Efforts to build a non-Chinese drone supply chain are gaining traction, but fragmented systems, procurement delays, and global competition could limit how far and how fast Taiwan can advance.
In his inaugural address two years ago, President Lai Ching-te set out an ambitious plan to turn Taiwan into a regional hub for uncrewed aerial system (UAS) supply chains serving democratic partners. Since then, that vision has begun to take shape. Taiwan is positioning itself as a trusted supplier of drones free of Chinese components to the United States and other countries increasingly wary of Beijing’s reach into critical industrial systems.
The industry remains in its early stages but is expanding rapidly. Taiwan produced roughly 10,000 drones in 2024, a figure that surged to more than 120,000 in 2025, most of them for export. Samara Duerr, a policy analyst at the Research Institute for Democracy, Society and Emerging Technology (DSET), says exports increased more than 35-fold last year to about 122,000 units.
Momentum has carried into 2026. Exports of uncrewed aerial vehicles (UAVs) reached roughly 85,500 units in the first two months of 2026, suggesting another strong year. The sector’s output value has climbed in tandem, rising from NT$5 billion in 2024 to NT$12.9 billion in 2025. It is projected to reach NT$20 billion in 2026, according to the Ministry of Economic Affairs (MOEA), which has set a longer-term target of NT$40 billion by 2030.
Still, obstacles to smooth development of the industry abound. The conservative Taiwanese military “is very resistant to uptake the UAV systems,” says Drew Thompson, a senior fellow with the S. Rajaratnam School of International Studies (RSIS). “It is not something they have envisioned.”
The military has adopted a hybrid doctrine that blends elements of an asymmetric “porcupine” strategy —one emphasizing a multitude of small, mobile, and relatively inexpensive weapons platforms — with conventional warfighting relying on major arms systems with big price tags.
As a result, there is no overarching strategy for how drones would be deployed to guide acquisition decisions. Instead, Taiwan is handling procurement on a platform-by-platform basis, Thompson says, often preferring the flashier equipment that traditionally has been the pride of each branch of the military.
In addition, the opposition Kuomintang and Taiwan People’s Party have been holding up a special defense budget of NT$1.25 trillion that includes calls for funding 200,000 drones by 2033. Analysts say the parties have shown limited support for developing a domestic drone industry, while the fate of other Cabinet-backed budgets for drone development remains uncertain. The delays have slowed efforts to scale up the sector, reinforcing concerns about whether Taiwan can build the industrial capacity needed to meet its longer-term defense objectives.
Too small a market
The most immediate challenge Taiwan faces is expanding the industry in order to offer more competitive pricing, retired Admiral Lee Hsi-min, former chief of the General Staff of Taiwan’s armed forces, told TOPICS by email.
“Taiwan’s domestic market is relatively small,” says Lee. “Relying solely on military procurements is insufficient to sustain long-term research and development and industrial scaling. To achieve economies of scale, Taiwan must expand into overseas markets and liberalize commercial drone applications.”
Policymakers have begun to move in that direction. The MOEA established the “Taiwan Excellence Drone International Business Opportunities Alliance” (TEDIBOA) in 2024, bringing together government agencies and domestic manufacturers to develop non-Chinese supply chains. The initiative is designed to connect Taiwanese drone and component makers with overseas customers.
The alliance now includes more than 260 companies, says Jennifer Chuang, president of the Aerospace Industrial Development Corporation. It has signed memorandums of understanding (MOUs) with counterpart organizations in eight countries — the United States, Japan, Czechia, Poland, Ukraine, Estonia, Latvia, and Lithuania.
TEDIBOA also promotes innovation by providing a platform for domestic manufacturers, including small and medium-sized enterprises (SMEs), to collaborate and share technology. According to the MOEA, the alliance has already secured overseas orders worth a total of NT$4.25 billion. More broadly, business-to-business agreements are proliferating, with more than half of those memorandums signed with American companies, Duerr says.
The vast majority of Taiwan’s drone exports go to Czechia and Poland, with the United States a distant third. Taiwan typically exports dual-use, incomplete drones, as well as such components as batteries, motors, and cameras, Duerr says. Direct exports of purely military systems are constrained by diplomatic sensitivities. Analysts say shipments to Czechia and Poland are often destined for Ukraine, where they are used on the battlefield.
Chiayi-based Kunway Technology reportedly exports two models of “kamikaze” quadcopters containing no Chinese components to Ukraine via Poland. The larger version can carry bombs of up to 8 kilograms.
“A lot of Taiwan’s demand is driven by the war in Ukraine,” Duerr says. “If the war ends, demand is likely to go down, which complicates Taiwan’s efforts to scale up.” Demand for Taiwan’s drones and related components could dry up, while Ukraine could in turn flood international markets with its own UAVs.
The United States requires its military drones to be free of Chinese components, although compliance has been uneven. In December, the Trump administration said that all foreign-made drones and their components posed “unacceptable risks to the national security of the United States.” The restrictions include imports from DJI, China’s largest drone maker, though the Departments of Defense and Homeland Security can grant exemptions in cases deemed not to pose a security risk.
Alluding to continuing opportunities for Taiwanese drones, American Institute in Taiwan Director Raymond Greene noted at AmCham Taiwan’s Hsieh Nien Fan banquet in March that the Ohio-based Association for Uncrewed Vehicle Systems International (AUSVI) had signed an MOU with the Industrial Technology Research Institute (ITRI) on Green UAS certification, a cybersecurity and supply chain compliance standard for drones, components, and software manufacturers.
ITRI will serve as a recognized assessor, Greene said, adding that the arrangement makes Taiwan the only location outside the United States certified by AUSVI for drone cybersecurity testing and could help ensure the security of Taiwan’s UAV systems.
In what Admiral Lee calls a major milestone, a drone created by Taiwan’s Thunder Tiger Corporation, a onetime toy maker, has been included in the U.S. Department of Defense’s Blue UAS Cleared List, meaning it has been vetted for government and military use. Lin Ting-wei, a non-resident fellow with the national security team at DSET, says the company plans to compete for participation in the U.S. Drone Dominance Program in order to secure government orders. Though it was not included in the first round of awards, she says, the company can pursue future opportunities and already supplies some participating companies with components.
Competing without China
Domestically, the government is taking steps to support the drone industry. The Asia UAV Innovation Application R&D Center opened in Chiayi in 2022, with the nearby Minxiong Aerospace and UAV Industrial Park expected to serve as a testing ground for manufacturers, though it is not yet fully operational.
The MOEA says it plans to gradually integrate drones into missions such as disaster-response inspections and environmental monitoring. Taiwan’s Public Construction Commission requires that drones procured by the public sector come from non-Chinese supply chains, while agencies including the Ministry of Digital Affairs and the National Communications Commission enforce strict standards on sourcing, cybersecurity, and performance to keep systems “red-free.”
Building non-Chinese supply chains presents significant challenges, not least competition from China, which can offer lower-cost drones to markets where security concerns are not an issue. China still accounts for the majority of the global UAV market. According to the Global Taiwan Brief, DJI sells drones at prices 50% to 70% lower than comparable U.S.-made systems. Taiwan’s drones, while generally cheaper than American ones, are still about 25% more expensive than those produced in China.
Robert Fintak, president of the Polish Chamber of Unmanned Systems, says China is accumulating valuable experience across diverse markets, enabling it to refine drones for a wide range of environments. In Iran, for example, systems must withstand extreme heat, while in Russia and Ukraine, they must operate in temperatures as low as minus 30 degrees Celsius.
Taiwan, by contrast, still needs to build the expertise required to fully localize its systems. “Taiwan can’t copy and paste Ukraine’s strategy,” Duerr says. “Because Taiwan is an island, its maritime front line constitutes different drone needs.” She notes that light reflecting off the water in the Taiwan Strait can interfere with sensors, forcing drones to recalibrate repeatedly. That, in turn, drains batteries and reduces flight time compared with similar operating conditions in Ukraine.
Like many UAV manufacturers elsewhere, companies in Taiwan still depend on certain materials from China, including rare earth magnets and germanium, Admiral Lee says.
That can pose a challenge when Taiwanese SMEs seek to offer a non-red supply chain when entering global markets. Thompson of RSIS notes that many of these enterprises are family businesses without transparent and institutionalized governance systems. “That presents a lot of risk for international partners,” he says.
Thompson adds that prime U.S. contractors such as Raytheon operate under stringent compliance regimes and are reluctant to engage with companies lacking sufficient transparency. Moreover, some family-run companies transitioning into the drone sector maintain business ties in China, sometimes through relatives, making it difficult to fully eliminate Chinese influence. “The burden of proving a non-red supply chain is often difficult,” Thompson says.
“Integrating with U.S. supply chains of course needs certifications,” explains Sheu Jyh-shyang, an associate research fellow with the government-funded Institute for National Defense and Security Research. “These kinds of processes go relatively slowly. It’s not surprising that it will take time.”
Taiwan’s state-run National Chung-Shan Institute of Science and Technology (NCSIST) is the most active public-sector player in this sector and is being promoted by the government as a key partner for international business, says Rupert Hammond-Chambers, president of the Washington, D.C.-based U.S.-Taiwan Business Council. “They are developing numerous solutions, but it will take time, and NCSIST has had issues in the past with developing other systems on time and at cost,” he says.
Duerr notes that NCSIST, which tends to focus on capabilities that are difficult for Taiwan’s private sector to develop on its own, is working with foreign partners, including American drone company Shield AI, to close key technology gaps. Once these systems are fully developed, the technology is expected to be transferred to the private sector.
Duerr describes Taiwan’s drone ecosystem as highly fragmented, with numerous companies operating on incompatible systems. In contrast, Ukraine relies on Delta, a cloud-based integration platform and national data lake that brings multiple types of weaponry together into a single system, giving military leaders a real-time operational picture of the battlefield. Ukraine’s drones are interoperable through Delta, she says.
In Taiwan, Duerr argues, domestically produced drones will need to operate on a unified command-and-control system. Software and other technologies acquired from, or developed with, American companies such as Anduril Industries would also need to be integrated into that framework.
“The government gave NCSIST the mission to solve this problem,” she says.
Capability to deployment
Taiwan is pursuing a “high-low” mix of drones, combining more advanced, higher-cost systems with cheaper, expendable ones. As it works to build up its domestic industry, it continues to procure platforms from the United States. In March, Taiwan received the first two of four MQ-9B SkyGuardian drones, among the most sophisticated systems in its inventory. At the same time, it has taken delivery of lower-cost tactical loitering munitions, including the Switchblade 600 and the Altius 600M.
American companies have also signed a series of MOUs with NCSIST. In June last year, Auterion announced a strategic partnership with the institute, describing it in a press release as its first international agreement with a defense technology company and “a significant milestone in advancing Taiwan’s autonomous drone capabilities across air, maritime, and land domains.”
The partnership will see Auterion OS, the company’s operating system for uncrewed systems, and Nemesis, its AI-powered drone swarming platform, integrated into a new generation of uncrewed vehicles developed by the institute.
In August last year, to coincide with the delivery of its attack drones, Anduril Industries announced that it had established a new Taiwan branch and was expanding collaboration with NCSIST, signing an MOU focused on AI-enabled command-and-control systems and uncrewed platforms.
A month later, AeroVironment announced that it had also signed an MOU with the institute aimed at strengthening the resilience and sustainability of Taiwan’s uncrewed and precision-strike systems.
In February, Shield AI announced that it had signed a contract with NCSIST to advance the development of AI-piloted drones capable of operating in contested environments where communications are degraded and GPS is jammed.
As part of the collaboration, Shield AI’s Hivemind software is to be integrated into the institute’s uncrewed systems. The platform enables drones to perceive their surroundings, make decisions, and execute missions autonomously, allowing them to avoid obstacles and respond to unexpected conditions without direct human control.
Brandon Tseng, cofounder and president of Shield AI and a former Navy SEAL, says Taiwan is pursuing an indigenization strategy, localizing AI pilot systems and integrating the company’s technology into its own platforms. He adds that Shield AI has already implemented a similar approach with the Singaporean Air Force.
Indigenizing the technology is critical for Taiwan, he says: “You don’t want to go back to the U.S. during wartime and say, ‘Can you modify our AI pilots? Can you update them?’”
For his part, Admiral Lee notes that Taiwan’s budgetary constraints extend beyond opposition efforts to block funding for the UAV industry. “Under Taiwan’s existing military procurement process, it typically takes one to two years from the initial requirements proposal to securing budget approval — this is before any UAVs are actually acquired.”
“This timeline cannot keep pace with the rapid iteration cycles of drone technology,” he says.
By contrast, Ukrainian manufacturers and assemblers receive continuous feedback from frontline units, allowing battlefield data to translate into near-real-time adjustments in production. “This has brought changes in battlefield data into almost real-time production changes,” Duerr says. Analysts broadly agree that Taiwan needs to study and adapt elements of this model.
