TL;DR
Taiwan's drone industry is held back not by engineering but by a defence budget that always loses to electoral politics.
Taiwan talks a lot about building its own drones. Push the camera in, though, and the obstacle is not chips or motors. It is the vote counter in the legislature.
The money has to survive politics first
Defence industrial spending is government spending, and politicians see it roughly the way they see a highway: how many local jobs, how many votes.
Both Tsai Ing-wen and Lai Ching-te tied 'defence self-reliance' to economic development. In a 2025 interview at an armoured vehicle plant, Lai promised his special defence budget would create 90,000 jobs.
The cost is efficiency. One Taiwanese opinion piece said outright that defence indigenisation breeds corruption and rent-seeking, and the KMT dug up a crooked 1990s navy procurement case.
The opposition will not let it through
Since February 2024 the KMT's 52 seats plus the TPP's 8 have controlled the legislature; the DPP holds 51.
Lai's November 2025 proposal — NT$1.25 trillion over eight years — was blocked in committee by KMT whip Fu Kun-chi, nine times over. That works out to NT$156 billion a year, more than a quarter of the regular 2026 defence budget.
The version that passed in May stripped out the drone funding. The KMT's alternative routes the money through annual budgets requiring fresh approval each year, and in August it forced the government to drop its six-year military drone budget altogether.
This is not new. Under Chen Shui-bian the KMT blocked a special budget for U.S. arms more than fifty times, until Chen gave up.
The real battlefield is the supply chain
The West's rush for 'red-free' supply chains is Taiwan's one opening. China controls several key links: cheap flight-control chips, the rare earths in motors, and most batteries and sensors.
Drone consumption in Ukraine is startling, and the U.S. military has begun using unmanned boats in combat. The demand is real.
But Taiwan's own market is too small to sustain these firms. Taiwanese drone companies booked NT$442 million in revenue in 2024, and startups raised NT$3.8 billion in paid-in capital through 2025, against NT$56.8 billion of government and military procurement — a gap of about fifteen to one.
So the way out is to be a component supplier and leave the 'brains' to American firms. From June 2025 to June 2026, Anduril added fifteen Taiwanese suppliers and multiplied its purchases fifteenfold.
The U.S. market also has a gate: since December 2025 foreign drones are banned unless they hold Pentagon certification or meet Buy American rules. The firms that make money will be the ones partnered with American companies.
In one line: Taiwan does not lack drone craftsmanship. It lacks the orders and the political patience to keep that craftsmanship alive.
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