Official statistics showed that Taiwan’s drone exports in the first quarter of this year surged past US$100 million, exceeding last year’s full-year total and signaling rapid growth in domestic drone production. However, the Legislative Yuan, dominated by opposition parties, cut the government’s special defense budget on Friday last week, dealing a severe blow to national defense and the domestic uncrewed aerial vehicle (UAV) industry.
Lessons from the war in Ukraine and the US-Iran conflict have accelerated the shift in modern warfare toward remotely controlled UAVs. Cheaper than missiles while offering greater operational flexibility and reducing military casualties, drones have become a key combat force, reshaping warfare into a low-cost, high-impact and large-scale form of conflict.
However, Chinese firms still dominate more than 70 percent of the global drone market and control key supply chains for motors and batteries, deepening international dependence on China while leaving democratic competitors behind in cost and production capacity.
Leveraging Taiwan’s strengths in high-tech manufacturing, the government launched the Unmanned Vehicle Industry Development Comprehensive Plan to strengthen drone capabilities and supply chain resilience, aiming to turn the sector into “a sacred mountain that protects the nation,” similar to Taiwan Semiconductor Manufacturing Co in semiconductors.
Taiwan also established a Drone Diplomacy Task Force to expand cooperation with allies and like-minded countries on UAV mass production and position itself as the Asia-Pacific hub of the democratic “non-red” supply chain, reducing reliance on China.
Driven by strong European demand since the Ukraine war, Taiwan exported 107,433 drones to Europe last year, more than 40 times the 2024 level. In the first quarter of this year, exports exceeded 136,000 units worth a combined US$115.85 million, already 1.2 times the total export value for all of last year.
US senators have introduced the Blue Skies for Taiwan Act to strengthen Taiwan’s drone industry, reduce reliance on China-linked supply chains and include Taiwanese UAVs in US defense procurement.
UAVs are also central to Taiwan’s deterrence strategy against China. In 2024, US Indo-Pacific Commander Admiral Samuel Paparo proposed transforming Taiwan’s asymmetric defense into a “hellscape” scenario by saturating surrounding air and waters with thousands of drones, uncrewed submarines and surface vessels resistant to jamming and capable of rapid strikes.
President William Lai’s (賴清德) proposed eight-year NT$1.25 trillion (US$39.67 billion) special defense budget included plans to acquire more than 200,000 drones and 1,000 uncrewed surface vessels to strengthen asymmetric warfare and support the domestic industry.
However, after repeated stalling of the general defense budget, the opposition-controlled legislature last week cut the special defense budget to NT$780 billion. Most UAV-related and defense self-reliance funding was removed, including NT$250 billion for military drones and counterdrone systems, NT$80 billion for uncrewed surface vessels and about NT$60 billion for joint research and development with the US.
The cuts have raised concerns over weakened defense capability and autonomy while further hindering Taiwan’s drone industry, which already faces interference from Chinese exporters. The US Department of State warned that delays to Taiwan’s defense budget amount to a “concession” to China. Experts also cautioned Taiwan risks losing its next trillion-dollar industry and its place in the global “non-red” supply chain, undermining long-term competitiveness.
The timing of the cuts — just before the closely watched summit between US President Donald Trump and Chinese President Xi Jinping (習近平) — also highlighted US-China tensions over Taiwan’s arms procurement. It risked signaling to the international community that Taiwan’s self-defense resolve is weakening, potentially encouraging Beijing to increase pressure on US arms sales to Taiwan and shape Washington’s broader stance toward Taipei.
To address the shortfall, the Executive Yuan could propose a new spending plan or supplementary budget, though this would require stronger public support to overcome opposition resistance.
Taiwan’s public and private sectors must also deepen cooperation with like-minded countries on drone production and key components. As more nations seek to reduce dependence on China’s dominance in drone manufacturing, Taiwan should position itself as a key partner in the global “non-red” supply chain rather than a pawn in great-power rivalry.
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