Earlier this month, Raymond Greene, America’s de-facto ambassador to Taiwan, called on the island to deter conflict by becoming “a hornet’s nest of air, surface, and subsurface drones.” His prescription for achieving this goal sounds deceptively simple: large-scale US-Taiwan cooperation in drone production.

Coproduction of civilian and military drones has become a frequent topic in US-Taiwan policy discussions. The concept enjoys support across Taiwan’s major political parties, and both the U.S. Congress and Taiwan’s Legislative Yuan are considering proposals aimed at turning it into reality. Yet significant obstacles must be overcome before coproduction can occur at a meaningful scale.

The logic behind coproduction is straightforward. The United States possesses much of the world’s most advanced military technology, but its production of defense systems is unable to keep up with demand. As for drones, the U.S. has fallen behind and is unlikely to catch up until it can translate technological advantages into large-scale production.

Taiwan, by contrast, is home to the world’s leading contract manufacturers of smartphones and computers, as well as many supply chain partners that serve these industries. This confers a significant advantage, given that many components used in drones are also found in consumer electronics. Taiwan already manufactures most of the world’s advanced semiconductors, along with precision sensors, motors, and other critical drone components. However, it lacks some of the military technologies needed to produce advanced drones for use in defense. Its industry is also constrained by a relatively small domestic market and insufficient demand to justify the large-scale investments needed to expand production capacity. 

By combining U.S. military technology, procurement contracts, and investment with Taiwan’s manufacturing expertise and supply chains, the two sides could establish a partnership that would both improve Taiwan’s access to drones and help U.S. defense companies fulfill orders more efficiently. Such an arrangement would likely resemble the contract manufacturing model employed by Taiwan’s semiconductor foundries and electronics manufacturing giants such as Foxconn. Over time, this model could transform the island into a global hub for drone manufacturing, with production capacity that could be redirected toward domestic defense needs in the event of a conflict or other security crisis.

Yet building such a partnership is easier said than done. Despite its natural advantages, Taiwan got off to a late start in developing its drone industry. Although the $93 million in drone exports it recorded in 2025 represented year-on-year growth of 2,000%, the figure pales in comparison to China, which exported $3.1 billion worth of drones during the same period, or Ukraine, which now manufactures more than 4 million drones annually.

Taiwan’s drone industry faces several challenges. Four, in particular, must be addressed before the island can develop an indigenous drone industry with the scale, sophistication, and security credentials needed to integrate into U.S. defense supply chains.

The first challenge is political. Taiwan’s ruling and opposition parties all support the goal of expanding the island’s drone industry, but mutual distrust and an apparent unwillingness of either party to let its opponents gain a policy victory have repeatedly hampered progress. Earlier this year, the opposition parties used their legislative majority to remove drone funding from a special defense budget. In June, they blocked a second special budget dedicated entirely to drones. They subsequently introduced alternative proposals of their own, which, along with the June special budget, are currently under committee review. Each bill contains both strengths and weaknesses, and the optimal outcome would likely involve combining the best elements of multiple proposals. At present, however, neither party appears ready to engage in the kind of good-faith compromise necessary to achieve that result.

The second challenge is cost. Taipei’s insistence on building a “non-red” supply chain free of dependence on mainland China is one of its greatest strategic advantages, but it also makes Taiwan’s drones more expensive than those with mainland Chinese components. This cost disadvantage should diminish as Taiwan’s industrial base expands and economies of scale take hold, but government intervention might be necessary in the interim. Taipei might have to employ temporary subsidies or other forms of support to bridge the gap while the industry matures.

Third, Taiwan’s drone manufacturers need to satisfy strict requirements to be accepted into U.S. defense supply chains. The most important of these is Blue UAS certification. This designation signifies that the Defense Department has approved a drone on the basis of security, operational performance, and supply chain integrity, including an absence of mainland Chinese components. In 2025, Taiwanese firm Thunder Tiger successfully had its Overkill suicide drone added to the Blue UAS Cleared List, demonstrating that certification is achievable. Nevertheless, the process remains difficult, especially for smaller firms with limited resources.

The final challenge is not one Taiwan can resolve on its own. In order to justify the amount of investment needed to develop the industry for coproduction, Taiwanese firms need to know that they have a willing partner in Washington. Greene’s enthusiastic endorsement of US-Taiwan drone cooperation indicates a high degree of support within the State Department, which Greene reports to. Likewise, a bipartisan group of senators introduced legislation in March designed to facilitate closer US-Taiwan cooperation on drones, reflecting clear interest in at least some congressional circles.

What remains uncertain is the depth of support within the Trump administration. President Trump has consistently emphasized domestic defense manufacturing and may be reluctant to create what might appear to be new dependencies on Taiwan. One possible compromise would be for Taiwanese manufacturers to establish production facilities in the United States for production geared for the U.S. military, while reserving facilities in Taiwan for requirements on the island and in other export markets. Whether such an arrangement is politically and economically viable, however, remains unclear.

Despite these uncertainties, U.S. defense technology firms see a lot of promise in partnering with Taiwan. Companies like Anduril and Shield AI have already made significant investments in the island, with a strong focus on drones, and this momentum appears set to continue as these investments bear fruit. Nevertheless, realizing the promise of coproduction will require more than just investment. It also needs political compromise, compliance with a complex U.S. regulatory regime, and continued support from both governments.

Header image: President Lai attends the Taiwan Excellence Drone International Business Opportunities Alliance (TEDIBOA) in Taichung on 9 June 2026. By Lin Yen Ting