Why Taiwan Military Counter-Drone Tenders Keep Failing

Taiwan’s Ministry of National Defense has fined counter-drone startup Tron Future NT$140.3 million — about US$4.3 million — for failing to deliver 26 counter-drone systems for Kinmen, Matsu and other bases. The penalty is a forfeited NT$49.4 million performance bond plus NT$90.9 million in late-delivery penalties. The Army plans to start the project over.

Most coverage has focused on Tron. The bigger problem is how the military sets prices: in several recent tenders, the ministry either asked for more than its budget could buy, or set a budget too low to pay for the non-Chinese parts it requires. The first drives good suppliers away, the second rewards suppliers who cheat.

The Tron contract: four years from incident to termination

In August 2022, people in Xiamen flew consumer drones over Taiwanese military posts on Kinmen and posted the videos online. The ministry promised a permanent detect-and-jam system. Four years later, troops there are getting handheld jammers instead.

A first, research-funded contract ended in November 2023 after Tron’s radar partner did not join. In March 2024 the Control Yuan censured the ministry for funding an acquisition as research. A tender for 26 systems followed in April 2024, budget just under NT$1 billion, and on January 17, 2025 Tron won NT$987.81 million in the third round. Three acceptance tests failed — October 2025, March 2026 and July 2026 — the last because the system could not integrate multiple drones on its display. The ministry terminated the contract on August 27, 2026.

Problem 1: asking for more than the budget can buy

The 2024 tender demanded more than the 2022 one: detect a 0.01-square-metre drone at 6 kilometres, up from 5, and jam it at 4 kilometres. Foreign experts said a drone that small could not carry a real explosive. The budget came to about NT$38 million, roughly US$1.2 million, per system. The US Congressional Budget Office put one site’s full setup at US$74 million, plus US$5 million a year to maintain.

Round one, in August 2024, failed under a rule requiring three bidders — only Tron bid, and one sales representative said the specs could not be met at that price. Round two dropped the rule; Tron and U&U Engineering bid and both failed the proof-of-concept test. Round three went to Tron. None of the four civilian experts on the selection committee attended the meeting that awarded the contract.

The Coast Guard’s NT$1.2 billion surveillance-drone tender failed the same way in June, after at least three of four qualified companies did not bid. The Army now plans a new tender in its 2027 and 2028 budgets, and will seek more money per system. The police agency’s counter-drone tender budgets NT$85 million for a top-tier system, more than double the Army’s price.

Problem 2: budgets too low to pay for compliant parts

In 2025, Hang Jian Technology won an 8th Army Corps drone contract with a bid of NT$2.95 million against a military estimate of more than NT$4 million. Prosecutors say the company’s head and a technical director at Real Plus Technology built the drones with Chinese chips and flight controllers, removed the labels and submitted fake certificates of origin; a source told the Taipei Times the parts were bought on Taobao. The Army found the problem at inspection and did not pay. In October, prosecutors detained two executives of listed drone maker Jiin Ming over similar allegations.

Taiwan’s tenders require local production or assembly and ban Chinese parts and Chinese-funded bidders, which makes compliant drones more expensive — so when the cheapest bid wins, a rule-breaker has an advantage until caught. Opposition legislator Ma Wen-chun says inspectors must trace chips, flight controllers, radios and storage to their makers, not just check where a drone was assembled.

What the government is changing — and the counterarguments

The ministry’s fixes focus on suppliers: bidders must agree to checks on funding and staff, and companies that fail inspection or acceptance testing will be listed and banned from future bids. The Public Construction Commission issued drone procurement guidelines in February 2026. These rules make cheating harder, but they do not fix tenders that ask for more than they pay for.

There are counterarguments. The spec may have been reasonable — a source told Storm Media the targets were demanding but realistic, based on Ukraine lessons. Tron’s Korean partner Huneed blamed how the ministry explained its requirements. And the technology is still new: an insider doubted any company would hit its promised performance on a first delivery. But none of this explains why most qualified companies did not bid, or why the ministry’s fix is to raise the price.

What it means for suppliers and buyers

For Taiwanese suppliers, domestic military demand looks big on paper but is unreliable: tenders fail, budgets get cut, and price caps can make it impossible to follow the rules and still make money. In May the legislature cut domestic drones from the special defence budget; since then it has passed a NT$240 billion drone act and the Cabinet has proposed a NT$55.9 billion supplementary budget.

In the US, some Drone Dominance vendors are reported to be selling below cost to stay in the program, betting a completed prototype order leads to a follow-on production contract. Taiwan offers no equivalent: each tender is competed from scratch, a failed contract can bar a supplier, and funding is reviewed yearly. For foreign buyers, the Hang Jian case shows a certificate of origin can be faked — audit rights, batch tracing and multi-batch inspection belong in the contract.

Why it matters

The re-tender is the test. If the new budget closes the gap with the police agency’s price, radar makers that stayed out have a reason to bid. If it stays near the old figure, expect the same short list and risk. Until budgets match what the market charges, Taiwan will keep losing years to failed contracts, and its best suppliers will keep looking to export.

Source: Taiwan Drones (Domino Theory)