Pentagon Lends Neros $450 Million to Build Small Drone Parts in the US

California drone maker Neros Technologies has received a $450 million conditional loan from the Pentagon's Office of Strategic Capital (OSC) to expand US manufacturing of small drone components. Neros will add $165 million of its own, bringing the total investment to $615 million.

Neros, which makes the Archer first-person-view (FPV) attack drone, is a frontrunner in the Pentagon's Drone Dominance Program. The OSC gave another drone maker, PDW, an $820 million conditional loan in July.

A US Army soldier prepares a Neros Archer FPV drone during training in South Korea. File photo: U.S. Army (public domain).

Getting China out of the drone

Until now Neros contracted other companies to make its parts. It has started producing motors in-house and will soon begin making circuit-board components. Head of growth Ross Pederson said small drones are almost entirely made in China today, and that by late next year about 80% of a Neros drone by dollar value should be made in-house, a company projection.

Pederson said the main driver is the US ban on Chinese electronics in military drones rather than tariffs. He declined to give the loan's interest rate or repayment terms, but said it is not forgivable and comes with manufacturing goals set by the Pentagon.

OSC director David Lorch said Neros has already shown it can design, build and deliver small drones at scale.

Why it matters

The war in Ukraine has made cheap FPV drones one of the most used weapons on the battlefield, and the US Army is now training units to use and counter them. A domestic supply chain is seen as essential if the US wants to buy them in the hundreds of thousands.