A robust indigenous defense industry would help Taiwan counter China’s unflagging military buildup.

In late June, two Chinese destroyers sailed into Taiwan’s territorial waters. They stayed in the Taiwan Strait for nearly a week, coming within 60 nautical miles of Lamay – an island off of Taiwan’s southwestern coast – before sailing onward.

It was the latest in a series of incursions by the People’s Liberation Army (PLA) into Taiwan’s airspace and territorial waters that signal Beijing’s displeasure with the state of cross-Strait relations. Chinese military activity around Taiwan has surged since President Tsai Ing-wen of the Democratic Progressive Party (DPP) took office in May 2016. Tsai’s refusal to acknowledge that the Chinese mainland and Taiwan are part of “one China” has peeved the Chinese Communist Party.

A war of words is escalating. In a June interview with Agence France-Presse, President Tsai rebuked Beijing’s brinkmanship. “Over the past two years, we have faced increasing pressure from China as they threaten our democratic way of life and limit our international space,” she was quoted as saying by the Central News Agency. “We [the international community] need to work together to reaffirm our values of democracy and freedom in order to constrain China and also minimize the expansion of their hegemonic influence.”

Beijing responded harshly. Tsai’s remarks “aim to create hostility between compatriots from both sides” of the Taiwan Strait and attract “foreign support,” Ma Xiaoguang, China’s Taiwan Affairs Office spokesperson, said at a press conference in response to the Taiwanese president’s remarks.

In the interview, Tsai called on Taiwan to boost its military readiness “in the face of China’s threats.”

That’s where the defense initiative under the government’s 5+2 Industrial Innovation Plan comes in. The Tsai administration hopes to utilize Taiwan’s manufacturing prowess to develop the domestic defense sector so as ultimately to better counter the PLA’s relentless military buildup. Given that Taiwan’s defense budget atrophied under former President Ma Ying-jeou, Tsai has pledged to boost military spending by 20% to reach NT$381.7 billion (US$12.5 billion) by 2025.

The Tsai administration aims to secure both Taiwan’s waters and skies. Submarines would be integral to defeating an amphibious invasion of Taiwan, especially as China lacks anti-submarine equipment. Better fighter jets could prevent, or at least forestall, PLA domination of Taiwan’s airspace before the expected arrival of U.S. forces. Taiwan is also developing a new advanced jet trainer (AJT) to replace the current 30-year-old models.

Taiwan may even move into the business of military maintenance by setting up a regional service center for Boeing’s AH-64 Apache helicopter, according to a July Taipei Times report. The newspaper attributed that information to an anonymous government source.

An expanded defense sector could be widely beneficial for Taiwan, observes Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council. “Companies doing defense work typically have a well-compensated and highly skilled workforce,” he says. “This would be a boon for Taiwan, which has struggled with under-employment and low wages. It can be an important part of the Tsai government’s overall effort to upgrade the economy.”

Further, a robust defense industrial base would strengthen Taiwan’s national security by providing it with capabilities that it cannot easily procure on the global market, he adds.

For the Tsai administration, the paramount indigenous defense project is the construction of state-of-the-art diesel-electric submarines. “Because of their stealth, advanced submarines would complicate China’s war plans,” says Alexander Huang, a professor of strategy and wargaming at Tamkang University.

Taiwan’s current fleet of four dated subs would be of little use to it in a conflict with China. The Hai Shi and Hai Pao, built for the U.S. Navy during World War II, belong in a naval museum. The two Dutch-built subs are more than 40 years old.

The indigenous sub program (IDS) kicked off in December 2016 as the government awarded the CSBC Corp. (formerly known as China Shipbuilding) a US$80 million contract for submarine designs. CSBC is working together with the Republic of China Navy and National Chung-Shan Institute of Science and Technology to design a fleet of eight 1,500-ton subs. If there are no delays, the first submarine will be ready in a decade. Design and construction will require four years each, while testing will take an additional two years.

In April, the IDS got a much needed boost from Washington when the State Department approved commercial licensing of technology needed to build the subs. General Dynamics, a U.S. defense contractor, will likely offer its AN/BYG-1 submarine combat management system to Taiwan, according to a July report in The Diplomat.

“Taiwan’s indigenous submarine program is quickly reaching a key juncture of being unstoppable,” says Rick Fisher, a senior fellow on Asian military affairs at the International Assessment and Strategy Center in Washington. With that in mind, the Trump administration decided to license the sale of U.S. submarine technology. “It’s important to get on the train now if you’re going to benefit from any business,” Fisher adds.

U.S. manufacturers aren’t the only interested parties. In total, six companies have submitted design proposals: two each from the United States and Europe and one each from Japan and India. The Japanese team has expertise in diesel electric submarine designs and is reportedly working together with a U.S. defense company, The Diplomat notes.

Important questions remain about the IDS. Most importantly, can Taiwan successfully build the subs? A source with many years of experience in the defense industry has doubts. “The U.S. can provide Taiwan with the combat system, but CBSC has no experience with submarine construction,” says the source, who spoke on condition of anonymity. “How can we verify that the subs will work properly?”

The person said that inexperience amongst the IDS leadership would also be problematic. “It’s like basketball: You need a good coach to have a good team.”

Securing the skies 

To be sure, defending Taiwan’s seas against a PLA onslaught would be tough. But securing the skies would be even harder. Taiwan has an aging fleet of combat aircraft, which is being strained by the regular intrusions of Chinese bombers and spy planes into Taiwanese airspace. In an April report, Asia Times notes that each time the Chinese planes approach, Taiwan’s aircraft must take off to intercept or monitor them. As a result, Taiwan’s military aircraft require additional repairs and maintenance work.

Quantitatively, China’s air force dwarfs Taiwan’s. Beijing has 1,700 combat aircraft, second only to the U.S.’s 3,400. In contrast, the Republic of China Air Force has just 286 fighters.

Since Taiwan cannot numerically match the PLA Air Force, using technologically superior fighters to obliterate enemy aircraft would be a better bet. With a sufficient number of such aircraft, Taiwan could make an aerial onslaught by China a costly endeavor.

Taiwan intends to build advanced fighters (IDFs) of its own. In January 2017, the Ministry of National Defense announced that it would develop a new generation of stealth-enabled indigenous fighter jets.

“Taiwan’s traditional preference has been to avoid the great expense of having to develop indigenous combat aircraft along with all of their complex expensive components,” says Rick Fisher. “Being tied to a U.S. logistics support system also makes it theoretically possible for the U.S. to rapidly resupply Taiwan with fighters and/or their parts during wartime.”

The new IDF program is designed to counter increasingly advanced PLA fighters such as the Chengdu J-10B/C and Shenyang J-16, Fisher observes. In his view, Taiwan has concluded that it cannot rely solely on the United States to meet its military aviation requirements, and thus is devoting considerable resources to developing components for its next-generation IDF. Washington could help Taiwan along by selling it an effective fighter turbofan engine, he adds.

Meanwhile, there is a chance Washington will sell Taiwan its F-35 fighter jet, which is more advanced than any PLA fighter. But if not the F-35, then the United States needs to offer an alternative fighter solution to Taiwan to help safeguard its security, Fisher says.

Although China couldn’t easily land troops on Taiwan, its 1,500 ballistic missiles pointed at the island give it the capability to inflict damage from afar. Taiwan has missiles of its own with impressive capabilities, notes Fisher. He points out that the indigenous Tien Kung III (Sky Bow) surface-to-air anti-ballistic missile has a hypersonic speed, approaching some of the interception capabilities of the U.S. Patriot PAC III.

“However, both missiles share the vulnerability of being very expensive counters to a PLA missile threat that is now moving toward thousands of very inexpensive artillery rocket-based precision-guided short-range ballistic missiles,” he says. Laser or railgun weapons could allow Taiwan “to handily reverse this cost ratio,” he adds, but the United States still requires many years to develop them.

In the meantime, Taipei and Washington must still deter any Chinese military adventurism. For Taiwan, that means taking the right steps to upgrade equipment and train personnel. The professionalism of the procurement process should be improved. Taiwan cannot afford another scandal like the Ching Fu case, in which company executives committed bank fraud to ensure the shipbuilder would receive loans to finance the construction of minesweepers. The incident was an embarrassment for Taiwan, raising doubts about the feasibility of indigenous defense manufacturing.

Hammond-Chambers sees “a broad and important national security benefit” for Taiwan if it can more closely partner with U.S. and global defense supply chains. “As Taiwan becomes more important for [the production of] critical components, so its strategic importance rises,” he says. “Countries such as the U.S. and possibly Japan would see another reason for ensuring that Taiwan remains free to determine its own future.”