The Cabinet’s proposed special defence budget of NT$1.25 trillion (approximately US$39.16 billion) is anticipated to stimulate significant growth within the defence industry, as indicated by an Executive Yuan official on Saturday.
This proposal is expected to generate over NT$400 billion in output for the defence sector and create more than 90,000 jobs, thereby enhancing national security while contributing to economic growth, according to the official, who chose to remain unnamed.
Despite previous challenges in entering the defence sector, Taiwan now possesses the capability to further develop its industry.
The Cabinet’s budget proposal centres on three primary initiatives:
- Establishing a ‘T-Dome’ multilayered defence system;
- Integrating artificial intelligence (AI) technologies to create a swift and accurate kill chain;
- Accelerating the development of domestic defence industries.
According to Cabinet data, the defence sector generated NT$230.8 billion in production value last year. This includes NT$12.9 billion from the drone industry, NT$69.6 billion from shipbuilding, and NT$148.3 billion from aerospace.
In the drone sector, the Cabinet approved an investment of NT$44.2 billion to support domestic production of uncrewed aerial vehicles. Additionally, the Ministry of Economic Affairs has been promoting the Taiwan Excellence Drone International Business Opportunities Alliance, which has seen participation from over 260 drone manufacturers as of December last year. This initiative has led to the signing of eight memorandums of understanding and the initiation of more than 35 international partnership projects.
Exports of complete drone units experienced a remarkable surge, increasing from NT$140 million in 2024 to NT$2.95 billion last year, marking a 21-fold rise. The primary export destinations for these units were the Czech Republic, Poland, and the United States.
In the aerospace sector, Taiwan has achieved key capabilities necessary for establishing an F-16 maintenance centre and launched its first large-scale constant-temperature forging production line for engines in April last year. The Aerospace Industrial Development Corp, Taiwan’s fighter jet developer, has outsourced production to local firms, resulting in 217 domestic suppliers achieving certification and entering into manufacturing contracts with 136 companies, worth a total of NT$11.17 billion.
As for shipbuilding, the Ministry of National Defense and the Coast Guard Administration have proposed the construction of 198 vessels, all of which are to be built by domestic shipbuilders. As of December last year, 145 vessels had been delivered, with all expected to be completed by the end of 2031. The coast guard commissioned 1,000-tonne and 4,000-tonne patrol vessels in September and November last year, respectively, enhancing maritime law enforcement capabilities.
The defence sector is recognised as one of the 13 strategic industries by the Executive Yuan, identified as critical pillars for future national development. Other sectors designated include semiconductors, AI, silicon photonics, quantum technology, AI robotics, security and surveillance, next-generation communications, critical minerals, biotechnology and medical services, an Asian asset management centre, public infrastructure and urban renewal, cultural and creative industries, and a trillion-dollar tourism sector.