.7Mavic-class multirotors | Ukrainian analogs at the front since 2025 | Finished platform | Price and integration | Ukrainian designs, some built abroad |
Eleven more classes in section 05: frames and carbon fibre, day cameras, EW hardware, RF detectors, energetics, FPV ground control, GNSS and anti-jam antennas, small engines, UGV and heavy drivetrains, production tooling.
China's share of Ukrainian import value, January to September 2025
These customs codes also cover civilian goods, so the shares measure concentration across all users. Lithium-ion cells are the only code where China's share fell.
What a non-Chinese option costs
against the Chinese one
Multiple of the Chinese price for a comparable part. Bases, channels and dates differ by row.
Four routes
for a non-Chinese supplier
The EU's Ukraine Support Loan sets aside an indicative EUR 60bn for Ukraine's defence industry, with origin rules attached. Brave1 pays Ukrainian applicants. In joint programmes the partner government pays the foreign side.
Supply Ukrainian producers
Sell components into Ukrainian assembly lines. Brave1's 2024 grant rules allowed grantees to buy components.
Licensed production or a JV
Build with a Ukrainian company. A Ukrainian legal entity can apply for Brave1 grants of up to UAH 8M.
Joint programmes
Under Resolution No. 829 the partner government funds the foreign side. UNITE Brave NATO pays up to EUR 1M per joint project, BRAVE FRANCE up to EUR 1M per grant. Neither had published winners by the cut-off.
Nearshore plant
Produce outside Ukraine and supply Ukrainian assembly lines. EU makers under third-country control stay eligible for loan work after screening.
Where buyers pay for origin
The Department of Defense cannot buy drones with flight controllers, radios, data links, cameras or gimbals made in China. From 1 January 2027 its magnet ban reaches material mined, refined or separated there.
Components from outside the EU, EEA EFTA and Ukraine are capped at 35% of component cost. The first drone tranche waived the cap for engines, flight controllers and batteries, the FT reported.
Every themed call found funds finished parts or complete systems. No public call was found for cells, magnets, chips, thermal sensor dies or optical fibre.
The next three months
China's suspended October 2025 export controls take effect unless extended, including No. 58 on battery materials and No. 61 on rare-earth magnet materials.
The suspension of China's ban on gallium, germanium and antimony exports to the US ends.
China's battery export VAT rebate, cut from 9% to 6% in April 2026, ends.
The Department of Defense ban on NdFeB and SmCo magnets from China extends to material mined, refined or separated there, with exceptions.
The counter-evidence,
stated fairly
Chinese supply keeps flowing. All but one of the 30 manufacturers polled still import some Chinese components. The EU loan waiver for engines, flight controllers and batteries points the same way.
The report keeps this in view. Each chokepoint names who can close it, with the price and volume they offer today. The gap is real, and so is the cost of closing it.
What a supplier should plan for
- The 10 November date. China suspended 6 export control announcements until then. No extension was reported by 6 September 2026.
- Informal pressure. IRON Cluster's co-founder says Beijing blocks component supplies to countries such as Poland and the Baltic states when it expects the goods to reach Ukraine.
- Tax. The price gap with Chinese parts is 8% to 29%, mostly tax, say IRON Cluster and Technological Forces of Ukraine. Bills passed on 3 September 2026 extend the relief once signed.
- Domestic content. Drone makers above 50% domestic component value qualify for guaranteed contracts. On our reading, Taiwanese or European parts count against that threshold as Chinese ones do.
- Payment terms. Drone makers can take advances of up to 70% on the DOT-Chain Defence marketplace since 28 April 2026. Some producers still report unpaid deliveries.
Are you a
component manufacturer?
Tell us what you make, and we will show you where it fits in Ukraine: buyers, grants and routes in.
Not ready for a call? Message us with what you make: partnerships@darcdefence.com