Speaking at a drone industry forum in the central Taiwanese city of Taichung, Raymond Greene, director of the American Institute in Taiwan, said unmanned systems offered a transformative opportunity to bolster the island’s security amid evolving regional threats.

The United States remains Taiwan’s most important international supporter and principal arms supplier despite the absence of formal diplomatic relations. Washington has consistently backed Taipei’s efforts to modernize its armed forces and increase defense spending as tensions with China persist.

Taiwan says it is accelerating military reforms in response to growing pressure from Beijing, which regards the democratically governed island as part of its territory. President Lai Ching-te has rejected China’s sovereignty claims, maintaining that only Taiwan’s people have the right to determine the island’s future.

Greene said the United States and Taiwan could help establish a democratic supply chain for drone production while strengthening collective deterrence among like-minded partners.

Referring to lessons from the war in Ukraine, Greene said drones have demonstrated their ability to enhance the defensive capabilities of forces confronting larger adversaries.

“Nothing will deter conflict more effectively than turning Taiwan into a hornet’s nest of air, surface, and subsurface drones,” he said.

Taiwan’s government has made asymmetric warfare capabilities, including drones, missiles and unmanned systems, a central pillar of its defense strategy. However, funding proposals have become the subject of political debate between the ruling administration and the opposition-controlled legislature.

In May, Taiwan’s parliament approved only about two-thirds of the government’s proposed T$1.25 trillion ($40 billion) supplemental defense package, allocating funding primarily for purchases of U.S.-made weapons.

The government has since proposed a separate T$210 billion ($6.59 billion) program extending through 2031 to finance surveillance drones, coastal attack platforms and small unmanned surface vessels.

The opposition Kuomintang this week introduced its own proposal that would authorize up to T$240 billion in drone spending over six years, with annual expenditures capped at T$40 billion. Unlike the government’s plan, the opposition proposal would finance the program through Taiwan’s regular budget rather than a special appropriations package.

Taichung Mayor Lu Shiow-yen, a senior Kuomintang figure who also addressed the forum, called for cross-party cooperation to accelerate development of Taiwan’s domestic drone industry.

Lu said recent conflicts, including the wars in Ukraine and Iran, demonstrated how drones and unmanned systems have fundamentally changed the character of modern warfare.

Taichung has emerged as one of Taiwan’s principal drone manufacturing centers and is home to companies including Thunder Tiger and the state-backed Aerospace Industrial Development Corp., both of which play significant roles in the island’s expanding defense industrial base.

On Wednesday, President Lai said strengthening Taiwan’s asymmetric defense capabilities had become increasingly urgent amid shifting geopolitical conditions and rapid changes in modern warfare, describing the effort as a race against time.

Official trade data showed Taiwan exported 181,159 drones between January and April, almost 20 times the volume recorded during the same period a year earlier and exceeding total exports for all of 2025. The majority of shipments were sent to the Czech Republic and Poland, destinations industry observers believe serve as transit points for equipment ultimately supporting Ukraine’s defense effort.

The sharp rise highlights how the Russia-Ukraine war has transformed the global drone market, with low-cost unmanned aerial vehicles becoming essential tools for reconnaissance, surveillance and precision strikes. The conflict has accelerated military spending worldwide and increased demand for alternative drone suppliers outside China.

Taiwan is positioning itself as an Asian production center for so-called “non-red” drones and components, a term used by industry participants to describe products free from Chinese materials and supply chains. The strategy aligns with broader efforts by Western governments and defense industries to reduce dependence on Chinese technology.

While Taiwanese manufacturers benefit from the island’s advanced electronics ecosystem, including strengths in semiconductors and artificial intelligence, they face significant cost disadvantages. Industry executives say non-Chinese drones can cost up to three times more than comparable products from Chinese manufacturers such as DJI, which dominates the global commercial drone market through large-scale production.

Analysts say overseas sales have become increasingly important for Taiwan’s emerging drone sector because domestic demand remains limited. Samara Duerr, a policy analyst at the Taiwan government-backed Research Institute for Democracy, Society and Emerging Technology, said international markets provide manufacturers with the scale and operational experience needed to expand production capacity.

The export boom also reflects opportunities created by Beijing’s tightening restrictions on drone exports in recent years. Those controls have encouraged foreign buyers to seek alternative suppliers, benefiting Taiwanese firms attempting to establish themselves in global supply chains.

Taiwan’s government has set ambitious targets for the sector, aiming to increase monthly production capacity to 100,000 drones by 2030, significantly above earlier goals. Officials view drone manufacturing as both an economic opportunity and a strategic necessity as Taiwan seeks to strengthen its defense capabilities in the face of military pressure from China.

China claims Taiwan as its territory and has intensified military activity around the island in recent years. Taipei sees the development of a domestic drone industry as part of broader efforts to enhance self-reliance and deterrence.

Industry leaders argue, however, that progress is being constrained by delays in government procurement programs. Plans to acquire more than 200,000 domestically produced drones under a proposed defense package worth nearly $40 billion have been stalled in Taiwan’s opposition-controlled parliament.

Max Lo, chairman of drone manufacturer AeroSoarX, said overseas contracts were essential for maintaining production lines while domestic orders remain uncertain. Taiwanese companies have increasingly pursued customers in Eastern Europe, particularly those involved in supporting Ukraine’s war effort.

Despite strong export growth, industry experts caution that Taiwan faces formidable competition. Ukraine has rapidly developed its own drone manufacturing ecosystem during the war and could emerge as a major exporter once hostilities end. Chinese producers also continue to dominate many segments of the market through lower prices and extensive manufacturing capacity.

Marcin Jerzewski of the European Values Center for Security Policy said one challenge for Taiwanese firms is proving their systems can perform under combat conditions, an area where Ukrainian manufacturers now possess extensive battlefield experience.

Analysts say Taiwan may ultimately find its strongest competitive advantage in specialized drone components rather than complete systems. Artur Savchii of Ukraine’s Snake Island Institute pointed to areas such as lithium-ion cells and advanced electronic components, where Taiwan’s technology sector could help reduce global dependence on Chinese suppliers.

Taiwanese companies are also expanding internationally through partnerships and joint ventures. Drone manufacturer Thunder Tiger has established a venture to produce drone motors in the U.S. state of Ohio and is exploring further expansion into Europe, betting that security concerns over Chinese technology will continue to drive demand for alternative suppliers.