As drones rapidly become indispensable tools in modern warfare, Taiwan is accelerating the development of its domestic unmanned aerial vehicle (UAV) industry to prepare for potential military conflict. In a recent feature, U.S. technology magazine WIRED covered the latest policy report published by DSET, titled Drones for Democracy: U.S.–Taiwan Cooperation in Building a Resilient and China-Free UAV Supply Chain, and discussed with DSET researchers the structural challenges and policy options facing Taiwan’s drone sector.
According to the report, despite the Taiwanese government’s stated goal of producing 180,000 drones annually by 2028, the country’s actual output over the past year remains below 10,000 units. This gap underscores the existence of systemic bottlenecks across both market dynamics and institutional frameworks.
Cathy Fang, Policy Analyst at DSET, pointed out that Taiwan’s drone manufacturing is constrained by high production costs, limited domestic procurement, and a lack of foreign government orders. While Taiwan possesses world-class semiconductor and battery technologies, it has yet to develop chips tailored for UAV applications. Furthermore, the battery sector remains heavily dependent on critical minerals sourced from the People’s Republic of China. Core components such as gimbals and optical sensors must still be imported from allied countries at premium prices, further weakening the industry’s cost competitiveness.
Fang further explained that most Taiwanese drone manufacturers rely on general-purpose chips from companies like Qualcomm and Nvidia—components not specifically designed for UAVs—and these tend to be significantly more expensive than Chinese-made alternatives, in some cases costing up to ten times more.
The report analyzes this dilemma as a vicious cycle: Taiwanese companies can’t increase production and reduce costs until they get more orders, but they can’t get more orders because their costs are too high.
In response to these challenges, DSET puts forward several policy recommendations, calling for deeper strategic cooperation between Taiwan and the United States. To date, no Taiwanese drone manufacturer has been included on the U.S. Department of Defense’s “blue list”—a roster of trusted UAV suppliers—representing a missed opportunity to establish stable procurement channels with Washington. DSET urges the U.S. to actively support Taiwan’s domestic UAV industry by integrating it into its defense procurement ecosystem and, at a minimum, removing tariffs on Taiwanese drone products.
Additionally, DSET recommends establishing a more detailed roadmap for what capabilities it wants and needs and how it intends to get there.
The report concludes by noting that, despite the severe military and industrial challenges Taiwan currently faces, Ukraine’s experience offers an important source of inspiration. “Three years ago, Ukraine couldn’t have imagined having that kind of production capacity,” said Fang. “But a sense of survival kicked in, and Kyiv stood up the world’s most impressive indigenous drone manufacturing industry.”
She added, “Because we are still not at war. But I don’t want to underestimate our capacity, even though we are in a peaceful time.”
