From Critical Chips to International Alliances:Taiwan’s Strategic Role in Shaping a Non-Chinese Drone Supply Chain

Special Thanks to: DSET Chief Executive Officer Dr. Jeremy Chih Cheng Chang and Non-Resident Fellow Lilly Min-Chen Lee and Research Fellow Dr. Kai-Shen Huang’s feedback on this paper to make it comprehensive

Abstract

This paper examines Taiwan’s opportunities and challenges in developing its drone industry from a geopolitical technology perspective. It analyzes the strategic importance of establishing a non-Chinese drone supply chain for Taiwan’s national security and economic development.

Geopolitical Technology: Opportunities and Challenges

Recent geopolitical developments have heightened the importance of Taiwan’s drone industry. Cross-strait tensions have intensified, with increased Chinese military activities near Taiwan posing significant security challenges. Concurrently, the Russia-Ukraine conflict has demonstrated the critical role of drones in modern warfare, highlighting the importance of asymmetric warfare strategies. These factors, coupled with growing global awareness of the need for supply chain diversification in critical technologies, necessitate a comprehensive strategy for Taiwan to develop its drone capabilities while ensuring independence from Chinese influence.

^{(Photo credit: The DSET.)}

Taiwan’s Drone Industry Landscape

Taiwan’s drone sector faces several challenges that must be addressed to ensure its growth and sustainability. The limited domestic military market is insufficient to sustain industry growth on its own. In the commercial sphere, the global drone market is dominated by Chinese firms, particularly DJI, making it difficult for Taiwanese companies to gain market share. Additionally, regulatory barriers hinder research and development efforts, while competition for skilled professionals with other high-tech industries creates talent shortages. To address these issues, Taiwan must position its drone industry for dual-use applications, serving both commercial and defense needs.

Leveraging Semiconductor Expertise for International Partnerships

Despite these challenges, Taiwan possesses significant opportunities to develop its drone industry. The country can utilize its semiconductor prowess, especially in drone-specific chips for positioning and communication, as a foundation for growth. By fostering international collaborations to develop complementary technologies, Taiwan can establish itself as a key node in a global, non-Chinese drone supply chain. This approach not only enhances Taiwan’s technological autonomy but also aligns with broader international efforts to diversify critical technology supply chains.

Despite DJI’s near-monopoly in the market, Taiwanese drone manufacturers have achieved successful international linkage models. For instance, Geosat Aerospace & Technology has demonstrated adaptability and competitiveness in the international market through collaborations with foreign companies. Coretonic Corporation has successfully integrated its past strengths in software and hardware technologies, securing a strong position in the international market and becoming a vital pillar of Taiwan’s technology strategy. Through differentiated competition and proprietary branding, coupled with robust technological development and international marketing strategies, Thunder Tiger Corporation has successfully entered the international market. Finally, the success of AIDC’s drone model relies on superior avionics and system integration technologies. By leveraging international cooperation to quickly penetrate the market and combining this with the domestic aerospace supply chain, AIDC develops detection and jamming equipment tailored to various customer needs, enhancing defense capabilities.

Three Key Strategies for Taiwan’s Non-Chinese Drone Supply Chain

To realize the potential of its drone industry, Taiwan should focus on three key strategies. First, ensuring supply chain security by eliminating Chinese components from critical drone systems is crucial for maintaining autonomy and security. Second, regulatory reform is needed to revise and streamline regulations for drone testing and development, thereby accelerating innovation in the sector. Finally, investing in talent development through specialized education and training programs for drone technology professionals, including operators and pilots, will address the current skills gap and support long-term industry growth.

^{(Photo credit: The DSET.)}

Conclusion: Towards Non-Red Drone Supply Chain and Building a Resilient Security Supply Chain

Developing a robust, non-Chinese drone industry is crucial for Taiwan’s national security and economic future. By enhancing international cooperation, optimizing regulations, and cultivating professional talent, Taiwan can establish a resilient drone ecosystem. This effort will not only contribute to Taiwan’s defense capabilities but also position the country as a significant player in the global drone market. Furthermore, it aligns with broader U.S. and allied interests in maintaining a free and open Indo-Pacific region, underscoring the strategic importance of Taiwan’s drone industry development in the context of regional security and technological competition.

Through expert meetings and technical exchanges, regulatory support, and policy coordination, the United States can assist Taiwan in establishing an independent non-Chinese supply chain, ensuring the security of key technologies and components. Specific measures include promoting bilateral cooperation between companies in core drone technologies such as chips, positioning, and communication. This will help form a stable and reliable supply chain system, enhancing the autonomy and security of Taiwan’s drone technology. Additionally, it will strengthen the competitiveness of the U.S. and Taiwan in the realm of technological geopolitics.