Charles Goulding and Greer Veon of R&D Tax Savers examine how the rise in demand for industrial drones may increase 3D printing activity.

United Parcel Services (UPS), the multi-billion-dollar Corporation and largest package delivery service for over 200 countries, and tech company Anduril Inc. are creating comprehensive drone strategies. The business initiatives described below will change how we approach delivery and security methods, which could, in turn, drive 3D printing drone manufacturing opportunities.

The UPS Drone Strategy

With a focused effort, UPS obtained the first full Part 135 Standard certification from the U.S. Federal Aviation Administration to operate commercial drone usage through their Flight Forward subsidiary. CEO David Abney says this approval allows the company to focus more on its drone technology, and strategically on healthcare initiatives. UPS has recognized that medical supplies are perfect products for drone delivery services.

The company argues that the drone service will be seen in many campus-like environments and that numbers will grow from working with twenty campuses to hundreds. In March, the company tested the method by initiating drone deliveries of various medicine samples, medical supplies, and records to the campus of healthcare provider WakeMed Health & Hospitals in Raleigh, North Carolina.

UPS has developed deals with multiple healthcare providers. Consumer Value Source Health (CVS), the largest U.S. pharmacy healthcare provider service with over 4.5 million customers, is now working with UPS to develop drone technology for delivering prescriptions and other items to homes.

The company also has plans with Kaiser Permanente, one of the most productive U.S. medical research institutions with annual revenue of $79.7 billion, to test drone logistics. AmerisourceBergen Corporation, a leading global healthcare solutions provider, also has plans to work with UPS to deliver pharmaceuticals and records to their hospital campuses across the nation and later worldwide. The initiative would then service more than 1,500 pharmaceutical manufacturers and over thousands of healthcare providers.

CEO Abney envisions that UPS will develop a full drone airline service that would be available for multiple locations and multiple deliveries. The company argues that the drone service’s numbers will grow and soon cross over into other types of delivery opportunities. UPS now appears as the frontrunner of the commercial drone race, as their progress puts the corporation ahead of other delivery service companies, such as Amazon.com and FedEx Corporation, who are also working to develop their own drone services.

Anduril, Inc. U.S. Government Focused Strategy

Over the years, the Pentagon has invested in extensive research on drones for defensive applications. Now, U.S. military clients are using the Interceptor, a small drone programmed to spot other drones to knock out of the air with high force and speed. The drone can be programmed with camera and sensor systems in order to find and attack drones that could harm soldiers or bases.

Anduril founder Palmer Luckey and his startup tech company, which is now valued at US$1B, are also under contract to ship hundreds more of the model overseas to other conflict zones. Luckey is said to have received a US$600M share when he sold Oculus Virtual Reality to Facebook for US$2B, which no doubt helped fund Anduril. Anduril’s strategy is to proactively offer solutions to identified government issues rather than bid on standard government conflict.

The device has been invested in by numerous leading companies in Silicon Valley, as seen by the US$120M raised for the project this summer from General Catalyst and other venture capital firms. The device is also backed by leading American entrepreneur and PayPal co-founder, Peter Thiel. The venture capitalist’s firm, Founder’s Fund, is a major investor in the Interceptor.

The product could be an answer to tackling recreational drones that are repurposed for dangerous applications, including ad-hoc war fighting. Anduril is also building prototypes that can attack larger objects to potentially sell to oil and gas companies that must monitor and protect larger open areas. Anduril Inc. sees the solution to problems with defense and homeland security is new technology and devices, including drones. Luckey positions the Interceptor and the work at Anduril Inc. as an alternative to the current methods within the U.S.’ defense industry.

Source: Amphibious Force 7th Fleet

The promise of 3D Printers

The 3D printing industry enables multiple opportunities for drone innovation. Since 3D printing allows complex drone parts to be made at a fraction of the time and cost, the technology can provide an ability to make more of these devices. 3D printing can also enable inexpensive design iterations to revise the process and materials needed to create these devices.

Industries invested in using 3D printing technology to create drones likely meet the qualification for the federal R&D Tax credit. The qualifications for meeting the credit requirements are listed below.

The Research & Development Tax Credit

Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

1. Must be technological in nature

2. Must be a component of the taxpayer’s business

3. Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process

4. Must eliminate uncertainty through a process of experimentation that considers one or more alternatives

Eligible costs include US employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.

On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.

Conclusion

As companies turn to advance drone technology, manufacturers should looker deeper into the 3D printing industry to produce stronger, faster, and better devices for numerous applications.