Introduction
The rapid evolution of Taiwan’s uncrewed aerial vehicle (UAV) industry reflects the country’s strategic imperative to strengthen self-reliant defense capabilities amid an increasingly complex regional security environment. Since the outbreak of the war in Ukraine in 2022, Taiwan’s UAV policy has undergone a significant transformation, shifting from a primarily national capability-building initiative under President Tsai Ing-wen’s administration to a more expansive, regionally focused vision under President Lai Ching-te. This new approach aims to position Taiwan as a key UAV manufacturing hub in the Asia-Pacific region — a “China-free,” dual-use drone supply chain center capable of serving both commercial and defense needs, while reinforcing democratic alliances.
Central to Taiwan’s UAV strategy is a three-pronged objective set forth by the Lai administration in 2025: fostering industrial development, enhancing defense self-reliance, and deepening integration into democratic supply chains.
This ecosystem is intended to support national security contingencies amid escalating cross-strait tensions——As one senior Taiwanese national security official involved in UAV affairs interviewed by DSET remarked: “Unlike Ukraine, in the event of contingencies in the Taiwan Strait, we cannot continue to rely on foreign UAVs or imported drone components. Taiwan must establish a fully self-reliant UAV supply chain—starting now.”
Reflecting Taiwan’s Leading UAV Manufacturers’ Perspectives
This report aims to provide a comprehensive assessment of Taiwan’s UAV industry and U.S.–Taiwan cooperation on building a “China-free” drone supply chain—examining the current state of the industry, ongoing policy collaboration, existing challenges, and key obstacles—while offering targeted policy recommendations.
The sources for this report include U.S. and Taiwanese government UAV-related documents, official Taiwanese government import-export data, and extensive interviews conducted by DSET from October 2023 to May 2025 with key stakeholders in Taiwan’s UAV ecosystem. Interviewees included (1) former and current senior Taiwanese government officials involved in UAV policy; (2) seven leading domestic UAV manufacturers, including commercial drone companies contracted by the Ministry of National Defense (MND); (3) academic researchers engaged in discussions on government R&D planning; and (4) representatives from Taiwanese and U.S. business associations involved in facilitating Taiwan’s international UAV cooperation. Given the sensitivity of the subject matter, all interviews were conducted anonymously. Throughout this report, insights from these sources are referenced under the categories “government stakeholders,” “leading drone manufacturers,” and “academic experts.”
Taiwan’s UAV Industry Growth and Remaining Challenges
The Ministry of National Defense (MND) has allocated substantial resources toward UAV development and procurement. Its landmark 2024 tender for 3,422 commercial-grade drones valued at NT$6.8 billion (US$210 million) represents the largest government procurement to date, with deliveries scheduled through 2028. In early 2025, the government further unveiled a cross-agency procurement plan targeting 47,000 UAV units over three years. These initiatives signal Taiwan’s ambition to scale UAV production capacity to 180,000 units annually and increase industry value to US$1.24 billion by 2030.
Despite the sector’s rapid expansion—marked by nearly doubling in industry value from NT$2.8 billion (US$87 million) in 2023 to NT$5 billion (US$155 million) in 2024, and a tenfold surge in exports—critical structural challenges persist. Production levels, though increasing, remain well below the government’s ambitious 2028 target. High manufacturing costs driven by reliance on non-China components, limited domestic procurement beyond the MND’s landmark 2024 order, and a scarcity of foreign government contracts impede further scaling. Taiwan’s UAV ecosystem also suffers from technological dependencies on allied imports for core components, notably the so-called “Three Chips, Two Softwares,” which the government is subsidizing through targeted R&D efforts. Supply chain bottlenecks involving Chinese-sourced raw materials and stringent U.S. export controls on military-grade technology further constrain the industry’s global competitiveness.
Overcoming Challenges: U.S.-Taiwan Cooperation as a Strategic Imperative
The convergence of U.S. defense innovation with Taiwan’s advanced manufacturing capabilities presents a timely opportunity to construct a China-free UAV ecosystem. As the American Institute in Taiwan (AIT, the de facto US embassy in Taiwan) Chairman Raymond Greene has emphasized, this is not just a matter of arms transfers—it is an industrial and strategic partnership aligned around shared values and common threats.
U.S. policy measures to reduce reliance on Chinese UAV components have intensified.The FY2020 and FY2025 National Defense Authorization Acts (NDAAs), Executive Order 13981, and the Countering Chinese Communist Party (CCP) Drones Act all reinforce supply chain security mandates. These include bans on DJI, reviews of other China-based manufacturers, and efforts to certify compliant suppliers via initiatives like Blue UAS.
Taiwan has implemented its own “China-free” standard for military procurement and tight regulations for public-sector drone acquisition. Agencies such as the Ministry of Digital Affairs (MODA) and the National Communications Commission (NCC) enforce rigorous sourcing, cybersecurity, and performance standards for all UAV platforms to support Taiwan’s contribution to a China-free, certified drone supply chain aligned with democratic standards.
Together, these parallel efforts reflect a broader shared objective: the establishment of a democratic, secure, and interoperable drone supply chain. As China endeavors to dominate UAV markets and set global standards, Taiwan and the U.S. are positioned to lead by example.
Constraints in U.S.-Taiwan Cooperation: Limited U.S. Market Access and Early Stage Co-Production
Since the inaugural U.S. Drone Business Development Mission to Taiwan in September 2024, organized jointly by the U.S. Department of Commerce and AIT, bilateral cooperation discussions have intensified. However, Taiwan’s UAV exports to the U.S. market remain limited, with government procurement largely confined to state-level contracts. No Taiwanese UAV manufacturers have secured federal contracts or appear on the U.S. Department of Defense’s Blue UAS or the industry-led Green UAS certification lists, constituting a major barrier to broader market penetration.
U.S.-Taiwan UAV collaboration remains embryonic, predominantly at the subsystem integration level. This contrasts with Taiwan’s more advanced defense cooperation with the U.S., such as in localized F-16 maintenance. While Taiwan supplies critical modules, it lacks formal arrangements for co-production, final assembly, co-design, or long-term sustainment of U.S.-origin UAV platforms like the MQ-9B or ALTIUS. Unlike South Korea and Japan, which benefit from joint development programs and local assembly facilities, Taiwan remains excluded from these strategic partnerships, constraining its operational autonomy and industrial expansion.
These limitations underscore five principal challenges: absence of final assembly and sustainment rights, lack of co-design mechanisms, limited certification and market access, fragmented interagency coordination, and the lack of formal legal or institutional recognition of Taiwan as a strategic industrial partner under U.S. law. Failure to address these issues risks Taiwan falling behind in defense-industrial innovation, undermining its long-term drone self-reliance.
Scope of the Report
This report provides a forward-looking strategy for U.S.–Taiwan UAV cooperation.
Chapter 1 analyzes the strategic framework for U.S.-Taiwan UAV collaboration based on official documents and policy plans.
Chapter 2 reviews Taiwan’s UAV policy transformation and industrial planning, assessing the government’s “Three Objectives, Five Strategies” framework, progress achieved, outstanding challenges, and corresponding recommendations. These strategies include: market expansion, technology development, industrial cluster formation, regulatory and cybersecurity alignment, and defense resilience.
Chapter 3 explores strategic uncertainty in bilateral coordination amid shifting U.S. policies. It applies a three-scenario framework to elucidate strategic options Taiwan must consider to embed itself within the democratic drone supply chain: Incremental Integration, Institutionalized Partnership, and Fallback Autonomy.
The recommendations for each chapter are consolidated at the beginning of this report.
Acknowledgment and Disclaimer
DSET extends its sincere appreciation to all interviewees for their invaluable contributions to this research. The findings and recommendations presented in this report reflect the views of DSET alone and do not represent the positions of the interviewees or any government agency.
