DSET Energy Security and Climate Resilience Program Policy Analyst Chen-Yen Chang on July 2 attended the General Assembly of the Taiwan Battery Association (TBA). The event brought together representatives from approximately 85 domestic companies across the battery industry. During the assembly, Chang publicly shared DSET’s latest research report, “Powering Resistance: Opportunities and Challenges in Localizing Taiwan’s Drone Battery Supply Chain,” providing an in-depth analysis of the opportunities and challenges facing Taiwan’s battery industry amid geopolitical tensions and supply chain restructuring.
Chang first pointed out that Taiwan’s drone battery industry has made significant progress in recent years. Between 2024 and 2025, Taiwanese-made drones drastically reduced their reliance on Chinese battery cells. Furthermore, according to Ukrainian customs data, the total value of battery exports from Taiwan to Ukraine has surged in recent years. By 2025, Taiwan had become Ukraine’s third-largest battery supplier—surpassed only by China and Vietnam—demonstrating that Taiwanese battery products have successfully entered the international drone market.
However, Chang explained that the critical vulnerability of Taiwan’s drone battery supply chain lies in battery cell materials. Currently, global battery cell manufacturers remain highly dependent on Chinese-made cathode and anode materials. Taking the Nickel Manganese Cobalt (NMC) lithium-ion batteries commonly used in drones as an example, China still controls approximately 65% of global cathode active material (CAM) capacity, 95% of precursor cathode active material (pCAM), 97% of anode active material (AAM) production, and 95% of battery-grade graphite processing. The export controls on lithium battery-related material processing technologies, battery cells, and precursors implemented by China in recent years reflect the critical supply chain risks that Taiwan’s battery industry must confront.
Based on these findings, Chang cited the policy recommendations from the report. Building upon the Operational Guidelines for Remote Control Drone Procurement previously issued by the Executive Yuan, the Taiwanese government could further specify a “non-Red” timeline at the electrode material level. For instance, the government could set a target to ensure that public sector procurements completely utilize Taiwan-made battery cells and feature zero Chinese material suppliers by 2028. Concurrently, by promoting the standardization of drone battery production specifications and pooling domestic market demands for high-spec batteries, the government can help domestic small and medium-sized battery manufacturers capture and secure niche markets, collectively mitigating the risks of over-reliance on Chinese supply chains.
During the Q&A session, attendees raised questions regarding export market opportunities following a potential end to the Russia-Ukraine war. Chang explained that if a ceasefire is achieved, Ukraine’s drone industry might pivot toward an export-oriented model. Given that Ukraine also aims to minimize its reliance on Chinese-made components, Taiwan’s development of a non-Red drone battery supply chain will effectively help domestic manufacturers align with non-Red market demands in the United States and Ukraine.
Additionally, some attendees noted that Taiwanese battery manufacturers currently possess competitive advantages in the research and development of next-generation batteries, such as Lithium Manganese Iron Phosphate (LMFP) batteries, solid-state batteries, and Lithium Titanate (LTO) batteries. They also highlighted that beyond military drones, commercial and agricultural unmanned aerial vehicles (UAVs) present substantial market demand, and expressed hope that more manufacturers will invest in these fields.
Chang emphasized that the non-Red sourcing of drone batteries has become a strategic issue vital to national security. This exchange further underscores the urgency for industry, government, and research institutes to collaboratively address vulnerabilities in critical materials. DSET’s Energy Security and Climate Resilience Program will continue to deepen its research into Taiwan’s battery supply chain, assisting the government in constructing a policy framework that balances supply chain security with industrial economic benefits. The full research report presented at this event will be officially launched on the DSET official website in the coming days and will be available for public download and reference.
