Interior Design Company's $570 Million Explosives Contract Terminated; MOD to Produce In-House Using Additional Budget

The Ministry of Defense's Armaments Bureau has terminated its procurement contract for RDX (Hai Sao Geng) high-explosive materials with Fumai International, after the company failed to secure the required export permits within the contractual timeframe. The incident has drawn significant scrutiny, as Fumai International was previously an interior decoration firm with no known background in defense or chemical manufacturing.

The procurement case, first announced on October 20, 2025, was part of Taiwan's asymmetric warfare enhancement strategy amid rising regional threats. Fumai International won the bid on December 2, 2025, and signed the contract on December 9. Under the agreement, the company was required to provide valid import/export licensing documentation within 180 calendar days of the bid award.

However, Fumai failed to meet this deadline. Starting June 1, 2026, the Ministry began imposing daily penalties amounting to 0.2% of the total contract value. By July 6, the delay had reached 36 days—meeting the contractual threshold for termination. As a result, the Ministry terminated the contract, imposed cumulative fines totaling NT$42,750,893, and confiscated the NT$41.23 million performance bond. The company has also been suspended from future government procurement activities.

In a press release on the evening of July 21, the Ministry explained that raw materials such as 'RDX Hai Sao Geng' are not currently producible by domestic Taiwanese manufacturers. Therefore, the procurement followed the 'domestic purchase of foreign goods' model under the Government Procurement Act. Eligibility criteria included only three items: legal business registration, international trading as a listed business category, and tax compliance—without requiring prior experience in explosives or defense logistics.

Moving forward, the Ministry announced it will utilize supplementary or annual budgets to expand in-house production capacity at the Armaments Bureau's 205th Factory. This shift aims to reduce reliance on external contractors and mitigate supply chain risks.

The Ministry emphasized its commitment to strengthening defense preparedness amid challenging external conditions, pledging stricter vendor qualification reviews and enhanced contract supervision to safeguard national security.