J Fox Insights

A group of American defence industry representatives recently visited Taiwan as part of an effort to strengthen its defence capabilities and promote peace and security in the Indo-Pacific region. Retired Lieutenant General Steven R. Rudder, leading the delegation, emphasised their commitment to a free, open, and inclusive relationship between the US and Taiwan, as well as the entire region. 

The US group stated that it aims to support Taiwan’s self-defence through defence industrial partnerships, ensuring supply chain resilience and enhancing Taiwan’s position in the international community. They also sought to understand Taiwan’s strategic thinking and enhance joint interoperability between Taiwan and the US to effectively coordinate under a unified C4ISR system for seamless communication and collaboration among different military branches.

Relations with China

China’s stated desire to bring Taiwan under its control is based on its historical claim that Taiwan is a part of its territory. The Chinese government views Taiwan as a breakaway province that needs to be reunited with the mainland. This desire is rooted in the Chinese Civil War, which took place between the Chinese Communist Party (CCP) and the Nationalist Party (Kuomintang or KMT) in the mid-20th century.

In recent years we’ve seen an escalation of hostilities against Taiwan, with Beijing lifting its anti-independence rhetoric and increasing its incursions into Taiwan’s air defence identification zone (ADIZ). In May 2022, China’s then-defence minister, Wei Fenghe, said that China would not rule out the use of force to achieve its goal of “reunification” with Taiwan. A month later, China’s president, Xi Jinping, said that he would not tolerate any attempt by Taiwan to declare independence.

In order to discover more about the US-led mission to Taiwan and what expanding ties between Western defence contractors and the island nation really means, we spoke with experts and industry from the field. 

Is there more emphasis on Taiwanese defence today?

The United States maintains a close relationship with Taiwan under the Taiwan Relations Act (TRA) and provides the island nation with significant military support, including arms sales. Western defence contractors play a crucial role in providing military equipment and technology to Taiwan through approved arms sales. These arms sales are often a point of tension in West-China relations, as China views them as interference in its internal affairs and a breach of the “One China” policy.

Western defence contractors, eager to access the lucrative Taiwanese market and bolster Taiwan’s defence capabilities, must navigate these sensitive political waters carefully. They must adhere to the restrictions imposed by their governments regarding arms sales to Taiwan and must also consider the potential implications for their broader business operations, especially if they have significant dealings with China.

Retired Lieutenant General Steven R. Rudder, United States Marine Corp:

“There was always interest by the US in the defence market really dating back to 1979. The difference today is that the PLA is breaking from the regional norms with claims to territories that are clearly outside of international law. It is concerning for the entire region considering the trade routes and global economics associated with the South China Sea. We have been less than predictable on our defence commitment to Taiwan and there is a renewed interest to update Taiwan’s defences and to assist all of our alliances and partners in the Asia Pacific.”

Jimmy Tsai, Liaison Officer at Rheinmetall Defence AG:

“The increasing interest in the Taiwanese defence market can be attributed to several factors. One of the primary reasons is the escalating geopolitical tensions in the Indo-Pacific region, especially between Taiwan and China. As China’s military capabilities and assertiveness have grown, there is a growing perception among countries in the region that Taiwan needs to strengthen its defence capabilities to safeguard its sovereignty and security. This has led to an interest in supplying Taiwan with advanced military equipment and technology.

Additionally, Taiwan’s own efforts to modernise and upgrade its armed forces have created opportunities for defence suppliers to engage in business with the island nation. Taiwan’s defence market is seen as a lucrative opportunity for defence contractors due to its relatively stable economy and strategic importance in the region.”

Anonymous defence industry expert

“I would say that fear of the China economic might kept most companies from supporting Taiwan, and only recent political changes have started to decouple the US & China’s economy reducing fears from CEO’s on publicly traded companies.  I have often been told that the more a countries economy rely on each other with mutual trade the less they are likely to go to war and so by breaking ties with China, supporting Taiwan the US is stepping closer to what some would call an eventuality.   As the US will likely never allow US defence articles to China again (we were their ally in WWII – well that government is now stranded on Taiwan during their civil war that allowed the communist to take control) Taiwan allows for quiet sales via FMS and DCS with a very willing customer who has the funding and real threat to defend against.  Politically it works well as the likelihood of Taiwan attacking China is very low whereas anyone who helps defend the week Taiwan will look good in the press.”

Sana Hashmi, PhD, Fellow at Taiwan-Asia Exchange Foundation:

“There is a compelling need for Taiwan to acquire advanced military equipment, driven by a growing interest in bolstering the island’s defence capabilities. The escalating threat posed by China has directly contributed to the heightened attention on Taiwan’s defence market. Recognising the imperative to defend itself and deter potential Chinese aggression, Taiwan’s leadership has prioritised strengthening its defence capabilities.

The increasing interest in Taiwan’s defence market is evident through the growing number of visits by US defence contractors. These visits underscore Taiwan’s significance as a strategic partner in the region and highlight the critical importance of securing advanced military technologies and equipment to enhance its defence readiness. Against the backdrop of a dynamic geopolitical landscape, investing in Taiwan’s defence market also presents potential economic benefits.”

How can ties between Taiwan and its Western allies be deepened further in relation to defence industry cooperation? 

As established Western defence contractor have worked with Taiwanese end users for decades. Our research indicates that while there is plenty of scope for increasing cooperation, US defence contractors have a backlog to work through and supply to customers in Taiwan. 

Retired Lieutenant General Steven R. Rudder, United States Marine Corp: 

“First is to deliver on what has been already agreed to. Depending on the source, we are behind on USD17-19 billion-worth of defence capability to Taiwan. Secondly, the areas of command and control and the opportunity to develop a common operating picture for Taiwan provides significant opportunities for collaboration. Another opportunity is in the unmanned surface vessels and unmanned aviation world. maritime security whether it is monitoring fisheries, energy farms, or maritime domain awareness writ large, teaming of unmanned surface (USV) and air capabilities (UAV) is the future.”

Jimmy Tsai, Liaison Officer at Rheinmetall Defence AG: 

“The long history of defence industry cooperation between Taiwan and the US, as well as some European nations, has laid the foundation for further deepening ties. Recent initiatives in defence cooperation signal a commitment to bolstering Taiwan’s defence capabilities in the face of regional challenges. To deepen ties further, these initiatives may include increased technology transfer, joint research and development projects, and the sale of advanced defence equipment to Taiwan. Strengthening the supply chain and enhancing interoperability between Taiwan and its defence partners could also be part of the initiatives.”

Anonymous defence industry expert:

“The Enemy of my Enemy is my friend, and thus as Europe, Southern Asia, Australia, and the USA try to contain both Russia and China (and their proxies) they have developed relationships and believe that a defensive “porcupine” Taiwan will keep China focused on that effort vs other areas to expand, and perhaps like Ukraine, Taiwan can hold off the attackers at great odds if properly supplied.   Great Generals study Logistic after all and wars are won through the supply systems not tactics and having a Taiwan that can produce their own goods and services for their military will aid them in the event of a full blockade.”

Sana Hashmi, PhD, Fellow at Taiwan-Asia Exchange Foundation:

“Co-production of airborne, surface, and underwater drones, along with ammunition, emerges as a promising pathway to deepen defence industry cooperation between Taiwan and the US. The Taiwan-US Defense Industry Forum held in May is also an effective platform. Then, Technology and knowledge sharing could play a pivotal role in deepening defence industry cooperation. Taiwan has embarked on an indigenous submarine program- this is an important potential area.”

Will we see Western defence contractors produce hardware in Taiwan?

Defence contractors don’t typically produce defence equipment in other countries primarily due to national security concerns, the high cost and complexity of production, and the specialised expertise required. The Biden administration has suggested its open to allowing US defence contractors to produce in Taiwan. “From a very high-level perspective, we think that co-production arrangements make sense, but we need to take a look at them on a case-by-case basis, and it has to be at the request of U.S. industry,” a senior Biden administration official told Nikkei. Co-production would also allow for US allies to expand their production base which has been described as woefully ill-prepared to produce munitions on a scale for a war with China. Here’s what our experts said:

Retired Lieutenant General Steven R. Rudder, United States Marine Corp: 

“Yes, I believe so. Some of these kind of arrangements have a historical precedence not only for defence but for commercial use as well.”

Jimmy Tsai, Liaison Officer at Rheinmetall Defence AG: 

“While the possibility of Western defence contractors producing hardware in Taiwan through co-production arrangements or other means cannot be ruled out entirely, it is a sensitive and complex issue due to the political sensitivities surrounding Taiwan’s status in international relations. China views Taiwan as part of its territory and strongly opposes any actions that may be seen as legitimizing Taiwan’s separate identity. As a result, any significant move towards defence production in Taiwan by Western contractors would likely face strong objections from China and could impact the broader geopolitical dynamics in the region. However, there might be limited cases of technology transfer or manufacturing partnerships that do not provoke strong reactions from China.”

Anonymous defence industry expert:

“It is unlikely for the US to authorize trade secretes for manufacturing to be exported to Taiwan as in the inevitable defeat is likely China will gain more than just hardware but how to build it.”

Sana Hashmi, PhD, Fellow at Taiwan-Asia Exchange Foundation:

“As of now, discussions for co-production arrangements between Taiwan and Western defense contractors are underway; however, there are no concrete indications that such arrangements will materialize. Whether or not these initiatives come to fruition depends on several critical factors, including political, economic, and strategic considerations. Notably, the China factor and domestic concerns play pivotal roles in shaping the potential outcome.”

How are concerns around technology transfer being approached?  

The issue of technology transfer involves navigating a complex set of considerations to balance the need to strengthen allied nations’ defence capabilities while safeguarding sensitive military technologies and ensuring that the transferred technology does not end up in the wrong hands or undermine global security. 

Retired Lieutenant General Steven R. Rudder, United States Marine Corp: 

“The US government has a process for this through FMS (foreign military sales).”

Jimmy Tsai, Liaison Officer at Rheinmetall Defence AG: 

“Concerns around technology transfer to Taiwan are approached with caution by Western nations due to the potential backlash from China. Technology transfer decisions are often weighed against maintaining a delicate balance between supporting Taiwan’s defence needs and not antagonizing China excessively. Western countries might provide Taiwan with certain advanced defence technologies and capabilities that do not significantly alter the balance of power in the region or provoke a severe response from China. However, more sensitive and high-end technologies might be subject to greater scrutiny and restrictions to manage geopolitical risks.”

What specific capability areas are being prioritised? 

To date, Taiwan has prioritised several defence capabilities to enhance its military readiness and deter potential threats, including air defence and counter ballistic missile threats. Experts have previously talked of a “porcupine strategy”. This refers to a defensive approach, where a nation or military force seeks to deter aggression or invasion by adopting a posture of robust defence and fortification. Here’s what our experts said:

Retired Lieutenant General Steven R. Rudder, United States Marine Corp: 

“I cannot speak to the Taiwan and US government deliberations, but current FMS and Presidential Drawdown Authority announcements will give you a sense on the capabilities being agreed upon.”

Jimmy Tsai, Liaison Officer at Rheinmetall Defence AG: 

“In its defence modernization efforts, Taiwan has been prioritizing several capability areas to enhance its overall defence posture. Some of these priority areas include:

A.    Air and Missile Defence: Taiwan aims to bolster its air and missile defence systems to counter potential threats from China, which has been increasing its military activities in the region, including conducting military exercises near Taiwan.

B.    Cybersecurity and Information Warfare: Taiwan recognises the importance of protecting its critical infrastructure and information networks from cyber threats and electronic warfare.

C.    Naval and Maritime Capabilities: Given Taiwan’s island geography, strengthening its naval and maritime capabilities is crucial for coastal defence and countering any attempts at naval blockades or amphibious invasions.

D.    Indigenous Defence Industry: Taiwan seeks to develop its indigenous defence industry to reduce dependency on foreign suppliers and enhance its self-reliance in defence capabilities.

E.     Asymmetric Warfare: Taiwan has been exploring asymmetric warfare strategies to deter potential aggressors, considering its relatively smaller size compared to its neighbours.

It is important to note that the priority areas may evolve over time based on the changing security environment and Taiwan’s defence requirements.”

Anonymous defence industry expert:

“Any specific capability would be wrapped up in a lot of secrecy for the protection of everyone involved it would not be discussed nor advertised by any party.”

Sana Hashmi, PhD, Fellow at Taiwan-Asia Exchange Foundation:

“Not very well aware of how such concerns are being handled but there are different governmental departments and agencies to deal with issues like these. Eg: ITRI”

Material impact of AUKUS

We also sought to address the impact of AUKUS on Taiwan. It’s too soon to observe any material impact of the AUKUS pact on Taiwanese defence. Although the announcement of the AUKUS pact did not explicitly mention China, due to context and geopolitical competition in region, most parties saw the agreement as challenge to Beijing. Beijing’s response was swift and critical, with the Foreign Ministry branding it “extremely irresponsible” and warning that the pact would disrupt regional peace. 

By contrast, the initial response from Taipei was cautious, with the Foreign Ministry spokesperson stating that they had “taken note” without endorsing the pact between Australia, the US and UK. However, later statements from Taiwan’s Foreign Minister Joseph Wu expressed satisfaction with the security pact. The island nation soon experienced an increase in including Chinese aircraft entering the ADIZ, while China reiterated and strengthened its sovereignty claims over Taiwan. 

While much hype has been made of the sale of nuclear-powered US Virginia Class submarines to Australia in the early 2030, the AUKUS pact should begin to have a manifest impact on regional security before that. 

Starting in 2023, the US plans to increase port visits of SSNs (nuclear-powered attack submarines) to Australia, allowing Australian sailors to train with US crews. Concurrently, Australia will embed its military and civilian personnel with the US Navy and the Royal Navy, including potential placement within the submarine industrial bases of the US and UK. This collaboration aims to enhance training and development, enabling joint operations and facilitating Australia’s eventual responsibility for these programmes. Furthermore, beginning in 2026, the UK will also increase port visits to Australia. 

Looking ahead, as early as 2027, the UK and the US will establish a rotational presence of one UK Astute class submarine and up to four US Virginia class submarines at HMAS Stirling near Perth, Western Australia, under the initiative called ‘Submarine Rotational Force-West’ (SRF-West). While the US already has submarine bases in Guam and Hawaii, the move will enhance the operational presence of the allies in the region. 

We asked a senior member of Britain’s AUKUS Pillar 1 team whether the programme was having a material impact on Taiwan’s defence. They gave us the following assessment.

Senior leader, AUKUS, UK Ministry of Defence

“Not that we have seen. I think it definitely will as our collective presence increases over the next decade. The uptick in US and UK subs over the next decade will undoubtedly compliment their strategy, even though that wasn’t the purpose of AUKUS.”

We also asked pacific defence expert and former Chilean Undersecretary for Defence, Vice Admiral (ret) Cristian de la Maza, for greater context. 

Vice Admiral (ret) Cristian de la Maza, former Undersecretary for Defence, Chile, Harvard ALI Fellow and Research Fellow at Universidad San Sebastián, Chile. 

“I think AUKUS, in conjunction with the rest of diplomatic, economic, technological actions orchestrated by the USA, aimed to keep China contained and avoid change of status quo in the South China Sea area. It should not be treated as an independent agreement but as a coalition of like-minded countries working on a medium-long term plan to contain what they perceived as a main threat to their existence. That includes, in different circles of engagement, the 5 eyes (AUS, CAN, UK, NZ, USA) plus Japan, South Korea, India, Philippines and other countries in the region which provides bases or deny bases to China.

Yes, it should affect Taiwan’s defensive strategy in terms of concentrate efforts in a littoral defence and asymmetric response to invasion rather than trying to compete with China in Air-Sea control within the strait of Taiwan and the high seas surrounding the island, where it would be bigger players involved, using high end capabilities such as the SSN which AUKUS agreement provides.

That littoral defence and asymmetric response should have some similarities with Ukrainian first phase of the war after Russia’s invasion, in terms of operational plans and tactical capabilities, technologies, C4ISR, Satellites, small and numerous defensive (anti….) weapons, working as swarms, etc. They should rise the cost for the invaders to succeed so increase probability for deterrence to act.

The time is now in terms of when to start evaluating defence equipment projects, since from conception to real capability you should expect months and years. You should also expect the selection of US-NATO interoperable equipment to be easily integrated in the actual Taiwanese forces.”