Three Taiwanese research and weather satellites launched between 1999 and 2006 were designed abroad.
A fourth scheduled to be launched next year will be 60 percent locally made.
But Taiwan had not previously managed to build equipment to receive signals from global positioning systems.
On Tuesday the National Space Organisation (NSPO) announced it has developed the equipment, which is on the export control list of space powers like the United States, France and Germany.
"This is truly a milestone in efforts to build our own space technology," Tom Lin, an official at the NSPO flight control division, told AFP.
"In the past, export of such sensitive equipment required government approvals, thus adding uncertainty to our projects," he said.
The equipment will be installed on a fifth satellite called Formosa-7, which is due to be launched in 2018.
Lin also said the NSPO is striving to develop "high-resolution" satellites that transmit photos with one-metre resolution, compared to the current two metres.
However he said the NSPO has not been tasked by the government to develop spy satellites, although local media have said those now in operation could be used for military purposes whenever needed.
In the face of a growing missile build-up by former rival China, Taiwan has been working to deploy a missile defence system. But analysts say this would be impossible without its own spy satellites.
Tensions have eased markedly in recent years but China still considers Taiwan part of its territory awaiting reunification, by force if necessary.
Taiwanese experts estimate China has more than 1,600 missiles aimed at the island.