South Korean Defence Industry Tightens Grip on European Market

It is a juggernaut that just keeps on rolling. Fuelled by its inherent strengths and geopolitical tailwinds, South Korea’s defence industry has hit a sweet spot, selling weapons to a growing list of countries and becoming one of the top ten arms exporters in the world.

In August this year, Hanwha Aerospace signed a deal to export 20 K9 howitzers to Vietnam. The deal, which is worth US$250 million, makes it the first South Korean defence firm to sell weapons to the Southeast Asian nation. The entry into the Southeast Asia (SEA) market is just the latest in the long list of successes that the country has notched as it climbs up the list of top arms exports.

In June this year, Korea Aerospace Industries (KAI) signed a US$700 million contract with the Philippine government for 12 FA-50PH light attack aircraft. The jets, which will be capable of aerial refueling and installed with AESA radars, will be delivered by 2030. Manila has also acquired other aircraft, frigates, corvettes, and weapons from South Korean defence firms.

Aiming High

Becoming one of the world’s top four arms suppliers by 2027 may be one goal too far, but the significant resources Seoul has spent over the last decade in developing and expanding its military industrial complex has helped it cemented its status as among the fastest growing players in the global defence market. Among the top ten countries, only five - United States, France, Italy, Spain and South Korea - saw their share of global arms exports go up in the 2020-2024 period compared to 2015-2019. The growth of South Korea’s indigenous defence industry is also reflected in the drop in arms imports – Seoul’s arms imports dipped by a significant 24% in 2020-2024, compared to the previous five-year period.

While South Korea’s share of global arms sales went up from 2.1 per cent in 2015-2019 to 2.2 per cent in 2020-2024, Italy made the biggest jump, to 4.8 per cent from 2 per cent in the previous five-year period. United States, which share its share of exports go up from 35 per cent to 43 per cent, is comfortably at the top of the list, France is second at 9.6 per cent. With Russian, Chinese and German arms exports falling, Seoul will be looking to improve its tenth position in the next five-year period.

Waiting on Good News

There has been a surge of interest in South Korean arms globally, particularly in Europe, South America, Asia and the Middle East, but the delay in finalizing major deals with multiple countries in the Middle East has meant that export figures have dipped since the 2022 peak of US$17.3 billion. Revenue from weapons sales dropped to US$13.5 billion in 2023 and dropped further to US$9.5 billion in 2024. Industry analysts expect the graph to head north again from 2025.

In February last year, LIG Nex1 bagged a US$ 3.2 billion contract to provide Saudi Arabia with 10 KM-SAM Block II mid-range surface-to-air missile defense system. Hanwha Systems will provide the radar while Hanwha Aerospace is the supplier of the launcher vehicles for the system, which is also known as Cheongung II. Another major deal with Saudi Arabia is on the anvil, with the country also keen on an additional export contract for the Cheongung-II. Talks with another Middle Eastern country for a deal worth US$5 billion is also ongoing, with a decision expected this year.

Deals signed by the United Arab Emirates, Iraq, and Egypt are further proof of the growing appetite for South Korean weapons by militaries in the Middle East. In April this year, the UAE and South Korea signed a letter of intent for cooperation on the KAI KF-21 Boramae fighter jet program. This is the third major deal signed by the two countries within the last three years; in January 2022, the UAE signed a US$3.5 billion deal to purchase Cheongung-II from LIG Nex1. A year later, the country signed a memorandum of understanding (MOU) with Korea Aerospace Industries (KAI) to jointly develop a multi-mission military cargo aircraft (MC-X).

In September 2024, Cheongung-II found another buyer in the region, with Iraq signing a US$2.8 billion contract with LIG Nex1. Egypt is currently in advanced talks to purchase up to 100 KAI-made FA-50 light attack aircraft in a deal potentially worth over $1 billion. The country is no stranger to South Korean arms; in 2022, it signed a US$1.66 billion deal for K9 self-propelled howitzers made by Hanwha Aerospace.

Conquering Europe

Even as they wait patiently for good news from the Middle East, South Korean defence contractors are busy expanding their market share in Europe, where countries are spending more on defence and rearming themselves in the light of the ongoing Russia-Ukraine war. Korean artillery weapons and armored vehicles are in high demand in Eastern Europe, and companies such as Hanwha Aerospace and Hyundai Rotem have been successful in selling tanks, howitzers, and missile systems to countries in the region.

In June this year, Romania’s Ministry of Defense announced that it aims to sign a US$2.7 billion contract this year for 246 next-generation infantry fighting vehicles (IFVs). Hanwha's AS21 Redback, which is compatible with its K9 self-propelled howitzer system, is among the companies fighting for the contract. The other IFVs in the fray are Rheinmetall's Lynx, BAE Systems's CV90, and General Dynamics European Land Systems's Ascod.

Showing the Way

Demand is highest in Poland, which has established itself as the biggest exporter of Korean arms in the region. In August this year, Hyundai Rotem signed a massive US$6.5 billion deal with the Polish Ministry of National Defence to supply 180 K2 Black Panther tanks, built by Hyundai Rotem, along with 81 accompanying vehicles. The Polish Armed Forces will take delivery of the tanks from 2026 until 2030. While 116 tanks will be produced in the K2GF variant that is manufactured in South Korea, 64 vehicles will be acquired in the K2PL variant. While the first three K2PL units will be made in South Korea, Bumar-Łabędy, a subsidiary of the Poland’s state-owned PGZ group, will be in charge of production of the other 61 K2PL units. Full-scale domestic production is planned from 2028 to 2030. The deal, which is a part of Poland’s plan to expand its tank fleet, is a follow up to the 2022 ordered for the first batch of 180 K2 tanks.

In 2022, Poland, which has set aside over 4 per cent of its GDP on defence to become the highest spender on defense in NATO as a proportion of GDP, signed a deal to acquire 48 FA-50 light attack aircraft from Korea Aerospace Industries (KAI); the jet will replace the Polish Air Force’s Soviet-era MiG-29s. The country also has signed contracts to acquire 364 K9 Thunder self-propelled howitzers by 2026 and potentially having as many as 672 by 2031. Warsaw has created a K9PL variant of the K9, which has domestically made subsystems such as the Topaz fire control system and a new integrated command and positioning system.

In January this year, multiple media outlets reported that Poland had taken delivery of 18 K239 Chunmoo Chunmoo rocket launchers, made by Hanwha Aerospace, ahead of schedule. The European nation is set to receive a total of 290 of the rocket launchers, with a US$3.55 billion contract for 218 of the systems signed in November 2022 and another deal, this one for US$1.5 billion, signed in April 2024. The Chunmoo rocket launchers, already being deployed with rocket artillery units of the Polish Army, are mounted on Polish Jelcz truck chassis and redesignated under the name Homar-K.

Deepening Ties

The biggest sign of the two countries moving beyond a weapons seller-buyer relation into something more substantial came in September this year at the International Defence Industry Exhibition (MSPO), when Hanwha Aerospace and Poland’s WB Group announced a joint venture that will localize production of 80-kilometer-range CGR-080 guided missiles for the HOMAR-K multiple launch rocket system used by the Polish Armed Forces. The venture is 51% owned by Hanwha Aerospace and 49% by WB Group’s electronics arm, WB Electronics. Initial serial production is expected to reach an advanced stage before 2029.
“This joint venture will localize CGR-080 manufacturing, transfer critical know-how, and co-develop next-generation munitions with our Polish partners,” says Hanwha Aerospace CEO Jae-il Son. “It is a commitment of investment, people, and technology in Poland, for a safer Europe.”

Technology Transfer

One of the major reasons that a growing number of militaries are opting for Korean weapons is Seoul’s willingness when it comes to technology transfer. The $1.66 billion deal for K9 self-propelled howitzers that Egypt signed in 2022 involves the local assembly of the K9A1 EGY variant and production of components. Egypt is also in advanced stages of talks with South Korea to acquire 36 KAI FA-50 Fighting Eagle light combat aircraft and may look to buy as many as 100 of the type. The proposed deal will involve technology transfer and local assembly of most aircraft at the Helwan Aircraft Factory in Egypt.

In April this year, Hanwha Aerospace secured a US$253 million contract to deliver 100 additional units of the K9 self-propelled howitzer to India. According to the term of the contract, the company will supply components for the K9 howitzer to India’s Larsen & Toubro to produce the K9 Vajra-T self-propelled howitzer, the locally modified version of the land weapons system. Hanwha had in 2020 completed delivery of 100 units of the type as part of a 2017 contract.

As part of the initial contract, the Indian company had assembled the final products in India with about 50 per cent of the production materials sourced locally. The new deal is even more to India’s liking, with 60 per cent of the production materials sourced domestically.

The Secret Sauce

Adding to the industry’s appeal is the willingness to set up joint ventures or joint production lines in other countries. South Korean defence products, which are designed to be interoperable with Western systems, have gained a reputation for offering quality comparable to Western systems at a fraction of the price. Another part of the secret sauce is the ability to meet deadlines - Korean defence firms have been successful in adapting their production lines to meet challenging delivery timelines. The ability to customize equipment to client needs is another distinguishing factor.

The Treaty on Conventional Armed Forces in Europe (CFE), which had limited the size of military forces in the region, has been suspended by European Union member countries following the Russian aggression on Ukraine. Pouncing on the opportunity, Korean defence companies have managed to effectively penetrate a big market. Forced by US President Donald Trup, NATO allies have pledged to increase their defence spending target from 2 percent of GDP to 5 percent by 2035; South Korea looks poised to benefit from the expected surge in demand for new equipment.