Taiwan’s military placed a high-stakes bet on a fighter jet upgrade program that no other country wanted to fund. It has returned more than $70 million so far, with several hundred million more expected over the next five years.
The F-16 has been in service since the late 1970s. Lockheed Martin has produced nearly 5,000 of the aircraft, and roughly 3,000 remain active across about 30 countries, making it the most widely deployed fourth-generation and 4.5-generation fighter in the world.
The F-16V variant is a major performance overhaul for older F-16 airframes. Its two most important upgrades are the AN/APG-83 AESA radar, which belongs to the same class of radar used in the fifth-generation F-35, and an advanced avionics suite. Taiwan, the U.S. Air Force, and Egypt originally agreed to co-invest in developing these systems. The U.S. and Egypt both withdrew. Taiwan continued alone.
The development contract included a clause that has turned out to be enormously lucrative: any country that later purchases F-16V-grade aircraft, or upgrades older F-16s to the V standard, must pay Taiwan a percentage of the project cost as a development royalty.
The F-35’s high price tag drove countries toward the F-16V instead
Fifth-generation jets like the F-35 are prohibitively expensive for many air forces. The F-16V fills the gap: it carries a radar comparable to the F-35’s at a fraction of the total cost. That value proposition has generated a wave of global orders.
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Taiwan received its first royalty payment in 2019. Hu Zhendong, a former U.S. Department of Defense official who managed the F-16V program, said that approximately $60 million in royalties had been paid to Taiwan during his tenure. Taiwanese military sources confirmed that cumulative payments exceeded $70 million (approximately NT$2.197 billion) by the end of 2025. All funds were deposited into the national treasury.
The next five years are expected to bring a sharp acceleration as more countries finalize purchases and older F-16 fleets undergo V-standard upgrades. Taiwan’s total take is projected to reach several hundred million dollars.
The F-16V royalties are one component of a broader expansion in Taiwan’s defense sector. The island’s 2026 national defense budget reached NT$949.5 billion, or 3.32 percent of GDP. Priority spending areas include unmanned aerial vehicles, missile systems, domestically built naval vessels, indigenous aircraft programs, and cybersecurity.
Getac Holdings, a Taiwanese defense and technology firm, reported that military contracts, drones, and digital soldier systems are now its three main growth engines. Chairman Huang Minghan said total revenue approached NT$40 billion in 2025, with 5 percent to 10 percent growth expected in 2026. Drone-related development projects surged tenfold year over year, concentrated in military and law enforcement applications. Rather than assembling complete drone systems, Getac supplies key components, a strategy designed to reduce the political and supply-chain risks of whole-system manufacturing in a highly localized market.
Huang said Getac plans to release AI-integrated products in 2027 that embed high-end computing into edge devices used in the field.
Drone exports increased 700-fold as Taiwan builds a supply chain free of Chinese components
Taiwan’s government has been pushing what it calls a “non-red” defense supply chain, one that deliberately excludes Chinese-made components and technology. The results have been striking: Taiwan’s drone exports increased 700-fold over the past two years.
AIDC (Aerospace Industrial Development Corporation), Taiwan’s state-backed aerospace manufacturer, is shifting from its traditional focus on domestic aircraft production toward drone integration and a bridging role in the U.S.-Taiwan defense supply chain. AIDC’s strategy has two tracks. The first expands maintenance, performance upgrades, and obsolescence management for Taiwan’s existing domestically produced aircraft. The second accelerates the company’s push into the drone industry.