DSET’s National Security Program publishes drone newsletters reviewing a curated selection of the most noteworthy domestic and international sources, and providing insights into the development of Taiwan’s drone industry and the implications of global uncrewed aerial vehicle (UAV) trends for Taiwan.
This Issue’s Drone Highlights:
Taiwan’s Drone Budget Enters Review; Delays Push Allied Firms Toward Japan: The Legislative Yuan will review drone procurement budgets this week. The Executive Yuan on June 18 approved a NT$210 billion special budget act for indigenous defense uncrewed systems, but KMT and TPP counterproposals would shift funding into the annual budget process instead. In this issue, we break down the differences between the three versions. Budget delays are slowing Taiwan’s production, while Japan and other allied countries, with steadier budgets, have become the preferred entry point for firms targeting the Asian market.
Taiwan’s Military Drills Drive Drone Kill-Chain Integration: In the first half of 2026, Taiwan expanded live-fire testing and fielding of uncrewed systems across the Marines, Navy, Air Force, and Army, including loitering munitions, ISR drones, anti-radiation UAVs, and US-sourced Altius-600M systems. At sea, NCSIST’s cooperation with Anduril on the DIVE-LD autonomous underwater vehicle has advanced to fielding training, marking an early step toward long-endurance undersea inspection, seabed mapping, and maritime infrastructure monitoring.
DSET 2026 Annual Forum Spotlights Taiwan-U.S.-Ukraine Drone Cooperation: At its June 2026 Annual Forum, DSET convened Taiwan, U.S., and Ukraine industry experts to take stock of the progress and challenges facing Taiwan’s drone industry, with procurement timelines and critical components still constrained and international cooperation key to breaking through. This month, DSET’s research was cited by The Diplomat, Nikkei Asia, Sankei Shimbun, Radio Taiwan International’s Ukrainian-language program, and Business Today, spotlighting Taiwan-Japan and Taiwan-Ukraine cooperation and detailing the industry impact of budget delays.
Ukraine’s Uncrewed Systems Export Opens Up; Indo-Pacific Becomes a Key Market: Ukraine’s government announced in July that certain weapons and defense technologies can now be exported to countries with which it has a ‘Drone Deal.’ While this does not include Taiwan, Ukrainian interests in the Indo-Pacific security market remain high. Reuters and other outlets report that several drone and USV makers have already been actively engaging the Taiwan and Japan markets.
US Drone Moves Signal a Distributed Indo-Pacific “Hellscape” Buildout: Five June developments—from V-BAT operations in the South China Sea and the activation of a new Multi-Domain Command-Pacific to MQ-9B arrivals in Taiwan, Triton transfers to the Philippines, and RIMPAC uncrewed-system experiments—show the US advancing distributed sensing, allied nodes, and attritable mass across the first island chain. For Taiwan, the main gap is not hardware but interoperability, as it has fewer routine channels to rehearse linking its sensors and shooters with US and allied networks.
Japan Accelerates Interceptor Drone Procurement: Japan’s defense minister announced in June that Japan would speed up procurement of interceptor drones, and Japanese firm Terra Drone has separately announced a production partnership with Ukrainian manufacturers on interceptor drones and other models. Taiwan’s procurement programs and domestic manufacturers’ product portfolios still lack these types of platforms, making them an area worth learning from.
Japan’s Unmanned Drone Sector Makes Major Strides：as the Japanese government moves to expand its defense manufacturing capacity, the country’s drone industry has also been buzzing with activity. European aerospace giant Airbus announced in June that it would jointly develop military drones with Kawasaki Heavy Industries, while U.S. defense company Anduril is also reportedly in talks to acquire a Nissan plant for drone production.
U.S. Drone Dominance Program Announces Gauntlet II Results: 19 of 49 competing firms advanced, with the eventual winners set to receive an order for 60,000 drones; reports indicate the Department of War is weighing equity stakes in three drone companies, one of which is among the 19 finalists.
On 18 June, the Executive Yuan approved the Special Act on the Procurement of Indigenous National Defense Uncrewed Vehicles (國防自主無人載具採購特別條例), capped at NT$210 billion (US$6.6 billion) and running from August 2026 through end-2031. The bill answers an earlier setback, reserving funding entirely for domestic procurement across three categories: 1,446 littoral surveillance drones, 208,200 littoral attack drones, and 1,320 kamikaze uncrewed surface vessels. It does not, however, close the NT$470 billion gap covering commercial procurement, NCSIST’s 32 Albatross II units, and US-Taiwan jointly developed and co-procured systems.
On 29 and 30 June, both opposition parties tabled competing versions, each routing funding through the annual budget rather than a special act and pairing procurement with industrial development in a single bill. The KMT proposed the National Defense Uncrewed Vehicles Technological Development and Procurement Act (國防自主無人載具科技發展及採購條例), a NT$240 billion, six-year program at NT$40 billion a year. The TPP introduced the Strengthen National Defense Self-Reliance and Drone Industry Development Act (強化國防自主暨無人機產業發展條例), which sets no spending ceiling. The Legislative Yuan is scheduled to refer all three versions to committee together at its 3 July plenary session.
The deadlock coincided with two US-Taiwan developments, one abroad and one at home. Leading a legislative delegation to Washington, Speaker Han Kuo-yu raised US-Taiwan drone co-production with members of the US Senate and House and officials at the Department of War and the White House. Separately, Taichung Mayor Lu Shiow-yen, whose city is a major drone-industry hub, and AIT Director Raymond Greene will cohost a drone industry forum on 2 July.
The difference between the ruling and opposition party drafts is chiefly over the funding vehicle and its oversight terms. The Executive Yuan version handles procurement through a special budget: it ring-fences multi-year funding and disburses quickly, giving manufacturers a sustained demand signal, but critics fault it as a “blank check” that bypasses normal scrutiny. The opposition versions, by contrast, favor annual budgeting, which subjects procurement to yearly bargaining and a slower, more constrained funding stream, all the more so as this year’s general budget remains under review more than 300 days into the fiscal year.
The implications are twofold. First, Taiwan’s manufacturers need a stable procurement budget before committing to further investment; a stop-start appropriation weakens the very demand signal that would justify it. Second, while Taiwan debates, international drone makers are gravitating toward partners with steadier budgets and clearer policy direction, such as Japan. Within the past month, US defense firm Anduril entered talks to acquire Nissan’s Oppama plant for drone production, Portugal’s Tekever announced plans for a Japanese manufacturing base, and Germany’s Rheinmetall moved to establish its first defense facility there. If Taiwan’s funding stays frozen, allied partners seeking a stable, well-resourced Indo-Pacific manufacturing base have an increasingly credible alternative, and Taiwan risks ceding the bilateral co-production momentum the FY2026 NDAA wrote into US law.
Taiwan’s Military Drills Drive Drone Kill-Chain Integration
(Author: Cathy Fang)
Taiwan conducted a series of drone live-fire events, exercises, and fieldings through the first half of 2026, spanning NCSIST-developed, first commercial-grade military UAVs procurement, and US-sourced platforms. Across the services, the Marines’ Mighty Hornet I conducted loitering-munition live-fire; the Navy’s surveillance and land-based surveillance variants performed ISR to cue precision missile strikes; the Air Force’s Chien Hsiang exercised anti-radiation suppression; the Army’s Altius-600M struck maritime targets; and the Army’s Capricorn flew reconnaissance. The pattern suggests Taiwan is moving uncrewed systems from acquisition into operational testing across every service, integrating them into existing kill chains.
A parallel milestone is the fielding of uncrewed systems at sea. NCSIST’s cooperation with Anduril on the DIVE-LD autonomous underwater vehicle has advanced to fielding training, with formal acceptance expected in August. NCSIST plans to prioritize an undersea-cable inspection demonstration and to assess the vehicle for search and rescue, maritime-accident evidence collection, and seabed mapping, building an indigenous long-endurance underwater detection capability. The large AUV operates to 6,000 m and navigates without GPS, carrying sonar, sensors, and high-resolution cameras on a modular, rapidly reconfigurable payload bay. Owing to agreements with Anduril and US arms-control rules, NCSIST positions the DIVE-LD for now as a commercial system for ocean survey, infrastructure maintenance, and SAR rather than a military platform.
Public Record of ROC Military Drone Exercises and Live-Fire Validation in 2026
System
Type
Unit
Date
Event and Result
Chien Feng I
Live-fire validation
Navy / Marine Corps
29 January (Lunar New Year Combat-Readiness Drill)
First public live-fire employment during the Navy’s Lunar New Year combat-readiness drill in Kaohsiung. The initial round failed due to fin-control malfunction; subsequent land- and boat-launched rounds successfully engaged maritime target balloons.
Surveillance / Land-Based Surveillance
Exercise validation
Navy, Marine Corps, Hai Feng Missile Group
Employed for maritime ISR, gray-zone response, and counter-landing scenarios. Drone-derived targeting information supported M109 assault-boat interception drills and simulated Hsiung Feng II/III anti-ship missile engagements.
Chien Hsiang
Operational exercise
Air Force Air Defense and Missile Command
7–9 April
Integrated into the Tianlong Exercise as a first-wave counter-blockade capability in a PLA blockade scenario. The exercise validated joint air-sea strike coordination.
Altius-600M
Live-fire validation
Army 21st Artillery Command Drone Battalion
3 June
Conducted its first publicly reported live-fire engagement against maritime targets during the Tianma Exercise in Yilan. Public reporting stated a 100 percent hit rate.
Provided aerial reconnaissance during an immediate combat-readiness drill in New Taipei City, supporting target detection and ground-force response against simulated infiltrators.
(Sources: Ministry of National Defense, compiled by DSET)
DSET 2026 Annual Forum Drone Panel Spotlights Supply-Chain Resilience: Taiwan, U.S., and Ukraine Experts Chart a “Constrained at Home, Breaking Through Abroad” Path
(Author: Jim Hsu-Sung Wu)
On June 6, at DSET’s 2026 Summit on Supply Chain Resilience, the panel “Taiwan–U.S.–Ukraine Cooperation on Drone Supply Chains” was moderated by DSET Policy Analyst Cathy Fang. It featured Gene Su, General Manager of Thunder Tiger Technology; Alexander Chang, East Asia Director at Anduril Industries; Andrii Ordynovych, Director of Strategic Development at the Free Ukraine Foundation; Molly Campbell, Research Assistant with the Defense Program at the Center for a New American Security (CNAS); and Artur Savchii, Analyst at the Snake Island Institute, who took stock of the progress and structural challenges facing Taiwan’s drone industry.
Fang reported that Taiwan exported roughly 123,000 drones in 2025, with first-quarter 2026 exports alone reaching 139,000 units, most routed to Ukraine via Poland and the Czech Republic. Yet uncertain domestic procurement timelines and continued reliance on Chinese-sourced components constrain Taiwan’s capacity to scale—underscoring, she argued, the necessity of international cooperation. On industry breakthroughs, Gene Su noted that with domestic procurement stalled, Thunder Tiger has pivoted abroad: its “Overkill” drone joined the U.S. Blue UAS Cleared List and placed in the top 11 of Phase 1 of the U.S. “Drone Dominance” Program, while the company opened a “Made in USA” motor line in Ohio to ease supply-chain bottlenecks. Chang revealed that over the past year Anduril has added 15 local suppliers in Taiwan, grown direct procurement fifteenfold, and integrated its Lattice command-and-control platform with Taiwan’s existing systems.
The Ukrainian and U.S. experts underscored the strategic value of “quantity” and “speed.” Ordynovych, invoking the image of being “outnumbered, but undeterred,” stressed that Taiwan must build modular component stockpiles, rapid iteration capacity, and whole-of-society defense resilience at once; from Ukraine’s frontline experience, he noted that drone designs are often updated weekly, and that sustaining mass production in wartime is what decides the outcome. Campbell introduced the CNAS “Hellscape for Taiwan” report, which proposes dividing the Taiwan Strait into four layers beginning roughly 80 kilometers from Taiwan’s coast, using low-cost uncrewed systems to deplete a landing force layer by layer; she cautioned that, given uncertainty over U.S. procurement, Taiwan should not expect Washington to fill its industrial gaps single-handedly, making deeper cooperation with Ukraine and Europe all the more critical. Savchii pointed to the strong complementarity between the two: more than 77% of Ukrainian manufacturers hope to phase out Chinese-made components, making Taiwanese electronics a prime opening, while Ukraine’s combat data and design experience can help Taiwan improve its domestic drones.
Beyond the forum, the National Security Program’s research on unmanned systems has continued to draw media attention. Cathy Fang published an op-ed in The Diplomat warning that special-defense-budget cuts could leave the drone industry facing a procurement gap, and was interviewed by Nikkei Asia and others on the impact of annual-budget delays. Fang also appeared on PTS Taigi TV Station’s “New Perspectives” and SET News’ online program “A Military Jacket” to discuss Taiwan’s NT$300 billion drone-industry strategy. Ryan Teng spoke to Sankei Shimbun and Nikkei Asia, examining opportunities and challenges to drone industry cooperation between Taiwan and Japan.Samara Duerr was interviewed by Radio Taiwan International’s Ukrainian-language program on Taiwan–Ukraine drone cooperation. AFP, Le Figaro, and Resilience Media likewise cited DSET analysis on the explosive growth of Taiwan’s drone exports.
Ukraine’s Uncrewed Systems Export Opens Up; Indo-Pacific Becomes a Key Market
(Author: Samara Duerr)
On July 1st, the Ukrainian Cabinet of Ministers unveiled a special mechanism under martial law that allows manufacturers with the capacity to fulfill both state and overseas orders to export non-critical weapons systems and defense technologies, including various types of uncrewed systems.
The move is expected to let Ukraine scale production and attract investments for the benefit of its defense forces, while establishing clear rules for cooperation with international partners. Under the published rules, the export review procedure takes up to 30 days and requires a minimum contract value of UAH 15 million (US$334,400); meanwhile, 20% of the profit from the export of finished products and technologies and 30% from the export of components will be redirected to the special state budget.
Notedly, exports of this kind are only authorized to ‘Drone Deal’ countries with which Ukraine has already made government commitments. As of the end of June 2026, this equates to the Netherlands, Lithuania, and Latvia, with agreements preparing to be made with Denmark, Germany, Canada, and the United States.
For Taiwan, this poses a significant challenge: to date, owing to the political risk of provoking China, Taiwan-Ukraine defense cooperation agreements remain limited to the business-to-business (B2B) level, with no government-to-government ‘Drone Deal’ yet signed, a gap that could constrain future Ukrainian exports to Taiwan.
Nonetheless, Ukrainian interest in selling to the Indo-Pacific market remains high. A Reuters article from this past June points out, according to interviews with 20 defense contractors and Ukrainian and Japanese government officials, there is a “large push by Ukrainian drone makers to tap a military-spending surge in Asia by U.S. allies eager to ward off an increasingly assertive China and deter a conflict over Taiwan”.
Evidence of this includes Ukrainian attack drone manufacturer UForce, which has already established contact with the Japanese market and participated in Indo-Pacific exercises using its sea drones. In addition, at least three Ukrainian manufacturers have confirmed they are already in contact with Taiwan as they look to enter the Taiwan market. Thus, while direct G2G agreements between Taipei and Kyiv are persistently elusive, Taiwan can still indirectly gain advantages from Ukraine’s integration into the broader Indo-Pacific security architecture.
US Uncrewed Systems Converge Across the Indo-Pacific in June
(Author: Cathy Fang)
Five US developments in uncrewed systems advanced within a tight June window. Taken together, they point to a pattern of distributed sensing and attritable mass across the first island chain.
On 17 June, the 11th Marine Expeditionary Unit launched a V-BAT from the USS Portland with the Boxer Amphibious Ready Group in the South China Sea. The Shield AI drone takes off vertically from a six-by-six-meter deck, stays aloft over 10 hours, and is designed to operate through GPS and communications jamming, letting an amphibious ship conduct over-the-horizon ISR without a runway or catapult. On 18 June, the Army activated the 7th Infantry Division (Multi-Domain Command-Pacific) at Joint Base Lewis-McChord, a roughly 12,000-strong, two-star theater command merging the 7th ID and the 1st Multi-Domain Task Force. It is structured to integrate long-range fires, cyber, space, electronic warfare, intelligence, and uncrewed systems under one standing headquarters.
On 21 June, the first two of four MQ-9B SkyGuardian aircraft reportedly arrived in Taiwan, with the remaining two due by 2027 under a roughly NT$21.7 billion program. Configured for round-the-clock, long-endurance ISR and over-the-horizon targeting, they add a high-end surveillance capability to Taiwan’s force. On 22 June, the US transferred four Ocean Aero Triton autonomous vehicles (about US$13 million) to the Philippine Navy at Subic Bay. Solar and wind powered and able to remain at sea more than 30 days, they expand surface and undersea sensing provided through an ally rather than US platforms alone. Finally, RIMPAC 2026 opened in Hawaii with 31 nations and 30 to 35 uncrewed-systems experiments, which Pacific Fleet leadership called a central focus. The drill is a venue for participating navies to test fusing multiple nations’ data feeds into a common operating picture.
Read together, these moves suggest the US is assembling the components often associated with the “Hellscape” concept, mobile sensors, allied nodes, high-end ISR, and a standing command, as distributed, largely peacetime efforts rather than a single program. The concept, attributed to U.S. Pacific Command Admiral Samuel Paparo, envisions saturating the Taiwan Strait with uncrewed systems early in a conflict, and June’s developments align with several of its prerequisites. For Taiwan, the relevant question is integration. As a non-participant in RIMPAC and a partner outside formal US alliance structures, it has fewer routine opportunities to rehearse linking its sensors and shooters with US and allied networks, which makes interoperability a more open question than hardware.
Japan’s Interceptor Drone Procurement: Taiwan Should Rethink Rapid Testing and Acquisition Mechanisms
(Authors: Hung-Yuan Teng & Mei-Hsin Lin)
In early June, Japanese Defense Minister Shinjiro Koizumi stated on X (formerly Twitter) that he hoped the public would help disseminate information about the MOD’s “interceptor drone procurement program.” The procurement places “speed” and “effectiveness” at its core: the announcement was issued in early June, proposals were due by late June, products are expected to be selected in early July, testing will take place from July to August, and a mass-production contract is scheduled to be signed in late August.
Interceptor drones have emerged as a key weapon on the Ukrainian battlefield for countering Russian unmanned aerial vehicles. During the conflict involving Iran, Ukrainian- and U.S.-made interceptor drones also played an important role in countering Shahed drones.
According to the requirements released by the Japan’s MOD, the interceptor drones are primarily intended to counter targets flying below 18,000 feet, at speeds of approximately 250 kilometers per hour, and weighing no more than 600 kilograms. These include, in particular, one-way attack drones such as the Shahed and Harpy-type.
Notably, Japan has not made “local production” a requirement. Instead, the emphasis is on rapidly introducing effective systems into the Self-Defense Forces.
At the same time, the Japanese company Terra Drone has announced over the past three months that it will pursue joint investment and production cooperation with Ukrainian companies Amazing Drone and WinnyLab, with a focus that also includes the production of interceptor drones.
By comparison, Taiwan has not yet included interceptor drones in its current procurement programs, nor have Taiwanese companies announced cooperation with Ukrainian firms to manufacture related models. Japan’s procurement design therefore offers an important reference point for Taiwan.
Japan’s Unmanned Drone Sector Makes Major Strides
(Author: Abby Huang)
Japan’s unmanned drone sector has seen significant developments over the past week. Reuters reported exclusively on June 25 that U.S. defense company Anduril is in talks to acquire Nissan Motor’s Tsuruhama Factory, located near the Yokosuka Naval Base (headquarters of Japan’s Maritime Self-Defense Force), to establish it as a military unmanned drone production facility.
Whether Japan’s largest post-war automotive manufacturer will transform into a weapons manufacturing center reflects industrial demand driven by geopolitical shifts. To demonstrate its ability to meet Japan’s domestic production requirements, Anduril developed “Kizuna” (meaning “bonds” in Japanese), a fully Japanese-made unmanned drone using exclusively Japanese components, last year.
European aerospace giant Airbus also announced on June 26 that it has signed a Memorandum of Understanding (MoU) with Japan’s Kawasaki Heavy Industries, planning to integrate Kawasaki’s anti-submarine warfare systems onto the “Eurodrone” (a European unmanned aircraft being developed jointly by Airbus and three other European companies), and jointly propose a customized variant to Japan’s Ministry of Defense.
This marks the first collaboration between a major Japanese heavy industry enterprise and a foreign counterpart in the defense unmanned aircraft sector. The MoU stipulates that Airbus and Kawasaki Heavy Industries will develop an unmanned aircraft variant tailored for the Japanese market, integrating Japanese-manufactured sensors and effectors, and explore collaborative production, maintenance, and logistics support models involving Japanese industry. The goal is to enable Japan to operate the unmanned aircraft platform independently without reliance on foreign support.
As Japan accelerates development of its domestic unmanned drone industry, China’s Ministry of Commerce announced on June 29 that it is placing 20 Japanese entities on an export control list for dual-use civilian-military materials, specifically targeting the unmanned drone, nuclear, and defense sectors. These include six subsidiaries under Mitsubishi Heavy Industries (Japan’s largest defense contractor), four affiliated enterprises of Mitsubishi Electric (a missile and radar manufacturer), and two subsidiaries of Kawasaki Heavy Industries (aircraft and submarine manufacturer). Additionally, entities including Mitsui E&S, Terra Drone, and Mitsubishi Nuclear Fuel have been added to a watchlist, subject to heightened export licensing reviews. This marks China’s second round of export restrictions on Japan since placing 40 Japanese companies on a blacklist in February of this year.
19 Drone Firms Advance to DDP’s Gauntlet II, and 1 Negotiates Federal Funding
(Author: Samara Duerr)
On July 1st, the U.S. Drone Dominance Program announced the 19 companies advancing to Gauntlet II, pared down from a previous pool of 49 qualifiers. These firms’ drones passed tests in both long range strike and tactical assault in close quarters.
Before Gauntlet II begins, these UAV companies each have 5 weeks to complete an order of 120 units, including lethality payloads. Additionally, each company will work together and be partnered with at least one previously selected DDP lethality provider—Bravo Ordnance, Kela Defense US Inc., Kraken Kinetics Inc., Mountain Horse LLC, or Northrop Grumman Systems Corp..
Following Gauntlet II, the DDP will procure 60,000 drones from the resulting winners. However, this isn’t the only pathway the U.S. is taking to push “America First” initiatives and reduce reliance on China.
In May this year, the Wall Street Journalrevealed that the U.S. Office of Strategic Capital—operating under the Department of War—has been in month-long negotiations over funding agreements with private drone companies. The companies publicly verified as being considered for this funding deal are Unusual Machines, Neros Technologies, and Performance Drone Works. One of these, Neros Technologies, is simultaneously a DDP Gauntlet II competitor. Find their details in Table 2 below.
In order to increase domestic drone production, which in turn lowers cost and coincides with broader national security objectives, the Office of Strategic Capital is offering funds in exchange for debt or equity stakes. Though these specific drone investments remain pending as negotiations continue, Washington’s industry policy shift into equity stakes is proven.
Specifically, government investments are extending to other critical sectors, such as semiconductors and critical minerals, culminating in $26.7 billion USD worth across thirty deals involving the transferral of direct ownership since January 2025.
This pivot towards a ‘China-free’ supply chain is beneficial to Taiwan, as it aims to position itself to integrate directly into the American defense industrial base through initiatives like the “Blue Skies for Taiwan Act of 2026”.
Drone Companies with Potential Trump Administration Funding
• Drone motors• Fat Shark HDO+ Headset• Aura Analog FPV Camera Module• Aura Video Transmitter (VTX)• Brave F7 Flight Controller• Brave 55A 4-in-1 Electronic Speed Controller (ESC)
• Not invited to participate in Gauntlet I or Gauntlet II• Supplies FPV components to PDW, a DDP participant
• Secured major military contracts and system integrations, including supplying the U.S. Army’s 101st Airborne, Red Cat’s FAN™ Lethal Strike Systems, and a $12.8 million defense order with Strategic Logix.• Other Multi-million-dollar contracts (e.g., $5M+ with Powerus, $3.75M with PDW), culminating in a monumental $75 million domestic inventory order.• Secured Blue UAS approval which drove 6,700 of flight controllers, making them a primary supplier of NDAA-compliant components
• ARCHER: FPV drone built for modular payloads and resilient comms• ARCHER STRIKE: Kinetic-enabled FPV• ARCHER FIBER: Fiber-Optic FPV• CROSSBOW: ground control station• LONGBOW: Maximum range ground control station for stationary positions
• Placed 2nd in Gauntlet I• As a result, 2,400 drones shipped (1,760 accepted)• Invited to participate in qualifiers for Gauntlet II• Passed Qualifier round and will proceed to Gauntlet II in August 2026
• Secured over $6.1 million in direct federal prime contracts, including a $17 Million Marine Corps Contract for the Archer Strike FPV• In November 2025, the U.S. Army selected Neros Archer FPV (Archer / Archer Strike drone platforms in both 5-inch and 10-inch variants) for the Purpose-Built Attritable Systems (PBAS) Program• Won a contract to send 6,000 FPV attack drones to Ukraine• Entered a purchase agreement with MICC Fort Drum with a $25 million ceiling to supply Blue List Compliant UAVs and their components
• C100: Multi-mission quadcopter• AM: Attritable Multirotor strike drone• PDW CORE: ground control station• PDW SIM: Dynamic 3D maps• Blackwave: radio system
• Competed in Gauntlet I, but did not rank in the Top 11 nor secured orders• Invited to participate in qualifiers for Gauntlet II• Did not pass the qualifiers for Gauntlet II
• Awarded a $20 Million Army contract for C100 systems and MMPs to be used in the 18th Airborne Corps and U.S. Army Special Operations Command (USASOC)• Secured $15 Million in Army Contracts for their C100 Drone fielded in INDOPACOM, European command, and central command• PDW’s first contract award with the U.S. Air Force for its C100 was with the 93rd Air Ground Operations Wing (AGOW)• Awarded a $6.9M contract from the Special Operations Forces Acquisitions, Technology and Logistics (SOF AT&L) office for delivery of Blackwave
(Source: Publicly available information compiled by DSET)
[DSET Drone Newsletter] Taiwan’s Budget Review, DSET Forum, Ukraine’s Export Opening, U.S. DPP Phase II, and Japan’s UAV Push (July 16, 2026)
Authors: Jim Hsu-Sung Wu (Editor-in-Chief), Cathy Fang, Samara Duerr, Hung-Yuan Teng, Abby Huang, Mei-Hsin Lin
2026-07-16
About DSET Drone Newsletter
DSET’s National Security Program publishes drone newsletters reviewing a curated selection of the most noteworthy domestic and international sources, and providing insights into the development of Taiwan’s drone industry and the implications of global uncrewed aerial vehicle (UAV) trends for Taiwan.
This Issue’s Drone Highlights:
Taiwan’s Drone Budget Enters Review; Delays Push Allied Firms Toward Japan
(Author: Cathy Fang)
On 18 June, the Executive Yuan approved the Special Act on the Procurement of Indigenous National Defense Uncrewed Vehicles (國防自主無人載具採購特別條例), capped at NT$210 billion (US$6.6 billion) and running from August 2026 through end-2031. The bill answers an earlier setback, reserving funding entirely for domestic procurement across three categories: 1,446 littoral surveillance drones, 208,200 littoral attack drones, and 1,320 kamikaze uncrewed surface vessels. It does not, however, close the NT$470 billion gap covering commercial procurement, NCSIST’s 32 Albatross II units, and US-Taiwan jointly developed and co-procured systems.
On 29 and 30 June, both opposition parties tabled competing versions, each routing funding through the annual budget rather than a special act and pairing procurement with industrial development in a single bill. The KMT proposed the National Defense Uncrewed Vehicles Technological Development and Procurement Act (國防自主無人載具科技發展及採購條例), a NT$240 billion, six-year program at NT$40 billion a year. The TPP introduced the Strengthen National Defense Self-Reliance and Drone Industry Development Act (強化國防自主暨無人機產業發展條例), which sets no spending ceiling. The Legislative Yuan is scheduled to refer all three versions to committee together at its 3 July plenary session.
The deadlock coincided with two US-Taiwan developments, one abroad and one at home. Leading a legislative delegation to Washington, Speaker Han Kuo-yu raised US-Taiwan drone co-production with members of the US Senate and House and officials at the Department of War and the White House. Separately, Taichung Mayor Lu Shiow-yen, whose city is a major drone-industry hub, and AIT Director Raymond Greene will cohost a drone industry forum on 2 July.
The difference between the ruling and opposition party drafts is chiefly over the funding vehicle and its oversight terms. The Executive Yuan version handles procurement through a special budget: it ring-fences multi-year funding and disburses quickly, giving manufacturers a sustained demand signal, but critics fault it as a “blank check” that bypasses normal scrutiny. The opposition versions, by contrast, favor annual budgeting, which subjects procurement to yearly bargaining and a slower, more constrained funding stream, all the more so as this year’s general budget remains under review more than 300 days into the fiscal year.
The implications are twofold. First, Taiwan’s manufacturers need a stable procurement budget before committing to further investment; a stop-start appropriation weakens the very demand signal that would justify it. Second, while Taiwan debates, international drone makers are gravitating toward partners with steadier budgets and clearer policy direction, such as Japan. Within the past month, US defense firm Anduril entered talks to acquire Nissan’s Oppama plant for drone production, Portugal’s Tekever announced plans for a Japanese manufacturing base, and Germany’s Rheinmetall moved to establish its first defense facility there. If Taiwan’s funding stays frozen, allied partners seeking a stable, well-resourced Indo-Pacific manufacturing base have an increasingly credible alternative, and Taiwan risks ceding the bilateral co-production momentum the FY2026 NDAA wrote into US law.
Taiwan’s Military Drills Drive Drone Kill-Chain Integration
(Author: Cathy Fang)
Taiwan conducted a series of drone live-fire events, exercises, and fieldings through the first half of 2026, spanning NCSIST-developed, first commercial-grade military UAVs procurement, and US-sourced platforms. Across the services, the Marines’ Mighty Hornet I conducted loitering-munition live-fire; the Navy’s surveillance and land-based surveillance variants performed ISR to cue precision missile strikes; the Air Force’s Chien Hsiang exercised anti-radiation suppression; the Army’s Altius-600M struck maritime targets; and the Army’s Capricorn flew reconnaissance. The pattern suggests Taiwan is moving uncrewed systems from acquisition into operational testing across every service, integrating them into existing kill chains.
A parallel milestone is the fielding of uncrewed systems at sea. NCSIST’s cooperation with Anduril on the DIVE-LD autonomous underwater vehicle has advanced to fielding training, with formal acceptance expected in August. NCSIST plans to prioritize an undersea-cable inspection demonstration and to assess the vehicle for search and rescue, maritime-accident evidence collection, and seabed mapping, building an indigenous long-endurance underwater detection capability. The large AUV operates to 6,000 m and navigates without GPS, carrying sonar, sensors, and high-resolution cameras on a modular, rapidly reconfigurable payload bay. Owing to agreements with Anduril and US arms-control rules, NCSIST positions the DIVE-LD for now as a commercial system for ocean survey, infrastructure maintenance, and SAR rather than a military platform.
Public Record of ROC Military Drone Exercises and Live-Fire Validation in 2026
(Sources: Ministry of National Defense, compiled by DSET)
DSET 2026 Annual Forum Drone Panel Spotlights Supply-Chain Resilience: Taiwan, U.S., and Ukraine Experts Chart a “Constrained at Home, Breaking Through Abroad” Path
(Author: Jim Hsu-Sung Wu)
On June 6, at DSET’s 2026 Summit on Supply Chain Resilience, the panel “Taiwan–U.S.–Ukraine Cooperation on Drone Supply Chains” was moderated by DSET Policy Analyst Cathy Fang. It featured Gene Su, General Manager of Thunder Tiger Technology; Alexander Chang, East Asia Director at Anduril Industries; Andrii Ordynovych, Director of Strategic Development at the Free Ukraine Foundation; Molly Campbell, Research Assistant with the Defense Program at the Center for a New American Security (CNAS); and Artur Savchii, Analyst at the Snake Island Institute, who took stock of the progress and structural challenges facing Taiwan’s drone industry.
Fang reported that Taiwan exported roughly 123,000 drones in 2025, with first-quarter 2026 exports alone reaching 139,000 units, most routed to Ukraine via Poland and the Czech Republic. Yet uncertain domestic procurement timelines and continued reliance on Chinese-sourced components constrain Taiwan’s capacity to scale—underscoring, she argued, the necessity of international cooperation. On industry breakthroughs, Gene Su noted that with domestic procurement stalled, Thunder Tiger has pivoted abroad: its “Overkill” drone joined the U.S. Blue UAS Cleared List and placed in the top 11 of Phase 1 of the U.S. “Drone Dominance” Program, while the company opened a “Made in USA” motor line in Ohio to ease supply-chain bottlenecks. Chang revealed that over the past year Anduril has added 15 local suppliers in Taiwan, grown direct procurement fifteenfold, and integrated its Lattice command-and-control platform with Taiwan’s existing systems.
The Ukrainian and U.S. experts underscored the strategic value of “quantity” and “speed.” Ordynovych, invoking the image of being “outnumbered, but undeterred,” stressed that Taiwan must build modular component stockpiles, rapid iteration capacity, and whole-of-society defense resilience at once; from Ukraine’s frontline experience, he noted that drone designs are often updated weekly, and that sustaining mass production in wartime is what decides the outcome. Campbell introduced the CNAS “Hellscape for Taiwan” report, which proposes dividing the Taiwan Strait into four layers beginning roughly 80 kilometers from Taiwan’s coast, using low-cost uncrewed systems to deplete a landing force layer by layer; she cautioned that, given uncertainty over U.S. procurement, Taiwan should not expect Washington to fill its industrial gaps single-handedly, making deeper cooperation with Ukraine and Europe all the more critical. Savchii pointed to the strong complementarity between the two: more than 77% of Ukrainian manufacturers hope to phase out Chinese-made components, making Taiwanese electronics a prime opening, while Ukraine’s combat data and design experience can help Taiwan improve its domestic drones.
For more, see the DSET 2026 Annual Forum Drone Panel recap.
Beyond the forum, the National Security Program’s research on unmanned systems has continued to draw media attention. Cathy Fang published an op-ed in The Diplomat warning that special-defense-budget cuts could leave the drone industry facing a procurement gap, and was interviewed by Nikkei Asia and others on the impact of annual-budget delays. Fang also appeared on PTS Taigi TV Station’s “New Perspectives” and SET News’ online program “A Military Jacket” to discuss Taiwan’s NT$300 billion drone-industry strategy. Ryan Teng spoke to Sankei Shimbun and Nikkei Asia, examining opportunities and challenges to drone industry cooperation between Taiwan and Japan. Samara Duerr was interviewed by Radio Taiwan International’s Ukrainian-language program on Taiwan–Ukraine drone cooperation. AFP, Le Figaro, and Resilience Media likewise cited DSET analysis on the explosive growth of Taiwan’s drone exports.
Ukraine’s Uncrewed Systems Export Opens Up; Indo-Pacific Becomes a Key Market
(Author: Samara Duerr)
On July 1st, the Ukrainian Cabinet of Ministers unveiled a special mechanism under martial law that allows manufacturers with the capacity to fulfill both state and overseas orders to export non-critical weapons systems and defense technologies, including various types of uncrewed systems.
The move is expected to let Ukraine scale production and attract investments for the benefit of its defense forces, while establishing clear rules for cooperation with international partners. Under the published rules, the export review procedure takes up to 30 days and requires a minimum contract value of UAH 15 million (US$334,400); meanwhile, 20% of the profit from the export of finished products and technologies and 30% from the export of components will be redirected to the special state budget.
Notedly, exports of this kind are only authorized to ‘Drone Deal’ countries with which Ukraine has already made government commitments. As of the end of June 2026, this equates to the Netherlands, Lithuania, and Latvia, with agreements preparing to be made with Denmark, Germany, Canada, and the United States.
For Taiwan, this poses a significant challenge: to date, owing to the political risk of provoking China, Taiwan-Ukraine defense cooperation agreements remain limited to the business-to-business (B2B) level, with no government-to-government ‘Drone Deal’ yet signed, a gap that could constrain future Ukrainian exports to Taiwan.
Nonetheless, Ukrainian interest in selling to the Indo-Pacific market remains high. A Reuters article from this past June points out, according to interviews with 20 defense contractors and Ukrainian and Japanese government officials, there is a “large push by Ukrainian drone makers to tap a military-spending surge in Asia by U.S. allies eager to ward off an increasingly assertive China and deter a conflict over Taiwan”.
Evidence of this includes Ukrainian attack drone manufacturer UForce, which has already established contact with the Japanese market and participated in Indo-Pacific exercises using its sea drones. In addition, at least three Ukrainian manufacturers have confirmed they are already in contact with Taiwan as they look to enter the Taiwan market. Thus, while direct G2G agreements between Taipei and Kyiv are persistently elusive, Taiwan can still indirectly gain advantages from Ukraine’s integration into the broader Indo-Pacific security architecture.
US Uncrewed Systems Converge Across the Indo-Pacific in June
(Author: Cathy Fang)
Five US developments in uncrewed systems advanced within a tight June window. Taken together, they point to a pattern of distributed sensing and attritable mass across the first island chain.
On 17 June, the 11th Marine Expeditionary Unit launched a V-BAT from the USS Portland with the Boxer Amphibious Ready Group in the South China Sea. The Shield AI drone takes off vertically from a six-by-six-meter deck, stays aloft over 10 hours, and is designed to operate through GPS and communications jamming, letting an amphibious ship conduct over-the-horizon ISR without a runway or catapult. On 18 June, the Army activated the 7th Infantry Division (Multi-Domain Command-Pacific) at Joint Base Lewis-McChord, a roughly 12,000-strong, two-star theater command merging the 7th ID and the 1st Multi-Domain Task Force. It is structured to integrate long-range fires, cyber, space, electronic warfare, intelligence, and uncrewed systems under one standing headquarters.
On 21 June, the first two of four MQ-9B SkyGuardian aircraft reportedly arrived in Taiwan, with the remaining two due by 2027 under a roughly NT$21.7 billion program. Configured for round-the-clock, long-endurance ISR and over-the-horizon targeting, they add a high-end surveillance capability to Taiwan’s force. On 22 June, the US transferred four Ocean Aero Triton autonomous vehicles (about US$13 million) to the Philippine Navy at Subic Bay. Solar and wind powered and able to remain at sea more than 30 days, they expand surface and undersea sensing provided through an ally rather than US platforms alone. Finally, RIMPAC 2026 opened in Hawaii with 31 nations and 30 to 35 uncrewed-systems experiments, which Pacific Fleet leadership called a central focus. The drill is a venue for participating navies to test fusing multiple nations’ data feeds into a common operating picture.
Read together, these moves suggest the US is assembling the components often associated with the “Hellscape” concept, mobile sensors, allied nodes, high-end ISR, and a standing command, as distributed, largely peacetime efforts rather than a single program. The concept, attributed to U.S. Pacific Command Admiral Samuel Paparo, envisions saturating the Taiwan Strait with uncrewed systems early in a conflict, and June’s developments align with several of its prerequisites. For Taiwan, the relevant question is integration. As a non-participant in RIMPAC and a partner outside formal US alliance structures, it has fewer routine opportunities to rehearse linking its sensors and shooters with US and allied networks, which makes interoperability a more open question than hardware.
Japan’s Interceptor Drone Procurement: Taiwan Should Rethink Rapid Testing and Acquisition Mechanisms
(Authors: Hung-Yuan Teng & Mei-Hsin Lin)
In early June, Japanese Defense Minister Shinjiro Koizumi stated on X (formerly Twitter) that he hoped the public would help disseminate information about the MOD’s “interceptor drone procurement program.” The procurement places “speed” and “effectiveness” at its core: the announcement was issued in early June, proposals were due by late June, products are expected to be selected in early July, testing will take place from July to August, and a mass-production contract is scheduled to be signed in late August.
Interceptor drones have emerged as a key weapon on the Ukrainian battlefield for countering Russian unmanned aerial vehicles. During the conflict involving Iran, Ukrainian- and U.S.-made interceptor drones also played an important role in countering Shahed drones.
According to the requirements released by the Japan’s MOD, the interceptor drones are primarily intended to counter targets flying below 18,000 feet, at speeds of approximately 250 kilometers per hour, and weighing no more than 600 kilograms. These include, in particular, one-way attack drones such as the Shahed and Harpy-type.
Notably, Japan has not made “local production” a requirement. Instead, the emphasis is on rapidly introducing effective systems into the Self-Defense Forces.
At the same time, the Japanese company Terra Drone has announced over the past three months that it will pursue joint investment and production cooperation with Ukrainian companies Amazing Drone and WinnyLab, with a focus that also includes the production of interceptor drones.
By comparison, Taiwan has not yet included interceptor drones in its current procurement programs, nor have Taiwanese companies announced cooperation with Ukrainian firms to manufacture related models. Japan’s procurement design therefore offers an important reference point for Taiwan.
Japan’s Unmanned Drone Sector Makes Major Strides
(Author: Abby Huang)
Japan’s unmanned drone sector has seen significant developments over the past week. Reuters reported exclusively on June 25 that U.S. defense company Anduril is in talks to acquire Nissan Motor’s Tsuruhama Factory, located near the Yokosuka Naval Base (headquarters of Japan’s Maritime Self-Defense Force), to establish it as a military unmanned drone production facility.
Whether Japan’s largest post-war automotive manufacturer will transform into a weapons manufacturing center reflects industrial demand driven by geopolitical shifts. To demonstrate its ability to meet Japan’s domestic production requirements, Anduril developed “Kizuna” (meaning “bonds” in Japanese), a fully Japanese-made unmanned drone using exclusively Japanese components, last year.
European aerospace giant Airbus also announced on June 26 that it has signed a Memorandum of Understanding (MoU) with Japan’s Kawasaki Heavy Industries, planning to integrate Kawasaki’s anti-submarine warfare systems onto the “Eurodrone” (a European unmanned aircraft being developed jointly by Airbus and three other European companies), and jointly propose a customized variant to Japan’s Ministry of Defense.
This marks the first collaboration between a major Japanese heavy industry enterprise and a foreign counterpart in the defense unmanned aircraft sector. The MoU stipulates that Airbus and Kawasaki Heavy Industries will develop an unmanned aircraft variant tailored for the Japanese market, integrating Japanese-manufactured sensors and effectors, and explore collaborative production, maintenance, and logistics support models involving Japanese industry. The goal is to enable Japan to operate the unmanned aircraft platform independently without reliance on foreign support.
As Japan accelerates development of its domestic unmanned drone industry, China’s Ministry of Commerce announced on June 29 that it is placing 20 Japanese entities on an export control list for dual-use civilian-military materials, specifically targeting the unmanned drone, nuclear, and defense sectors. These include six subsidiaries under Mitsubishi Heavy Industries (Japan’s largest defense contractor), four affiliated enterprises of Mitsubishi Electric (a missile and radar manufacturer), and two subsidiaries of Kawasaki Heavy Industries (aircraft and submarine manufacturer). Additionally, entities including Mitsui E&S, Terra Drone, and Mitsubishi Nuclear Fuel have been added to a watchlist, subject to heightened export licensing reviews. This marks China’s second round of export restrictions on Japan since placing 40 Japanese companies on a blacklist in February of this year.
19 Drone Firms Advance to DDP’s Gauntlet II, and 1 Negotiates Federal Funding
(Author: Samara Duerr)
On July 1st, the U.S. Drone Dominance Program announced the 19 companies advancing to Gauntlet II, pared down from a previous pool of 49 qualifiers. These firms’ drones passed tests in both long range strike and tactical assault in close quarters.
Before Gauntlet II begins, these UAV companies each have 5 weeks to complete an order of 120 units, including lethality payloads. Additionally, each company will work together and be partnered with at least one previously selected DDP lethality provider—Bravo Ordnance, Kela Defense US Inc., Kraken Kinetics Inc., Mountain Horse LLC, or Northrop Grumman Systems Corp..
Following Gauntlet II, the DDP will procure 60,000 drones from the resulting winners. However, this isn’t the only pathway the U.S. is taking to push “America First” initiatives and reduce reliance on China.
In May this year, the Wall Street Journal revealed that the U.S. Office of Strategic Capital—operating under the Department of War—has been in month-long negotiations over funding agreements with private drone companies. The companies publicly verified as being considered for this funding deal are Unusual Machines, Neros Technologies, and Performance Drone Works. One of these, Neros Technologies, is simultaneously a DDP Gauntlet II competitor. Find their details in Table 2 below.
In order to increase domestic drone production, which in turn lowers cost and coincides with broader national security objectives, the Office of Strategic Capital is offering funds in exchange for debt or equity stakes. Though these specific drone investments remain pending as negotiations continue, Washington’s industry policy shift into equity stakes is proven.
Specifically, government investments are extending to other critical sectors, such as semiconductors and critical minerals, culminating in $26.7 billion USD worth across thirty deals involving the transferral of direct ownership since January 2025.
This pivot towards a ‘China-free’ supply chain is beneficial to Taiwan, as it aims to position itself to integrate directly into the American defense industrial base through initiatives like the “Blue Skies for Taiwan Act of 2026”.
Drone Companies with Potential Trump Administration Funding
(Source: Publicly available information compiled by DSET)
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