About DSET Drone Newsletter

DSET’s National Security Group publishes a biweekly drone newsletter. It reviews a curated selection of the most noteworthy domestic and international sources, providing insights into the development of Taiwan’s drone industry and the implications of global uncrewed aerial vehicle (UAV) trends for Taiwan.

Drone Highlights This Week

  1. Taiwan’s USD$40 billion defense push and US NDAA both emphasize drones and counter-drone systems in Taiwan.
  2. The Taiwanese Navy plans to procure uncrewed surface vessels (USVs), and Liberty Times estimates the purchase could reach up to 1,500 units.
  3. Mighty Hornet IV, a drone co-developed by Taiwan and the US, will reportedly undergo testing in the US in January, further materializing U.S.–Taiwan drone co-production
  4. The US plans to invest $1 billion USD over the next two years to rapidly procure 300,000 small attack drones; Thunder Tiger became the first Taiwanese company to formally seek participation
  5. Ukraine’s naval drone success encourages Taiwan, but harsher Taiwan Strait conditions make USV design more challenging.
  6. Ukraine is further opening its drone technology, trading it for Polish and British manufacturing capabilities, while cooperation with Taiwan remains limited.

(Read the full newsletter on DSET’s website here.)

Taiwan and US Defense Bills Focus on Expanding UAV/USV Procurement and Co-Production

Taiwanese President William Lai announced a US$40 billion special defense budget after a high-level national security meeting on the morning of November 26; his op-ed, “Taiwan’s president: I will boost defense spending to protect our democracy,” was published the same day in The Washington Post.

“Recently, the Beijing authorities have been fully pushing ahead with efforts to turn ‘democratic Taiwan’ into ‘Chinese Taiwan,’ which has already posed a serious threat to our national security and to Taiwan’s freedom and democracy,” Lai said. He noted that Taiwan’s defense budget for next year will exceed 3% of GDP in line with NATO standards, and that he aims to reach 5% of GDP by 2030. 

Following this announcement, a draft “Special Act on Procurement for Enhancing Defense Resilience and Asymmetric Capabilities,” proposing up to NT$1.25 trillion (about US$40 billion) in extra defense spending for 2026–2033, was approved by Executive Yuan the next day. The draft framed around three themes: building a multi-layered defense “shield” for Taiwan, accelerating kill chains with high tech and AI, and strengthening the domestic defense industry with a non-red supply chain.

It’s unclear how much of the package will ultimately be allocated to uncrewed systems. However, based on earlier estimates and reporting, the current “uncrewed” basket is understood to include:

  • MND Armaments Bureau domestic procurement plan worth NT$50 billion for roughly 50,000 Taiwan-made drones (as estimated in DSET’s second newsletter edition).
  • NCSIST-developed UAS, including Albatross II UAVs — 36 aircraft for NT$12.6 billion.
  • The Navy’s “Kuai-Chi Project” attack uncrewed surface vessel (USV) plan: 1,500 boats, with press estimates ranging from roughly NT$18 billion (Commercial Times; Upmedia) to about NT$30 billion (Economic Daily News).
  • Procurement from the US totaling more than NT$24.9 billion so far, including Anduril’s ALTIUS 600M-V anti-armor UAVs (2,032 units for NT$24.9 billion, estimated by Upmedia) and Shield AI’s V-BAT (quantity and amount not yet disclosed).

However, opposition parties, the Kuomintang (KMT) and Taiwan People’s Party (TPP), have twice voted down procedural motions since December 2, blocking the bill from being sent to committee for detailed review. The final content of the draft and its timeline for passage remain uncertain.

Across the Pacific, the US Congress on December 7 released a version of the National Defense Authorization Act (NDAA), which includes up to US$1 billion in funding for Taiwan Security Cooperation Initiative in fiscal year 2026. The compromise text drops earlier language that would have invited Taiwan to join the US-led Rim of the Pacific (RIMPAC) exercise. A statement from House Speaker Mike Johnson’s office says the bill “enhances US defense initiatives in the Indo-Pacific to bolster Taiwan’s defense and support Indo-Pacific allies.”

In Section 1237, the bill directs the US Secretary of Defense to engage Taiwan by March 1, 2026 in a joint program to field “uncrewed systems and counter-uncrewed systems,” including “co-development and co-production,” for both the U.S. and Taiwan militaries. From 2026 to 2030, projected costs include deploying US Coast Guard training teams to Taiwan to bolster maritime security, law-enforcement capabilities, and deterrence. The Pentagon would also need to submit a Taiwan security assistance roadmap and an assessment of how quickly US forces could mobilize, deploy and sustain operations in a Taiwan Strait or broader Indo-Pacific crisis. Final funding levels will still depend on future appropriations bills.

Taken together, Taipei’s proposed special budget and Washington’s NDAA language point to a shared focus: scaling up drones and counter-drone systems and multi-year cooperation to harden Taiwan’s defenses. The NDAA’s “co-production” language also reflects a goal shared by Taiwan’s and the US governments and firms, aligning with the policy direction DSET advocated in its earlier report. US companies have also been actively engaging Taiwan, as DSET previously noted: many visited the TADTE in September to explore partnerships with local partners and compete for Taiwan procurement opportunities.

Codifying co-production in the bill is a milestone, but key questions remain: which co-production model will be used, how far technology sharing will go, and what concrete plan the US Department of War will ultimately propose. Meanwhile, Taiwan’s own draft faces headwinds: the special budget—including a major purchase of 50,000 drones—stalled in legislative review amid opposition-party obstruction. In this context, American Institute in Taiwan (AIT) Director Raymond Greene publicly welcomed Taiwan’s defense budget push, while Senators Elissa Slotkin (Democrat–Michigan) and Thom Tillis (Republican–North Carolina), co-chairs of the bipartisan Senate Taiwan Caucus, issued a joint statement backing Taiwan’s special defense budget. These signals are worth watching over the next two weeks.

Taiwanese Navy Issues Public Solicitation for 1,500+ USVs

As the new special budget announced to include attack drones and uncrewed boats, the Navy on December 8 issued a soliciting proposal for four systems: one-way attack uncrewed surface vessels (USVs), portable control stations, mobile command vehicles, and relay nodes. The project is labeled a “defense innovation” priority, and Taiwanese newspaper Liberty Times estimates the buy could reach up to 1,500 units.

The Ministry of Defense says attack drones and boats should be small, stealthy, and efficient, to strengthen asymmetric capabilities and shorten the time from detection to strike. For the USVs, the Navy is asking for a top speed of at least 35 knots and a range of at least 250 nautical miles. The boats should be able to autonomously identify targets, avoid collisions, operate in sea states of Beaufort force 4 or higher, and conduct swarm operations. They are also expected to carry electro-optical/infrared sensors, send imagery back from 24 nautical miles away, and withstand GNSS and radio jamming.

According to a report by CommonWealth Magazine titled “Uncrewed Vessels Double in Five Years: Taiwan’s Defense Industry Expands Beyond Drones as CSBC and Thunder Tiger Compete for New Military Orders”, several Taiwanese firms, including CSBC, Jong Shyn, Lungteh, and Thunder Tiger, are already developing uncrewed vessels, but firm orders and mass-production plans are still unclear. The report adds that local development is necessary because the Taiwan Strait is a high-traffic international shipping and fishing corridor, and overseas systems may not be well-suited to local operating conditions.

NCSIST Pushes Drone Procurement and Testing, Further Materializing US-Taiwan Co-Production

In the newly announced special budget, the Navy reportedly included the “Albatross II”, a medium-sized, long-range reconnaissance-and-strike drone. Media reports also say the “Mighty Hornet IV” attack drone is scheduled for live testing in the US in January. Both systems are being developed by Taiwan’s National Chung-Shan Institute of Science and Technology (NCSIST).

The special budget plans to buy 36 Albatross II drones for NT$12.6 billion (about US$403 million), with deliveries scheduled between 2026 and 2029. Albatross II has a control range of more than 300 km and is designed to replace some manned flights currently used to monitor People’s Liberation Army activity at sea. Meanwhile, if trials of Mighty Hornet IV meet the requirements of both Taiwan and the US, the program is expected to move into pre-production. Mighty Hornet IV is based on the MQM-178 target drone made by US company Kratos. 

These two drone programs have finally shown tangible progress since the public first saw them on display at TADTE in September. The NDAA has also, for the first time, included language on US–Taiwan co-production and co-development on uncrewed systems, though the exact form of cooperation will remain unclear. So far, at least three cooperation models are visible:

  • NCSIST × Kratos: Developing the Mighty Hornet IV by remodelling Kratos’ MQM-178 platform.
  • NCSIST × Anduril: Working on low-cost loitering munitions and the “Dive-LD” uncrewed underwater vessel (UUV).
  • NCSIST × Auterion: Introducing Auterion OS and the Nemesis drone-swarming platform to enable cross-platform integration and multi-type uncrewed operations.

Whether these approaches deliver operational and industrial results will be worth watching. Kratos-linked designs also stand out because they are among the few long-range drones associated with Taiwan’s current development pipeline, reportedly reaching around 1,000 kilometers—far beyond the shorter-range models the MND Armaments Bureau has been procuring (roughly 6 to 100 kilometers). Liberty Times has also reported that Kratos is optimistic about Mighty Hornet IV’s export and external sales opportunities in the future, a potential signal that Taiwan’s drone industry is moving into long-range manufacturing, an area Ukraine has also been trying to develop with foreign partners.

The US Gets Serious About ‘Drone Dominance’

For this holiday season, the US Department of War wants drones—300,000 of them. 

Recently, the DoW assessed the drone industry’s inclination and capacity to rapidly manufacture a mass amount of uncrewed aerial vehicles (UAVs) consisting primarily of small attack models. With the new year, the department plans to invest $1 billion USD into the industry over a course of 2 years and 4 phases. In the first phase, or ‘gauntlet’ from February to July 2026, 12 companies will be tasked with building 30,000 units worth $150 million USD. For the following gauntlets, the number of contracted vendors will be pared down to 5, while simultaneously increasing the number of drones produced—150,000—and lowering cost per unit. 

Since Trump published the “Unleashing American Drone Dominance” executive order, the US has been trying to accelerate the domestic production and integration of drones into their supply chain and defense strategy. To make this achievable, procurement prioritizes cheap, local, and high performing systems. Backing up this plan, the “Unleashing US Military Drone Dominance” memorandum by Secretary of War Hegseth again called for strengthening the US industrial drone base, rapid fielding, and using drones as ‘ammo’.

These initiatives have the potential to directly support the defense of Taiwan through the ‘hellscape’ and ‘replicator’ initiatives which plan to utilize thousands of drones to swarm the Taiwan Strait and slow down invasions. Taiwan’s Thunder Tiger has said it plans to compete in the ‘Drone Dominance’ gauntlet. The company’s ‘Overkill’ FPV was added to the Pentagon’s Blue UAS Cleared List in September, making it the first Taiwanese firm on the list and giving it a shot in this initiative. As the most active Taiwanese drone company pursuing the U.S. military market, whether Thunder Tiger is selected to participate in the program will be a key point to watch in U.S.-Taiwan supply chain cooperation.

Are Naval Drones the Next Big Thing? Ukraine and Taiwan Seem to Think So

On December 10, Ukraine’s Security Service struck Russia’s “Shadow Fleet” by deploying their ‘Sea Baby’ naval drone. The oil tanker ship, Dashan, which was traveling with its identification system off was thus critically damaged. This was not a singular occurrence. Earlier in November, the same Ukrainian naval drones successfully stopped two sanctioned Russian oil tankers, Kairos and Virat. 

As Russia leverages its oil economy to sustain warfare, Ukraine’s tactics have increasingly turned towards preventing revenue going through the Black Sea. With a new maritime frontline, uncrewed technology has also shifted to this domain. Ukraine has increasingly invested into its uncrewed surface vehicle (USV) ‘Sea Baby’: creating new variants, adding automated machine guns or rocket launchers, and reinforcing their engines and navigation systems. 

The success of Ukrainian USVs in the Black Sea, alongside the Taiwanese Navy’s announcement this week of a USV procurement program, has drawn significant media attention. However, replicating Ukraine’s experience will be challenging, as Taiwanese manufacturers note that sea conditions in the Taiwan Strait are far harsher than those in the Black Sea, complicating USV design. Whether Taiwan can achieve mass production and complete testing within the next year will be a key point to watch.

Ukraine is More and More Open to Sharing Its Drone Technology 

Last Wednesday, the Polish Army announced they were in negotiations with Ukraine over the transfer of MIG-29 fighter jets in exchange for selected drone and missile technologies. Poland believes this will aid joint defense and an interoperable industrial base. 

This isn’t the first case of Ukraine leveraging its hard earned, innovative drone technology with allied countries. A groundbreaking tech sharing agreement was announced this September between Ukraine and the United Kingdom. Through their joint ‘Project Octopus’, thousands of interceptor drones will be produced using UK production lines and Ukrainian technology and then transferred to Ukraine. The UK, in return, stated the enterprise would create new British jobs and support their national security. 

On the other hand, while the Taiwan Defense Industry Development Association’s (DIDA) Memorandum of Understanding with Ukrainian counterparts recently states that Ukraine will contribute to drone research and development, the extent of what technology is shared is unknown. Taiwan aims to bridge this gap by deepening technical cooperation, thereby securing access to Ukraine’s critical ‘lessons learned’.

Author Biographies

Ting-Wei Lin

Ting-Wei Lin is a journalist and researcher, serving as a Non-Resident Fellow at DSET’s National Security Program. Her research focuses on defense technology and supply chain resilience. Lin specializes in the intersection of technology and geopolitics, cross-strait relations, and Taiwan’s public policy. Her work has appeared in Agence France-Presse, Initium Media, The Reporter, and other publications. She holds a B.A. in Anthropology from National Taiwan University.

Samara Duerr

Samara Duerr serves as a policy analyst for the National Security and Dual-use Technology (NSDT) taskforce at DSET. Samara earned a Master’s degree in Asia Pacific Studies at National Chengchi University in Taiwan, a Bachelor’s degree in International Relations and Chinese Studies at Emory University in the US, and has also studied at Yonsei University in Seoul and the School of Oriental and African Studies (SOAS) in London. Her research focuses on dual use technology in relation to Taiwan-US and Taiwan-EU cooperation. With an emphasis on techno-geopolitics, her work specializes in the drone supply chain, emerging technology, and US-Taiwan relations.

Chih-Cheng Sung, Editor

Chih-Cheng Sung currently serves as a Senior Analyst at DSET, specializing in public relations and policy analysis. He previously served as Chief of Staff in a legislative caucus office at the Legislative Yuan, where he was responsible for policy research and legislative strategy. With in-depth knowledge of parliamentary operations and the policymaking process, he brings extensive experience in policy coordination and advocacy. Mr. Sung holds a Master’s degree in Political Science from National Chengchi University.