TAIPEI (Taiwan News) — Taiwan’s drone industry faces uncertainty after opposition lawmakers cut drone production funding from a major defense spending plan, Nikkei Asia reported Thursday.
The Legislature cut drone production funds from President Lai Ching-te’s (賴清德) US$40 billion (NT$1.25 trillion) special defense budget last month. The budget had been meant to strengthen Taiwan’s defense by supporting local drone makers and other systems used in asymmetric warfare.
The cuts have worried drone companies in Taichung, a major industrial city in central Taiwan. Many firms had been preparing to expand production based on expected government orders.
Taichung has become an important base for aerospace, defense, and drone development. Local companies say clear government demand is needed before they can make large investments.
Thunder Tiger Group General Manager Gene Su (蘇聖傑) said government purchases would help give the industry confidence, per the report. He said clear and large orders would also encourage suppliers and smaller companies to keep investing.
Su said bigger companies may be able to survive the delay. However, smaller firms may give up or move into other industries if government support remains unclear.
The government said last summer it wanted to buy 50,000 aerial drones for NT$50 billion. It also planned to buy 1,600 unmanned boats for NT$330 billion as part of related defense procurement plans, but the purchases are still pending, per the report.
Experts said Taiwan needs a strong local drone industry because China controls much of the global drone supply chain. The US, Japan, and Europe are also trying to reduce their reliance on China-linked suppliers.
Taiwan has promoted itself as part of a “non-red” drone supply chain, meaning one that avoids dependence on China. The term is often used to describe supply chains for defense technology that do not rely on Chinese companies.
Drone exports from Taiwan to Europe have increased sharply in recent years. Local companies have also continued private talks with foreign partners while waiting for government orders.
An industry analyst said stalled procurement could make it harder for Taiwanese firms to work with US drone companies, according to the report. The analyst said foreign companies may turn to other markets if Taiwan cannot show clear local demand.
Association for Uncrewed Vehicle Systems International President Michael Robbins said the budget cut sends the wrong message to local firms. He said companies need steady support to increase production, attract investment, and lower costs.
Taichung Mayor Lu Shiow-yen (盧秀燕) has supported drone development and said the industry can help upgrade local manufacturing. Robbins said drone funding would likely benefit Taichung more than any other area in Taiwan.
KMT politicians have said drone funding could be placed in the regular annual budget instead of a special defense budget. Former KMT vice presidential candidate Jaw Shau-kong (趙少康) said the party was not against Taiwan’s defense industry but wanted stronger budget review.
Research Institute for Democracy, Society and Emerging Technology Analyst Cathy Fang (方怡然) said moving the funding to the annual budget could delay drone procurement by about two years, per the report. She warned that such a delay could hurt Taiwan’s place in the international drone supply chain.
