Taiwan has the industrial base, security pressure, and technical talent to become a major drone producer. The harder question is whether it can turn those strengths into volume quickly enough.
A report from the Research Institute for Democracy, Society, and Emerging Technology (DSET) says Taiwan is still far from its target. The country aims to produce 180,000 drones per year by 2028, but it produced fewer than 10,000 last year.
The scale problem is now the central issue
Drones have become a defining tool in recent conflicts in Ukraine, Iran, Nagorno-Karabakh, Sudan, and elsewhere. The source article frames that shift as one Taiwan understands clearly, because the island has long lived with the threat of Chinese invasion.
DSET’s June 16 report gives the clearest measure of the gap. According to its research, Taiwan produced between 8,000 and 10,000 unmanned aerial vehicles (UAVs) over the past year. That output is a fraction of the 180,000-a-year goal for 2028.
Cathy Fang, a policy analyst at DSET, argues that capability is not the missing ingredient. “Taiwan definitely has the ability to make the best drones in the world,” she says. The problem is that ability has not yet translated into an industry that can produce large numbers at acceptable cost.
The report identifies several obstacles: “high manufacturing costs, low domestic procurement, and minimal foreign government orders.” In plain terms, Taiwan’s drone makers need bigger orders to lower costs, but the high costs make those orders harder to win.
Defense urgency is shaping the drone push
The pressure behind Taiwan’s drone effort is not abstract. Beijing has said it intends to complete its aggressive modernization of the People’s Liberation Army by 2027. Taiwanese officials say invasion could come that early but almost certainly before Premier Xi Jinping’s current term in office ends in 2029.
There is no single agreed view of what Chinese military aggression would look like. But military analysts in Taiwan fear a full combined arms onslaught, beginning from air and sea and followed by a land invasion.
That threat has made drones central to Taiwan’s self-defense thinking. In 2023, one American commander described a strategy of turning the Taiwan Strait into a “hellscape” by using swarms of uncrewed aerial and naval vehicles against incoming Chinese ships and planes.
The point of that strategy, as described in the source, is not necessarily to destroy the Chinese navy and air force outright. It is to slow and disrupt an advance long enough for Taiwan’s allies to rally to its defense.
Taipei has already tried to organize around this need. In 2022, the government launched the Drone National Team to connect government and industry and help scale a young sector. The effort also looked to Ukraine, where small, tactical, cheap UAVs have become closely integrated with ground units and used across multiple missions.
China’s supply chain dominance complicates everything
Taiwan’s challenge is not only building drones. It is building drones without relying on Chinese technology in critical places.
Other countries expanding drone programs have used Chinese technology either as a benefit or a necessary compromise. Taiwan is far more cautious for obvious security reasons. That caution raises costs, because China has major advantages in parts such as gimbals, optical sensors, and antennas.
Fang puts the competitive problem bluntly: “We are not able to compete with DJI,” referring to the Chinese drone manufacturer. The cost gap shows up even when Taiwan has strong adjacent industries.
Taiwan has an advanced battery industry, but that sector is heavily reliant on Chinese critical minerals. Taiwan also has the world’s most impressive semiconductor industry, producing 60 percent of the world’s semiconductors and 90 percent of the advanced semiconductors. Yet Fang says Taiwan does not make chips specifically for drones.
Instead, Taiwanese drone makers are buying chips from Qualcomm and Nvidia. “Those are communication chips, sensor chips, those are for more general use,” Fang says. The source article says even those general chips can be much more expensive than Chinese competitors, sometimes by a factor of 10.
Fang says Taiwan can make the needed chips. But companies have little reason to enter a market that remains small. As she puts it, “the scale is just too small.”
Orders may matter as much as engineering
The industry’s bottleneck is partly financial. “We need more government procurement from Taiwan itself,” Fang says. So far, Taiwan’s defense ministry has ordered fewer than 4,000 drones, though it plans to purchase tens of thousands more in the years to come.
DSET and other analysts cited in the source point to politics as part of the problem. Financing the level of defense spending Taiwan needs remains difficult, and earlier this year opposition lawmakers in the Legislative Yuan passed a budget that slashed planned defense spending.
This creates a familiar industrial trap. Drone manufacturers need demand to scale production. But without scale, their products remain expensive. And because the products are expensive, demand remains limited.
Foreign orders could help solve that loop. DSET’s report argues that America has a major role to play if Taiwan’s drone industry is going to grow at the required pace.
Why the US role is under scrutiny
DSET says the US should do more to support Taiwan’s local drone industry. One specific issue is access to the Department of Defense’s “blue list,” its roster of trusted drone suppliers. No Taiwanese drone manufacturer has secured access to that list so far.
That matters because a place on the list could bring millions or billions of dollars in Pentagon orders. For a sector struggling with low volume, that kind of demand could change the economics.
There has already been drone-related support flowing from the US to Taiwan. The US has supplied Taiwan with about 1,000 drones, mostly AeroVironment Switchblade loitering munitions and a small number of MQ-9 Reaper long-range drones. It has also provided access to the Replicator Initiative, described as an autonomous drone swarm capability designed to find and destroy targets at sea.
But DSET argues that some of these capabilities reflect what the US thinks Taiwan needs. The report contends Washington could be more useful by building partnerships with Taiwanese industry and making longer-term decisions around Taipei’s self-defense needs. DSET also says Washington should drop tariffs on Taiwanese UAVs, at least.
For Taiwan, the recommendation is clearer planning. DSET says the country needs a more detailed roadmap for the capabilities it wants, the systems it needs, and how it will build them. Small first-person-view drones will draw attention, but the larger challenge is creating a domestic drone industry that can move from promise to production.