Taiwan is making a determined push into aerospace as part of its "Five Trusted Industry Sectors" initiative, with the sector reaching NT$133.6 billion (US$4.2 billion) in output, returning to pre-pandemic levels. This industry, deemed critical for national defense and technological advancement, is experiencing a renaissance after the severe disruption of 2020-2022.
According to Tracy Lu, acting general manager of Taiwan Aerospace Corporation, the island's aerospace strategy encompasses three key segments: drone/unmanned aerial vehicles (UAVs), low-earth orbit (LEO) satellites, and rocket launch capabilities.
Strengthening domestic UAV capabilities
In the UAV sector, Taiwan is pursuing a cluster development strategy reminiscent of its successful semiconductor industry model. The initiative centers on the Chiayi region, where manufacturers are congregating to create synergies in research and production. Recent visits by US defense contractors have opened possibilities for technology transfer, particularly in military UAV development.
However, significant challenges remain in domestic manufacturing capabilities. "Critical subsystems such as motors, avionics, sensors, and flight control systems still present high technical barriers," said Lu. The development of essential thermal imaging chips for optical payload systems is expected to take another two to three years to mature.
Credit: Drone Industry Insights
Global market opportunities and alliances
The market opportunity is substantial. Military UAV spending is projected to reach US$54 billion globally between 2023-2032, with commercial applications adding another US$58.5 billion. The ongoing Russo-Ukraine War has intensified demand, creating opportunities for Taiwanese manufacturers in Southeast Asian markets where domestic production is limited.
A new industry alliance, led by the Aerospace Industrial Development Corporation (AIDC) and comprising over 50 companies, was formed in September to pursue international opportunities. The consortium includes major players such as Air Asia Company Limited, Thunder Tiger, and Evergreen Aviation Technologies.
Satellite development and challenges
In the satellite sector, Taiwan aims to achieve 80% self-sufficiency in key components for ground-based communication systems by 2027, backed by a US$1 billion government investment. The global satellite industry is dominated by ground equipment manufacturing, accounting for US$150.4 billion or 53% of the market - an area where Taiwan's electronics expertise could prove advantageous.
Credit: SIA
Yet Taiwan faces stiff competition in the increasingly crowded low-earth orbit space. With global satellite launches expected to reach 3,500-4,000 annually by 2025, driven by projects like SpaceX's Starlink and Amazon's Kuiper, Taiwanese manufacturers are primarily focused on component supply rather than system integration.
Navigating regulatory constraints
The rocket launch sector presents perhaps the greatest challenge, constrained by the Missile Technology Control Regime (MTCR) which limits the range to 300km. Some companies, like TiSPACE, are circumventing these restrictions by conducting launches overseas, with tests planned in Japan early next year.
"Government procurement needs to ignite initial demand and sustain production lines," Lu emphasized, noting that Taiwan's defense ministry plans to outsource 80% of its UAV requirements to domestic manufacturers. Current localization rates below 40% are expected to improve significantly as the industry matures.
The convergence of geopolitical tensions and technological advancement has created a strategic opportunity for Taiwan's aerospace sector. Its success hinges on the ability to leverage manufacturing expertise while navigating international restrictions and global competition. As Taiwan seeks to reduce its technological dependence on foreign suppliers, the aerospace industry's development has become increasingly intertwined with national security considerations.
