Amid Chinese security threat, are drones ‘the next big thing’ for Taiwan after chips?

HSINCHU/TAIPEI - In an office in the Hsinchu tech hub, a screen shows a map of Taiwan’s Kinmen island, nearly 200km away from Taiwan and just 2km from China’s coast, and radars scanning for suspicious drones across different parts of this vulnerable outpost. 

The office belongs to Tron Future Tech, a Taiwanese firm started in late 2018, which makes radars, jammers and interceptor drones that can detect and neutralise the threat from unmanned aerial vehicles (UAVs), among other equipment. 

Anti-drone systems account for about two-thirds of its business, its founder and chief executive Wang Yu-jiu told foreign reporters visiting his firm’s headquarters in July.  

The use of drones in the ongoing Russia-Ukraine war, coupled with Chinese drones flying over Kinmen, has sparked greater demand for counter-drone systems, especially for protecting critical infrastructure like power plants, science parks or water dams, he said.

China claims Taiwan as its territory and has been putting pressure on the island by frequently flying military aircraft and having its navy ships sail near or around the island.

“The demand for anti-UAS (unmanned aircraft system) suddenly increased a lot in the past two or three years,” he said, estimating that demand has grown at least 10 times in the last two years.

Tron, which is contracted by the Taiwan government to supply anti-drone systems in Taiwan, also works with partners in countries like India, the Philippines and Singapore.

In Taiwan, the drone or UAV business has come under the spotlight as a rapidly growing industry earmarked for development by the government – it has even been seen as possibly “the next big thing” for Taiwan after its world-leading semiconductor industry.

A cover story in Taiwan’s Business Weekly magazine in July called the drone industry a “new industry that safeguards the nation”, similar to an often-cited description of the island’s chip industry, which makes most of the world’s advanced chips and is of strategic importance.  

In the first half of 2025, Taiwan exported US$11.89 million (S$15.25 million) worth of drones, more than five times as much as the US$2.3 million in the whole of 2024. 

Overall, the industry output of Taiwan’s UAV market has increased from NT$2.8 billion (S$119 million) in 2023 to NT$5 billion in 2024. But this is dwarfed by output of Taiwan’s semiconductor industry, which reached NT$5.32 trillion in 2024.

While Taiwan’s drone industry still has a long way to go to match its chip industry, observers say that drones can nevertheless be a strategic pillar of the island’s economy.

“Taiwan’s push into drones was driven by a mix of urgency and pragmatism,” Taiwan-based international affairs analyst Aadil Brar told The Straits Times, adding that the Ukraine war was a wake-up call.

He said: “For Taiwan, which faces a much larger and better-funded adversary across the strait, drones offer a way to offset that asymmetry without matching China tank for tank or jet for jet.”

China is said to have 4,800 tanks versus Taiwan’s 750, and 3,400 aircraft versus Taiwan’s 530, according to the 2023 Military Balance report by the International Institute for Strategic Studies think-tank.  

Under former Taiwan president Tsai Ing-wen, the island had embarked on building up its capacity in making drones, especially after the outbreak of the Ukraine war in 2022.

Mr Brar noted that Taiwan’s push into the drone industry is also about self-reliance.

“In a crisis, foreign arms supplies could be delayed or blocked entirely, so having a domestic production line – even if small – ensures at least a baseline of capability. And unlike major weapons systems, drones can be produced more quickly, iterated on rapidly and tailored to Taiwan’s unique geography, like dense urban areas and mountainous terrain.

“In terms of defence, a strong local drone industry means more than just hardware – it’s about building a full ecosystem of operators, engineers and supply chains that can sustain operations during prolonged conflict. It also makes Taiwan less predictable to its adversaries, because it can field custom, home-grown platforms that don’t mirror foreign models.”

At a dialogue with visiting foreign journalists in Taipei in July, Professor Tu Wen-Ling, director of the Research Institute for Democracy, Society And Emerging Technology (DSET), a Taiwan think-tank, said in answer to a question from ST that the “drone industry has become a very strategic one for Taiwan”. She referred this reporter to the organisation’s research paper titled Drones For Democracy, issued recently.

A shift has taken place after current President Lai Ching-te took office in May 2024, with the aim now to “position Taiwan as a key UAV manufacturing hub in the Asia-Pacific region – a ‘China-free’, dual-use drone supply chain centre capable of serving both commercial and defence needs, while reinforcing democratic alliances”, DSET noted in the paper.

Supply chain free of China components?

To sell its drones, Taiwan is touting a supply chain free of components from China, which are seen to pose security risks. This is a pitch welcomed by countries wary about over-reliance on Chinese drones. 

So far in 2025, the top five markets for drones from Taiwan are Poland, the US, Germany, the Czech Republic and Hong Kong, Taiwan media reported, citing the Taiwan External Trade Development Council. 

Mr Brar said that exporting drones to the US and Europe signals that “Taiwan can meet strict export regulations, cyber-security requirements and quality standards in highly regulated markets”. “That boosts credibility,” he added.

Taiwan aims to increase the value of the industry to NT$40 billion by 2030 and reach an annual output of 180,000 UAVs by 2028.

There is a way to go to meet the target, as Taiwan’s annual output is estimated to be between 8,000 and 10,000 units from April 2024 to April 2025, according to figures cited in the DSET paper. 

Certainly, Taiwan’s drone industry has to grapple with various challenges. 

It faces constraints like the small size of its domestic market, with a relatively small domestic procurement, regulations, lack of space on the island to test out products and the fact that Taiwan, despite its prowess in chipmaking, does not make some of the vital chips and software used in drones. 

Not least of Taiwan’s challenges is the large drone industry across the Taiwan Strait.

Chinese firms, led by Shenzhen-based firm DJI, command the global market in commercial drones, accounting for 70 per cent to 80 per cent of global supply, the Financial Times reported in June. China makes up to millions of drones a year. 

Professor Lien Hsien-Ming, president of the Chung-Hua Institution for Economic Research in Taipei, told ST: “The Taiwan government is trying very hard to build a supply chain without Chinese components, but it’s not that easy. The size and volume of the parts built in Taiwan are not big enough, leading to high costs. The key issue is whether (Taiwan’s drone industry) is competitive relative to China’s.”

As the DSET paper noted, Taiwan’s drone industry uses components sourced from outside China, which can be a lot more expensive. For instance, the SDR video transmission chips imported from countries friendly to Taiwan can cost up to 10 times more than DJI’s in-house chips.  

On whether the drone industry can be the next big thing in Taiwan after its chip industry, Mr Brar noted that Taiwan’s private sector “has a culture of fast-moving, small-scale innovation, which is ideal for an industry where designs evolve quickly and customers want niche, tailored solutions”.  

While Taiwan’s drone industry “won’t match chips in scale or economic weight, at least not soon, it could become a strategic second pillar”, he said.  

“Unlike semiconductors, drones blend civilian and defence markets, so Taiwan could build a dual-use sector that serves global commercial applications while supporting national security.”