The agreement paves the way for the construction of a facility to cater to the maintenance, repair and overhaul (MRO) requirements of the People’s Republic of China Air Force’s (RoCAF) F-16 combat aircraft fleet.
However, the plan to build the maintenance hub is subject to approval from the US Government.
The centre is also expected to meet the maintenance needs of other F-16 aircraft users in the Asia-Pacific region.
AIDC entered a memorandum of understanding with Lockheed Martin for enhanced cooperation in MRO.
The RoCAF operates around 142 F-16 A/B fighter aircraft and is looking to expand its fleet.
Earlier this year, the Trump administration backed the sale of 66 F-16 fighter jets to Taiwan under an $8bn sale.
The US State Department informed Congress in August about the government’s decision to proceed with the proposed sale, despite opposition from China.
Taiwan requested to buy 66 F-16C/D Block 70 aircraft and related equipment.
The country is also upgrading its existing F-16 fleet to the F-16V Block 70 configuration. Lockheed Martin was awarded a contract in 2012 to deliver the upgrades.
AIDC is assisting Lockheed Martin in the modernisation project.
The RoCAF received the first upgraded aircraft in October last year. The remaining deliveries are expected to be completed by 2023.