The Research Institute for Democracy, Society and Emerging Technology (DSET) National Security Program Policy Analyst Cathy Fang was recently interviewed by international and domestic media outlets, including Nikkei Asia, Resilience Media, and SET News online program “A Military Jacket,” to discuss the implications of the Legislative Yuan’s cuts to defense special budget allocations related to unmanned systems and their potential impact on the future development of Taiwan’s drone industry.
The Executive Yuan recently proposed an eight-year special defense budget totaling NT$1.25 trillion, which the Legislative Yuan substantially cut on May 8, retaining only up to NT$780 billion in U.S. arms procurement-related items. The decision has drawn significant attention from both domestic and international media. DSET’s National Security Program has also previously provided analysis to media outlets including Agence France-Presse (AFP), France’s Le Figaro, and Japan’s Sankei Shimbun.
Recent reports by Nikkei Asia and Resilience Media highlighted concerns that the removal of drone-related budget items could create uncertainty for Taiwan’s emerging drone industry. The reports also cited Kuomintang politician Jaw Shaw-kong’s remarks at a Taiwan Foreign Correspondents’ Club (TFCC) press conference in May, where he stated that the party supports the development of the defense industry but believes drone-related spending should be incorporated into the annual budget process to strengthen oversight mechanisms.
In her interview with Nikkei Asia, Fang noted that moving drone-related funding back into the annual budget process could create a policy and procurement gap of approximately two years. Based on current procedures, she explained that relevant budget proposals would likely not be submitted until September 2026 at the earliest, with legislative review potentially completed after February 2027. Actual procurement implementation could therefore be delayed until mid-to-late 2027, potentially causing Taiwan to miss a critical opportunity to secure a key position within the international “non-red supply chain” ecosystem. The report also noted concerns among industry stakeholders that if domestic defense procurement progress stalls, foreign companies may shift their partnerships toward other markets.
Resilience Media also cited Fang’s analysis that government procurement serves not only as a foundation for building a “non-red supply chain,” but also as a key driver for industrial scaling and overall defense resilience. She noted that modern drone warfare is increasingly evolving toward attrition-based models, where production capacity and resupply speed are becoming as important as platform performance itself — an area where Taiwan still faces challenges.
During her interview on “A Military Jacket,” Fang further analyzed the development of Taiwan’s drone supply chain. She stated that Taiwan’s long-term goal should be to gradually move toward building an “self-sufficient supply chain”. Beyond increasing production capacity, Taiwan must also clarify non-red standards for different critical components. She added that the Public Construction Commission under the Executive Yuan has begun developing government procurement frameworks that set phased targets and timelines for reducing reliance on restricted supply chains for key components.
Fang emphasized that defense procurement orders serve as an important “demand signal” for industry, influencing corporate investment and research and development priorities. Beyond budget size, procurement mechanisms themselves are also critical to advancing defense technology development. Using the United States as an example, she pointed out that the Defense Advanced Research Projects Agency (DARPA) supports emerging technology validation and development through early-stage prototype testing and small-batch procurement. Flexible acquisition mechanisms such as Other Transaction Authority (OTA) have also helped accelerate the adoption of emerging technologies.
She further noted that Taiwan has established an innovation unit similar to the U.S. Defense Innovation Unit (DIU), known as the Defense Innovation Organization (DIO). Introducing more flexible procurement mechanisms could help accelerate the development of emerging defense technologies, including unmanned systems.
DSET’s National Security Program will continue to track developments in Taiwan’s unmanned systems industry, supply chain resilience, and related defense technology policies.
