Taiwan wants to build a drone "hive," but will the drones used to defend against China still need Chinese parts to fly? U.S. Republican Congressman McCaul recently called in Taipei for the U.S. and Taiwan to establish a partnership in drone production and technology.
Taiwan also plans to invest NT$210 billion to purchase domestically produced drones, and has listed the "non-red supply chain" as a key focus. The term "non-red" means that the upstream components of the drone, its materials, and the materials used in those materials all need to be non-red in order to be considered a complete non-red system.
Taiwan's procurement guidelines announced this year require that complete machines and key modules must be manufactured in Taiwan by Taiwanese companies; most other parts must also comply with the requirement that they are not Chinese-funded or made in China.
However, even with regulations in place, alternative production capacity cannot be implemented overnight. Based on our current research, motors and battery cells are the components most likely to be dependent on China. In terms of battery cells, the most crucial components are currently the positive and negative electrode materials. These materials determine the battery's performance and its cost.
Japanese cathode material manufacturers told us that, while taking environmental protection into account, the cost of producing these cathode materials in Japan is about 20% to 50% higher than in China. Inventory can only buffer short-term shocks; in the long run, new production capacity must be supported by orders. Simply put, stable orders are needed to support scale, which will reduce costs and then allow for alternative investments in materials.
This production capacity cannot be formed immediately in the short term, probably within three or four years, which is indeed a risk. This window of opportunity coincides with a new supply chain clash between the US and China.
On August 5, China tightened its case-by-case review of controlled drones, key components, and related technologies exported to the United States; Xi Jinping is expected to visit the United States on September 24 and meet with Trump. Ahead of high-level interactions between the US and China, the drone supply chain has become a new point of contention.
For Taiwan, the real test is not how many drones it has, but whether it can continue to produce, repair, and replenish them without being constrained by the Chinese supply chain after a crisis.
