South Korea's four major defense contractors are on track to post combined sales of 50 trillion won ($36 billion) this year as strong earnings continue. With an order backlog approaching 100 trillion won converting rapidly into revenue, the four companies are pouring money into research and development, core personnel and production facilities in a push to join the global top tier.
Combined consolidated sales at Hanwha Aerospace (012450.KS), Hyundai Rotem (064350.KS), Korea Aerospace Industries (047810.KS) and LIG Defense & Aerospace (079550.KS) are projected to reach 49.76 trillion won this year, up 22.7% from 40.55 trillion won a year earlier, according to financial data provider FnGuide on the 2nd. Hanwha Aerospace is expected to book 32.4 trillion won, Hyundai Rotem 6.85 trillion won, KAI 5.39 trillion won and LIG D&A 5.12 trillion won.
Mid- to long-term work is also nearing 100 trillion won. The four companies' combined order backlog stood at 98.46 trillion won at the end of June, up 16.6% from 84.42 trillion won a year earlier. Hanwha Aerospace's ground defense business led with 38.31 trillion won, followed by KAI at 25.75 trillion won, LIG D&A at 24.58 trillion won and Hyundai Rotem at 9.82 trillion won.
The backlog edged down from 101.33 trillion won at the end of last year because large contracts signed earlier have been shipped on schedule and converted into revenue. Growth is expected to continue as new orders have come in from core Western markets including the United States and Spain since August. "Additional orders for the K2 tank and K9 self-propelled howitzer are expected around the MSPO international defense exhibition in Poland this month," said Yang Seung-yoon, an analyst at Eugene Investment & Securities.
With steady earnings and a full order book, R&D is where the companies have raised spending most aggressively. Korean defense exports have expanded from Eastern Europe to the Middle East, North America and Western Europe, pushing up the specifications buyers demand, while competition in next-generation battlefield technologies such as artificial intelligence and manned-unmanned teaming has begun in earnest.
The four companies spent a combined 1.05 trillion won on R&D in the first half, the first time the half-year figure has topped 1 trillion won. That nearly matches the 1.61 trillion won they spent on R&D for all of last year. Hanwha Aerospace spent the most at 559.3 billion won, followed by KAI at 294.2 billion won, Hyundai Rotem at 125.4 billion won and LIG D&A at 75.5 billion won.
The rising workload is translating into hiring. Excluding consolidated units and counting only defense division staff, the four companies employed 19,156 people at the end of June, up 1,648, or 9.4%, in a year. The increase in permanent employees, at 1,386, far outpaced the 262 added on fixed-term project contracts. As the industry focuses on expanding mid- to long-term production capacity rather than short-term hiring to meet delivery deadlines, the defense sector is emerging as a leading source of jobs for young workers.
Companies are moving quickly on additional hiring and capital spending. LIG D&A has opened large-scale public recruitment for entry-level and experienced staff in the second half, saying it plans to select more than 100 people. Recruiting areas include missile systems, maritime, satellites, AI and cybersecurity. "We are working to bring in the core talent that will lead the development of advanced defense technologies such as AI and cybersecurity in order to secure the initiative in the future battlefield environment," an LIG D&A official said. "We will expand a range of recruitment programs, including corporate invitation events."
KAI has also posted a second-half recruitment notice for university graduates and is conducting campus recruiting at more than 20 universities nationwide through the 18th. Hanwha Aerospace is continuing rolling hires of experienced AI staff.
Capital spending is substantial as well. Hanwha Aerospace will invest 749.8 billion won to expand its Boeun plant and 122.2 billion won to increase production lines in Daejeon, both in installments through 2028, to boost output of explosives, ammunition and guided weapons. LIG D&A will spend 423.6 billion won through 2029 to buy and remodel production facilities in Gumi and 128.7 billion won to expand a guided weapons assembly line at its second plant in Gimcheon. KAI will invest 665.6 billion won in facilities and computing equipment through 2028.
"Global defense demand has risen sharply amid the wars involving Ukraine and Russia and the United States and Iran, and related industries such as steel and metals are benefiting as well," an industry official said.
