Korea rising as a defense supplier amid global tensions

U.S. allies and security partners worldwide looking to re-stock their arsenals are increasingly turning to Korean defense companies to procure weapons.

The Korean 4.5-generation fighter jet KF-21 makes its first maiden flight in Sacheon, South Gyeongsang, in July 2022. [DEFENSE ACQUISITION PROGRAM ADMINISTRATION]

U.S. allies and security partners worldwide looking to re-stock their arsenals are increasingly turning to Korean defense companies to procure weapons.

Korea signed defense export contracts worth a cumulative $17 billion in 2022, representing a 242 percent increase in a single year and making the country the eighth-largest weapons exporter in the world.

The growth in Korean defense exports, which made up 2.8 percent of a global arms exports market dominated by the United States, Russia, France and China, is all the more remarkable given the late start of the Korean weapons industry compared to the big players.

Rising Korean defense exports also more broadly signal the country’s growing capacity and will to supply arms to other U.S. allies in the face of rising military threats posed by Russia and China in Europe and the Indo-Pacific region.

Korea’s potential as a source of advanced military hardware at a time when countries are still ramping up defense production became apparent in December 2021, when Australia inked a $730-million contract with Hanwha Defense (now Hanwha Aerospace) for 30 K-9 self-propelled artillery howitzers and 15 armored ammunition resupply vehicles, and again in July, when Poland announced that it had signed contracts worth an estimated $14 billion for K-2 battle tanks, K-9 howitzers and FA-50 light attack aircraft from Korea.

Rise from humble beginnings

The Korean defense industry has come a long way since October 1971, when then-President Park Chung Hee set up the Agency for Defense Development to execute the country’s “self-sufficient defense” doctrine for weapons procurement.

Cheongung medium-range surface-to-air (M-SAM) guided missile system, developed by the Agency for Defense Development and manufactured by LIG-Nex1 [DEFENSE MEDIA AGENCY]

Accordingly, Korean weapons were initially “not designed with exports in mind,” but rather “specifically created in response to [Korea’s] national needs to be able to conduct high-intensity operations against a designated adversary on a disputed border,” according to a report by Kevin Martin, a researcher at the Paris-based Institute for Strategic Studies.

But even as Seoul sought to advance its ability to fulfill its own security needs, its defense industry continued to build weapons and equipment that were interoperable with U.S. gear, since the two countries would be expected to fight side-by-side in any conflict with North Korea or China — a feature that now makes Korean weapons appealing to other U.S. allies and partners who have traditionally relied on U.S. weapons supplies.

The compatibility of Korean defense products with U.S. weapons systems was not only a deliberate choice, but also a consequence of technology transfers that built the country’s military industrial complex.

“The rise of our defense industry relied heavily on technological know-how imparted by the United States and other advanced countries,” according to a defense expert who asked not to be named in this article.

“This in turn led to natural interoperability between Korean and U.S. systems, which was reinforced when Korea also leaned on U.S. technological transfers to produce more advanced defense products domestically, such as the KF-16 fighter and the T-50 training aircraft.”

FA-50 light combat aircraft [KOREA AEROSPACE INDUSTRIES]

Unlike car manufacturing, which is near-continuous and adjusted according to consumer demand, the production of big military items such as tanks only happens once a procurement order has been placed.

As Korea’s arms production capacity exceeded domestic demand, Seoul began to seek overseas buyers for its weapons to sustain defense production.

Following the establishment of the Defense Acquisition Program Administration under the Roh Moo-hyun administration to promote and facilitate Korean defense exports, the domestic defense industry has featured prominently in Seoul’s sales diplomacy, with past presidents Park Geun-hye and Moon Jae-in timing weapons deals announcements to coincide with their visits to purchasing countries.

President Yoon has continued the trend by mentioning the 1988 South Korea-U.S. Reciprocal Defense Procurement Agreement during U.S. President Joe Biden’s visit to South Korea in May last year in an effort to help South Korean firms enter the U.S. defense market, which in 2021 totaled $801 billion, of which South Korean weapons accounted for only $95 million.

Advantages of K-Defense

Besides fulfilling the criterion of interoperability with U.S. weapons, purchasing Korean weapons offer several advantages to potential buyers — namely cost-effectiveness, short delivery times, production and technology transfers and low political cost.

“Korean defense products designed for conventional terrestrial warfare do not differ significantly in their capabilities compared to U.S., British, French or German products, even as they are quite a bit cheaper,” said Bang Jong-goan, a research fellow at the Korean Institute for Defense Analysis.

For instance, although Poland initially asked Germany for more Leopard 2 battle tanks after it donated more than 300 Soviet-era T-72M and Polish-built PT-91 tanks to Ukraine, it eventually turned to Korea after Korea offered 980 K-2 tanks within five years, compared to the promise of one Leopard 2A7 per month from Germany, according to Edward Kim, an expert on South Korea’s defense industry, in an interview with Breaking Defense.

But while the K-2 compared favorably to the latest Leopard 2A7 during cold-weather Norwegian Army trials in January 2022, one Leopard 2A7 tank costs approximately $15.3 million, while one K-2 tank costs only roughly $8.5 million, according to publicly available pricing estimates.

Further, whereas Korea defense companies have largely kept up production to fulfill Seoul’s own defense requirements in its frozen conflict with Pyongyang, European leaders are mired in disagreement with the continent’s weapons makers over whether industry should move first or receive long-term procurement orders before they step up production.

To sweeten any potential deals for defense customers, Korean companies also typically partner with defense companies in purchasing countries to set up manufacturing facilities and transfer technology, which would not only reduce their dependence on Korea’s own production capabilities for future deliveries, but also enhance their own defense industries.

The Korean Army conducts a live-fire drill with K-2 tanks in Pocheon, Gyeonggi on Sept. 20, 2022. [REPUBLIC OF KOREA ARMY]

For example, under the terms of the contracts between Hyundai Rotem and the Polish Defense Ministry, the first 180 K2 tanks were delivered to Poland in early December, but the remaining 800 tanks will be at least partially manufactured in Poland.

During his visit to Seoul in March, Polish Foreign Minister Zbigniew Rau said Warsaw is “counting very much on the transfer of technology and reproduction of similar weapons” in an interview with Yonhap in March.

The arrangement mirrors the deal between Korea and Australia for the localized production of the K-9 howitzer in Geelong, Victoria, which was signed between Canberra and Hanwha Defense in December last year, as well as Turkey’s $200-million deal with Hyundai Rotem in May last year for the Korean company to provide engine transmissions for the country’s Altay battle tank, which is already based on the K-2 with design assistance and technology transfers from Hyundai Rotem.

“For a country that wants to build up its defense production base, Korea is a very appropriate partner,” Bang said, referring to the mutually beneficial nature of the recent contracts between Warsaw and Korean defense companies.

“These deals help countries that want to build up their industrial capacity with an eye to meet their future defense needs,” Bang said.

Future direction of the Korean defense industry

Worldwide spending on defense is only set to rise amid current global tensions, with data from Aviation Week Network last year showing that global spending on arms procurement will total $680 billion in 2023, up from $550 billion in 2022.

According to Janes, some of the biggest increases is expected to come from NATO member states, such as France, Britain, Poland, Norway and Canada, which are all expected to raise their weapons spending by over 30 percent.

Amid this expected growth, President Yoon Suk Yeol said in November last year that Korea aims for a 5-percent share of the global arms export market by 2027 to become the world's fourth-largest defense exporter.

A nearly completed prototype of the KF-21 multirole fighter is displayed during a media open day at Korea Aerospace Industries' production facility in Sacheon, Gyeonggi, on Feb. 24, 2021. [YONHAP]

Pending tenders by Korean defense companies include Hanwha Aerospace’s Redback infantry fighting vehicle (IFV), which is currently hoping to be selected by the Australian Department of Defense’s Land 400 Phase 3 project, worth $18-21 billion and aimed at acquiring 400 next-generation IFVs to replace the country’s M113 armored personnel carriers.

Hanwha Aerospace is also part of a consortium with Oshkosh Defense to design a U.S. Army optionally manned fighting vehicle (OMFV) to replace around 3,500 M2 Bradley vehicles in a project worth approximately $47 billion, with the Oshkosh-Hanwha design for an OMFV expected to be based on the chassis of the Redback.

But Korea is unlikely to be the only rising defense supplier in the global weapons market.

According to Bang, both Japan and Turkey are focused on bolstering their domestic weapons industries in response to the changing global security environment.

“In some ways, we already see these two countries gearing up to become serious weapons producers, with Turkey currently supplying drones to Ukraine, while Japan launched its Acquisition, Technology and Logistic Agency to further its military technological innovation and to develop a sixth-generation stealth fighter,” he noted.

For Korea to continue growing as a major player in the global weapons market, the country would have to shift its budget allocation from systems development to technological research, he added.

“The current proportion of Korea’s defense budget dedicated to research and development is around 7 percent, but we need to increase that to at least 10 percent so we can develop or indigenize key technologies,” Bang said, noting that 15 percent of the U.S. defense budget is dedicated to R&D.

Bang also said that Korea’s defense industry would need to diversify to reduce its reliance on a few big industry players.

“If you look at the example of Israel, they have a robust defense industry that is made up of strong, medium-sized companies,” he said, adding that Korea’s defense industry would be better served if it, too, had smaller players that strongly specialized in components that would strengthen military supply chains.

BY MICHAEL LEE [lee.junhyuk@joongang.co.kr]