Is Taiwan’s Defense Just a Budget Issue?

Yes, but no not really

A friend recently said, “If the U.S. really wanted to defend Taiwan, they would just throw money at the defense, and it would be done.” This same friend has a lot of issues with the amount of money the U.S. spent in Afghanistan just to lose. When I pointed out this juxtaposition he shrugged and said, “that was different.” This goes to the heart of a growing issue with the way Taiwan is framed in U.S. discussions as an overwhelmingly military problem that can be answered by increasing military spending at home and by nations abroad.

On a very superficial level, Taiwan’s defense is a budget issue but, as Jim Frick said “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” This is undoubtedly right. If the U.S. was going to prioritize the defense of Taiwan, they would spend more on helping Taiwan prepare. But, what would that spending look like? What does Taiwan need to maintain the current status quo?

Framing the Problem

U.S. Secretary of Defense Pete Hegseth’s speech at the recent Shangri-La Dialogue in Singapore is important to set the U.S. thinking around Taiwan and the Indo-Pacific.

China seeks to become a hegemonic power in Asia. No doubt. It hopes to dominate and control too many parts of this vibrant and vital region. Through its massive military build-up and growing willingness to use military force to achieve its goals, including grey zone tactics and hybrid warfare, China has demonstrated that it wants to fundamentally alter the region's status quo.

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China uses its vast and sophisticated cyber capabilities to steal technology and attack critical infrastructure— in your countries and in the United States, as well. These actions not only compromise our countries, but endanger the lives of our citizens.

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Every day you see it. China's military harasses Taiwan. These activities have been paired with China's rapid military modernization and buildup – including huge investments in nuclear weapons, hypersonics, and amphibious assault capabilities.

Framing a conflict over Taiwan in the proper context is important. I am not going to review the history of the R.O.C. and P.R.C.’s relationship or Taiwan’s geographical position in that relationship. There are more books on Taiwan and why it matters than I could list and some are actually good. What everyone knows is Taiwan has a homegrown asymmetric advantage. TSMC is the world’s best semiconductor manufacturer. That’s why Taiwan important and what will save it, right?

Chris Miller’s Chip War is one my favorite recent looks at the Taiwan problem. There is an argument that it is not a geopolitical book but I think this misses Chris Miller’s depth of analysis. In his chapter on “The Taiwan Dilemma,” Miller notes “TSMC’s chairman is certainly right that no one wants to ‘disrupt’ the semiconductor supply chains that crisscross the Taiwan Strait. But both Washington and Beijing would like more control over them.” This was right when the book went to print. Instead of reinforcing China’s reliance on TSMC the U.S. placed significant export controls on TSMC’s ability to sell chips to PRC companies. This, obviously, lead to PRC on-shoring semiconductor production and it was a foregone conclusion that they would at least get to 7nm chips because they already were close when the controls went in place. Ben Thompson—the notable U.S. tech writer who lives in Taiwan and has a vested personal interest in not living in a warzone—noted the export controls served to make TSMC more important to Taiwan, the U.S., and the global economy while reducing China’s reliance on it in a way that actually increases the threat to Taiwan. Hurting TSMC now hurts America and Europe more than it hurts China.

The loss of that economic advantage has to be replaced by something of Taiwan wants to preserve the status quo. This is where Taiwanese defense spending comes in. By focusing on investment in asymmetric capabilities and marrying them with higher end military systems, when it makes sense, Taiwan can restore some of its lost asymmetrical advantage.

Buying for Asymmetric Advantage

Already the U.S., under the Trump administration, is indicating an increase in military sales to Taiwan. This would be in line with the first Trump Administration, that approved $10 Billion more in arms sales to Taiwan than the Biden Administration. That said, the total sales are not as important as what is purchased. Ukraine’s recent successes against Russia are instructive here, but not for the reason that is initially apparent.

Taiwan, but virtue of being a smaller more concentrated island, has more concentrated forces than the PLA on the other side of the Strait. This is true for their hardware as well as their personnel. As

Erik Davis

noted, bombers and fighters might be more capable than any drone or drone swarm but as long as they have to land, they are vulnerable. For Taiwan, this means investments in jets and large systems also have to come with investments in high-end counter-UAS systems that, honestly, are just not as capable as the FPV drones are currently. This fact doubles the cost if Taiwan wants to protect its systems from an Ukraine style assault in the openings of an invasion. This is a cost Taiwan cannot bear and hope to field a competent national resistance. This means that exquisite American weapon systems cannot be the core focus on acquisitions, even if they absorb large portions of Taiwan’s national defense budget. So then, what should Taiwan look to buy?

Native drone production capabilities - Taiwan has an advantage here, they make the chipsets already. They need distributed production capabilities around the island. This means 3D printers, munitions, and personnel trained in assembly and production. Ukraine is now pushing towards producing thousands of drones a day. This is something that they were not able to do on day one of the Russian invasion. Ukraine had to build systems and expertise. They were able to do it in a conflict, but it would have been better if they had the skeletal framework of that production in place on D-Day. Taiwan has that opportunity.

Anti-armor, Anti-ship, and Anti-Air (Anti-Access Area Denial-A2/AD) Weapons and Storage - These systems, Stinger missile launchers, Harpoon anti-ship missiles, and increased low-cost anti-armor (Javelins and FPV drones working in tandem) offer asymmetrical advantage to defenders. Taiwanese Forces are already training with U.S. and other partners on the use of these weapons. This needs to continue as a focus of training. They also must ensure there are distributed stores of these weapons in areas that are relatively safe from destruction during a “Shock and Awe” style opening. Where would Taiwan store these weapons? The easiest and best answer is the existing underground caves, tunnels, and complexes. The military would need to ensure access and control, but as shown by Hezbollah, Hamas, the Islamic State in Syria, and other irregular groups, fighting a superior force often requires you to go underground.

Cave complex on Kinman Island now a tourist destination

Nuclear Power - On 17 May 2025, Taiwan paused the use of its last nuclear reactor. This was a strategic misstep. The island does not produce enough of it own power. This is a critical vulnerability to an embargo. Taiwan wants about 50% of its power production to come from liquefied natural gas and 30% to come from coal. This means 80% of Taiwan’s energy comes from overseas. Any steps it could take to onshore power production directly enhances its resistance. They are currently set to hold a referendum on restarting the reactor on 23 August 2025. Hopefully, from a national security perspective, they restart it and rush to build more reactors. Nuclear power is not without risk in a location with a high risk of earthquakes. However, it’s less vulnerable to enemy targeting than petroleum and oil storage because it is unlike that a rational actor will target nuclear power reactors in areas that it wants to occupy. This is a very expensive option, but I think it is as important as any investment in weapon systems to enhance resistance capabilities.

Maanshan Nuclear Reactor, Taiwan. Source World Nuclear News

Satellite and microwave communication - Undersea cables are vulnerable. Taiwan needs to continue investing in satellite and microwave communication to move data off-island quickly during a crisis. Just like with power, relying on overseas locations as the conduits of critical data creates significant vulnerabilities. The ability to communicate freely is important for the flow of information and fighting disinformation that will absolutely be a core aspect of any Chinese operation against Taiwan. Chinese information warfare will be directed at controlling the narrative space before and during any incident with Taiwan. Taiwan’s—the whole of Taiwan and not just the government—ability to reliably communicate with the outside world is paramount to countering those narratives

Taiwan Undersea Cables Source Asian Times

Electronic Warfare (EW) Resistant A-PNT - If PLA leaders are watching the Russian performance in Ukraine they will have seen the effect of Russian EW against some U.S. weapon systems. China will likely bring the full force of its EW capabilities against Taiwan. This means the fires systems Taiwan acquires need to be resistant to spoofing and jamming. It also means they need to field jamming and spoofing resistant devices to their soldiers. This will ensure they can call for fires accurately and the weapons will reliably find their marks.

Any military invasion of Taiwan will be a messy affair. The beaches most likely to see PLA forces are also near massive population centers. The equipment on this list would not make winning that fight easy, but they would make Taiwan a harder target. In the end, keeping the status quo requires Taiwan to remain just beyond the capability of the PRC to force reunification, which means they must grow stronger as China does. In the end it is not how much money is spent, but how it is spent that will make the largest difference in Taiwan’s defense.