North Asian economies leverage AI and defense supply chain shifts

Taiwanese drone manufacturers are actively diversifying their supply chains toward friendly nations like Japan and Australia to mitigate risks from Chinese export controls on critical raw materials such as rare earths, graphite, and gallium. While this shift aims to secure non-Chinese supply chains, experts warn that material costs could increase by three to five times, requiring international orders to offset transition expenses.

The 2027 Taipei International Aerospace & Defense Industry Exhibition (TADTE) has opened registration, focusing on AI, autonomous systems, and trusted supply chains. This comes as Taiwan's drone export value for the first half of 2026 reached $212 million, significantly outpacing 2025 totals.

In the broader North Asian economy, analysts from Fidelity International suggest that Taiwan and South Korea are positioned for growth driven by AI capital expenditures and significant current account surpluses. The surge in AI investment is expected to sustain high profit margins for semiconductor and power supply chains through 2028. Additionally, North Asian currencies may see appreciation as large trade surpluses and relatively low valuations attract investors seeking value stores.