Taiwan’s Domestic Drone Chips Are Coming. Can They Meet the Industry on Price and Volume?

Elan Microelectronics announced on November 3 that a drone chip project it leads with partner companies has been approved for subsidy under the Ministry of Economic Affairs' IC Breakthrough program, according to cnYES. The project carries a total development budget of NT$1 billion and plans 11 ICs. According to the same report, reviewers asked the team to strengthen its market positioning, international market entry strategy and chip commercialization planning, which are the questions of price and volume this piece looks at.

Taiwan's move toward domestically designed chips for drones now has policy, funding and enforcement behind it. The government has named the chips it considers missing, funded two rounds of development, and prosecutors have opened cases over Chinese chips found in military drones. The direction is set. The question that buyers and integrators will ask next is narrower: whether these chips reach the drone industry at a price and in a volume it can build on.

Two caveats belong at the top. First, most of the projects described here are development programs, and the figures attached to them are government or company projections rather than delivered results. Second, the procurement cases referenced below are under investigation, and the allegations have not been proven in court.

Five components the government says Taiwan still lacks

The government's own shorthand for the gap is "three chips, two software": flight-control, communications and satellite-positioning (GNSS) chips, plus flight-control and ground-control software, as summarized by uAnalyze from Economic Affairs Minister Kung Ming-hsin's remarks in October. Kung described a two-stage approach: first, whole aircraft without Chinese content; second, domestic capability in key components and software, so that Taiwan can keep producing if international supply is interrupted. The same report cites Commercial Times estimates of current localization at about 70 percent for small drones, 60 percent for medium and 30 percent for large, against a policy target above 90 percent for key technologies.

Demand is meant to come from procurement, but the law behind that procurement is not the one the Cabinet proposed. The Executive Yuan's June 18 draft, the Special Act on Procurement of Domestically Autonomous Unmanned Vehicles, would have authorized a special budget of up to NT$210 billion for the Ministry of National Defense to buy coastal surveillance drones, coastal attack drones and small suicide boats between August 2026 and December 2031. That draft did not pass. On August 27, legislators instead passed the Act for Strengthening Defense Autonomy and Unmanned Vehicle Industry Development, with most articles taken from the Kuomintang's version and some provisions from the Taiwan People's Party and the Cabinet, NOWnews reported.

The enacted law differs from the draft in ways that matter for suppliers. The Ministry of Economic Affairs is the competent authority, with the Ministry of National Defense responsible for military procurement. Funding runs through the regular annual budget rather than a special budget: NT$240 billion over six years, in principle NT$40 billion a year, with a clause allowing increases if funds fall short. The three drone and boat categories from the Cabinet's draft are listed as priority purchases, and a national strategy committee for the industry is added. Apart from the budget article, the law takes effect six months after promulgation. The Ministry of Economic Affairs said it regretted that the Cabinet's version was not adopted, arguing that funding military drone purchases only through annual budgets would make it difficult to meet the industry's expectation of stable, predictable orders. The Kuomintang caucus said it would not accept the blank-check authorization it saw in the Cabinet's draft.

The Cabinet has since proposed a separate supplementary budget that sets aside NT$55.9 billion for coastal attack drones, coastal reconnaissance drones and small one-way unmanned surface vessels. As we noted in our analysis of the Tron Future case, a larger budget does not by itself produce tenders that close, which matters for chip makers whose volumes depend on those tenders.

What has been funded so far

Round one: image chips and flight-control boards. The ministry's January 2025 announcement of its drone key chips and modules program targeted two items, AI image chip modules and low-cost flight-control boards. Projects that develop their own chips were encouraged to pair a chip company with a drone system maker; projects using purchased chips had to use a domestic main processor. Grants covered up to 50 percent of costs for projects of up to two years, according to the Commercial Times.

On September 10, 2025, the ministry approved seven of 17 applications. Its grant records show NT$326.34 million in subsidies against total project budgets of NT$916.6 million, so the companies are funding NT$590.26 million, about 64 percent, themselves. The largest project, a 6-nanometer AI image chip platform from Coretronic Intelligent Robotics and iCatch Technology aimed first at police and defense users, received NT$150.5 million on a NT$430 million budget, nearly half of the round's grants; the ministry expects it to generate NT$1 billion in cumulative output over three years. The others include an AI vision module on MediaTek's Genio 720 from AzureWave and Taiwan Hope Innovation, flight controllers from Accton and from Taiwan Hope Innovation on ASIX Electronics' domestic dual-core microprocessor, and a flight-control ecosystem from 威力工業網絡 and HiDes Technology built around a domestic COFDM datalink chip.

The allocation leans toward imaging. The Coretronic and iCatch project alone has a larger budget than the four flight-control projects combined, which total NT$186.6 million including 易發精機's flight-control verification platform, even though flight control and communications are two of the three chips the government lists as gaps.

Products already shipping. Some chips are past the development stage. Elan subsidiary 義晶科技 began volume shipments of an image signal processor for drones in the third quarter of 2025, with five drone customers in production and about 16 domestic supply chain companies testing samples at the time, according to cnYES.

Round two: a wider chip set. In the project announced on November 3, Elan leads on IC design, edge computing and on-device AI vision, while its partners handle component and subsystem specifications, airframe design and system integration, and AI visual navigation for autonomous flight, environmental perception and precision landing. The planned chips include a time-of-flight ranging chip for obstacle avoidance, a long-range array antenna chip, an RF chip for a software-defined radio (SDR) platform and a domestic AI SoC. The communications work covers SDR long-range video and control, array antennas and decentralized ad hoc mesh networking, with planned anti-jamming swarm operation of five or more drones. The project also includes an outdoor-ready ground station with post-quantum cryptography planning and simulation platforms built on digital-twin models of Taiwan's terrain.

Elan has said the subsidy will share upfront R&D costs and reduce development risk, and frames the project as an extension of its notebook-focused interface chips, AI image recognition and edge computing into drones and other smart vehicles. The reviewers' request for commercialization and international market plans is a reminder that the program has been approved for its engineering scope, while its pricing and market path are still being defined.

A pattern runs through both rounds. Several projects adapt chip families that Taiwanese companies already sell into other markets, such as MediaTek's Genio line, ASIX's microcontrollers and Elan's display and sensing ICs, rather than starting drone-only designs from scratch. That bears directly on the volume question below.

Origin rules now reach inside the chip package

Demand for documented domestic chips is being shaped by enforcement as much as by subsidy. In August, prosecutors detained the head of Hang Jian Technology on suspicion of supplying the Army's 8th Corps with drones built on Chinese-packaged chips and Chinese-made flight-control boards, with labels covered and false certificates of origin. In October, prosecutors in Taoyuan detained two executives of Jiin Ming Industry over alleged use of prohibited Chinese chips and camera lenses in drones supplied under military contracts. Both companies' cases are at the investigation stage. We covered the implications for foreign buyers in our report on Taiwan's origin prosecutions.

Where a chip is packaged has become a practical issue in its own right, separate from where it was designed or fabricated. Kao Chang-yuan, CEO of Aeroprobing, told Business Today in August that he dropped a top-performing US chip from his bill of materials because it was packaged in China. If no substitute can be found, he said, that function may simply not be possible. For integrators in that position, a chip designed, fabricated and packaged in Taiwan reduces the paperwork needed to prove compliance, which is part of its value independent of performance.

Tender pricing adds to the pressure. Hang Jian won its 8th Corps contract with a bid of NT$2.95 million, reportedly the lowest, per Taiwan News, against a military estimate above NT$4 million, as we detailed in our Tron Future analysis. That piece described the mechanism: compliance raises costs, so a lowest-price award favors whoever cuts corners until they are caught. For domestic chip makers, the same mechanism works against them, because a documented Taiwanese chip competes on price with an undocumented Chinese one until inspection catches the difference. Defense Minister Wellington Li-Hsiung Koo has since said that problems surfaced in small purchases that were not torn down for inspection, and that those will now be inspected.

Chips are the part where volume lowers cost

Not every component responds to scale in the same way. Chen Ping-hui, a National Taiwan University mechanical engineering professor and co-convener of the ministry's drone industry expert group, has argued that for parts such as motors, material and labor costs set a floor: raising output from 10,000 to 100,000 units will not cut the price to a tenth. In his account, chips and sensors are the components where volume can bring cost down substantially, and they are also where Taiwan's industry is strongest.

The logic of that argument runs in one direction: a domestic drone chip becomes cheaper as more units are sold. Its price is therefore less a fixed characteristic of the chip than a function of the demand behind it.

Volume is the variable to watch

Taiwan's drone production capacity is about 15,000 units a month, according to Ministry of Economic Affairs estimates cited by the Financial Times and reported by TechNews, and the ministry expects that capacity to grow sevenfold by 2030, with half of output going to export. That figure describes capacity rather than confirmed monthly production or shipments, and actual output depends on orders. Ukraine's wartime demand runs to several million drones a year, against Taiwanese output in the hundreds of thousands, Taiwan News reported in May, adding that price remained an obstacle for Taiwanese suppliers.

For chips, those numbers set the scale of the opportunity. The ministry's expectation of NT$1 billion in cumulative output over three years for the Coretronic and iCatch platform gives a sense of the volumes now being planned for a single drone chip program. Chips that share a design base with consumer, industrial or automotive products can spread development cost across those markets as well, which is one reason the adaptation pattern in the funded projects matters.

Early volume, though, depends heavily on how public and military buyers write their tenders, and the tender record is mixed. The Coast Guard's NT$1.2 billion surveillance drone tender failed in June after at least three of four qualified companies did not bid, and the Army's counter-drone tender went three rounds before an award that later ended in termination, as our Tron Future analysis set out. Each failed or delayed tender is also volume that does not reach the component makers below the integrator. A domestic chip priced on the assumption of large military orders needs those orders to be placed, at budgets that reflect the cost of compliant parts.

Foreign demand is part of that picture. As we reported in September, some buyers approaching Taiwanese suppliers have arrived with production quantities rather than evaluation lots. Whether domestic chip makers can serve those orders depends on decisions not yet made public, including wafer allocation, pricing tiers and minimum order quantities.

What we're tracking

Disclosed prices and volumes. None of the funded projects has published unit prices or annual capacity. The first domestic drone chip vendor to quote production pricing publicly will give buyers a reference point that is currently missing.

The Elan program's commercialization plan. The Elan-led project has not stated a mass-production date or the size of the government subsidy, and reviewers have asked for stronger commercialization and international market plans. We will report those details when they are released.

Chip-level procurement rules. Watch whether the Ministry of National Defense clarifies how packaging location, wafer origin and design origin are treated for chips, and whether tenders move away from lowest-price awards toward criteria that weigh documented origin. The Army's counter-drone re-tender in its 2027 and 2028 budgets will be one early signal of whether budgets are being reset to market prices.

Revenue lines. Listed chip makers such as Elan and iCatch report results quarterly. Whether drone-related chips appear as a disclosed revenue item over the next year will be a practical indicator of volume.

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This analysis draws on announcements from the Executive Yuan and the Ministry of Economic Affairs, and on reporting from cnYES, CNA, the Commercial Times, Business Today, TechNews, Taiwan News, the Taipei Times, NOWnews, uAnalyze and INSIDE, and on TaiwanDrones' prior reporting. Project budgets, output projections and performance claims are those of the companies or agencies named and have not been independently verified. The procurement cases referenced are under investigation, and the allegations have not been proven in court. This piece reflects public information as of November 4, 2026 and does not constitute legal, compliance or investment advice.