The defense industry of Taiwan is a strategically important sector and a significant employer. They primarily supply weapons and platforms to the Republic of China Armed Forces with few major weapons systems exported abroad. With foreign assistance the Taiwanese defense industry has produced fighter aircraft, missile systems, surface ships, radars, rocket artillery, armored vehicles, and small arms.
From 1825 until 1866 a shipyard in Tainan produced warships for the Qing navy. Logging for warship production was one of the impetus for the Qing's colonial expansion into Taiwan's mountainous interior.
The defense sector was invigorated following the recognition of the PRC by the United States in 1979 and the subsequent uncertainty this injected into the US-Taiwan relationship. The KMT government aimed to eventually achieve full self sufficiency in weapons systems. During that period, Taiwan made the IDF fighter in which is playing the role of rapid response towards PLA fighters approaching.
In 2014 the Aerospace Industrial Development Corporation was privatized with the government retaining a 39% stake and the National Chung-Shan Institute of Science and Technology was made an administrative corporation of the government rather than a constituent of the Armaments Bureau.
Under DPP President Tsai Ing-wen, there was a renewed focus on indigenous manufacturing, particularly of air and naval defense. President Tsai has also increased the military budget.
In 2021 Ministry of National Defense launched an initiative to recruit foreign workers to permanent jobs in Taiwan to address local talent shortages. The initiative also aims to address disruption stemming from the churn of contracted foreign technicians and advisors.
In 2022, 800 combat drones manufactured by DronesVision were transferred to Ukraine through Poland for use during the 2022 Russian invasion of Ukraine.
Taiwanese company JC Tech has created a "Taiwanese Switchblade" suicide drone called the Flyingfish. After a while, NCSIST also demonstrated a loitering munition made indigenously. Following the widespread use of drones in the war between Ukraine and Russia the official drone development program was expanded to include non-state owned companies as prime contractors for the first time. The government views drones as a destabilizing technology whose adoption would allow Taiwan to asymmetrically counter the threat from the PLA.
Missile production is extensive with annual production surpassing 1,000 units in 2023.
The National Chung-Shan Institute of Science and Technology, the Armaments Bureau, and the Aerospace Industrial Development Corporation are the only three Taiwanese defense manufacturing firms with the capabilities of a full defense prime. For naval systems there are three major shipbuilders and more than a half dozen active shipyards. In addition to the big defense firms there are more than 200 small and medium businesses involved in the defense industry. As the Taiwanese military budget increases many Taiwanese firms which did not formerly make defense products have explored the market, interest was particularly piqued following the 2022 Russian invasion of Ukraine.
See also: Armaments Bureau
Taiwan's domestic vehicle industry supplies the ROC Army with armored personnel transport and some light vehicles. Famous examples include CM-12 Tank, CM-21 Armored Vehicle, and CM-32 Armoured Vehicle.
See also: Maritime industries of Taiwan
The major shipbuilders, CSBC Corporation, Taiwan, Jong Shyn Shipbuilding Company, and Lungteh Shipbuilding, all build military and coast guard vessels. Military and Coast Guard orders make up a large portion of shipbuilders books by dollar value. Between the Taiwanese Navy and the Coast Guard Administration Taiwan spends approximately a billion dollars a year on new vessel construction. The vessels are usually constructed by the shipyards and weapon installation done by NCSIST afterwards. Famous examples include Tuo Chiang-class corvette, Panshih-class fast combat support ship, and Yushan-class landing platform dock. Moreover, Taiwan is building on the Hai Kun-class submarine to create a fleet of new diesel attack submarines.
In 2019 the Legislative Yuan passed the National Defense Industry Development Act which among other things instructed the Ministry of National Defense to evaluate prospective defense companies and rank them in three tiers based on their technological capability, the size of their operations and their experience in researching, developing, manufacturing and maintaining military equipment, as well as their track record working with academia, businesses or foreign companies.
Later in 2019 the Legislative Yuan passed a bill which encourages foreign direct investment in the defense industry and other ”strategic” industries. The bill allows foreign investors in these sectors to claim "special tax rates" and also tax rebates of up to half their tax bill.
The Taiwanese government restricts the export of dual use items to certain countries. In 2023 Taiwan placed additional restrictions on machine tool exports to Russia and Belarus in response to reports that certain Taiwanese machine tool manufacturers were playing a key part in Russia's war effort.
The T65 and T91 assault rifles have been widely exported to many nations with the upper receiver for the T91 been sold on the US civilian market. Taiwanese SOEs have not exported any major high-end weapons systems but the Taiwanese Government is becoming more open to the idea. Private companies have been more successful, with Lungteh Shipbuilding supplying multiple generations of the Multipurpose Assault Craft to the Philippines. The Taiwanese government has expressed increasing interest in supplying high end weapons systems and components to like-minded democracies.
The Taipei Aerospace & Defense Technology Exhibition is the primary Taiwanese defense industry trade show, it is held biennially.