The democratic island faces the constant threat of an invasion by China, which claims it is part of its territory, and is under US pressure to spend more on its own defence.

Taiwan's National Chung-Shan Institute of Science and Technology (NCSIST) agreed earlier this year with US defence firm Anduril to jointly make the company's Barracuda-500, a low-cost, autonomous cruise missile.

On Thursday, NCSIST and Anduril signed another agreement to co-produce the company's underwater drone.

These are Taiwan's first such agreements with a foreign company, NCSIST president Li Shih-chiang told AFP.

"Our purpose is if in the warfare, even the blockade, we can manufacture every weapon we need to protect ourselves," Li said on the sidelines of the Taipei Aerospace and Defense Technology Exhibition, where the Barracuda is on display.

Anduril's Taiwan head Alex Chang said the focus of the joint cooperation was on "mass producibility" and making local production sustainable.

The company would "work very closely" with the United States and Taiwan, Chang told AFP.

NCSIST said it would take 18 months to build the supply chain in Taiwan for the Barracuda-500, which use 100 percent Taiwanese components.

Taiwan has ramped up spending on military equipment and weapons over the past decade, and has its own defence industry.

But the island remains heavily reliant on US arms sales to deter China.

A senior Taiwanese lawmaker told AFP last week that the defence ministry will seek up to a record NT$1 trillion ($33 billion) in special funding to upgrade the island's defences.

The plans include integrating Taiwan's air defence systems, acquiring from overseas partners more advanced technology to detect small drones, rockets and missiles and ensure a rapid response to an attack, and increasing the island's capacity to produce and store ammunition for wartime.

President Lai Ching-te's government announced last month plans to boost its 2026 defence budget to NT$949.5 billion, or more than three percent of gross domestic product.

It aims to increase spending to five percent of GDP by 2030.