South Korea's defense industry is widening its export range beyond tanks and self-propelled howitzers to missiles, air defense systems, fighter jets and submarines. Recent deals include not only follow-on contracts for existing exports but also bids to sell next-generation weapons systems abroad for the first time.
Korea Aerospace Industries' (047810) next-generation supersonic fighter, the KF-21, is moving closer to its first overseas sale, industry officials said on the 2nd. Direct export talks with Indonesia, a co-development partner, are in their final stage, and KAI began initial mass production this year. Deployment with South Korea's military allows the company to show foreign buyers an operational track record, which is expected to strengthen its export competitiveness. KAI has already exported more than 140 FA-50 light combat aircraft to six countries.
LIG D&A's Cheongung-II, which demonstrated cost-effectiveness with a 96% intercept rate in the recent Iran war, has moved beyond prospects to become a core K-defense export. Following contracts with the United Arab Emirates and Saudi Arabia, the company added Iraq, strengthening the position of Korean-made missiles in the Middle East air defense market, and it has received a stream of requests for early delivery and follow-on orders, according to industry sources. Cheongung-II is exported as a package that includes radar, launchers and engagement control systems as well as interceptors, which is expected to generate spillover benefits across the domestic defense industry.
Prospects are also improving for overseas submarine orders, an area where South Korea had gone without a deal for years. HD Hyundai Heavy Industries (329180), which signed a joint development contract with the Peruvian Navy in December last year for a 1,500-ton next-generation submarine, is negotiating to sign a detailed design and construction contract for the first vessel this year, with the goal of starting full construction next year. If the Peru submarine export is confirmed, it would be the country's second submarine export, 15 years after Hanwha Ocean (042660) signed a contract with Indonesia in 2011. HD Hyundai Heavy Industries and Hanwha Ocean are competing with France's Naval Group and Italy's Fincantieri in a four-way race for the Philippine Navy's next-generation submarine acquisition program.
Ground warfare systems, including Hanwha Aerospace's (012450) K9 self-propelled howitzer, are also broadening their export base. Hanwha Aerospace signed an export implementation contract with Spanish defense firm Indra Sistemas last month, bringing the number of countries operating the K9, including South Korea, to 11.
Hyundai Rotem's (064350) K2 tank has received a green light for exports to South America after the Peruvian Army recently recommended it as the optimal model for its next-generation tank program. Procedures remain before a final contract, but having passed the technical evaluation, the tank is drawing attention as a strong candidate for an additional export following Poland. Hyundai Rotem is also pursuing local production and technology transfer.
The next battleground for K-defense is unmanned systems. As the prolonged war between Russia and Ukraine has expanded the role of drones beyond reconnaissance to attack, electronic warfare and communications relay, unmanned systems have emerged as a core capability on future battlefields. South Korean defense companies are expanding development across land, sea and air, including unmanned aerial vehicles, unmanned ground vehicles, unmanned surface vessels and autonomous unmanned submersibles.
Hanwha Aerospace in particular is expanding into manned-unmanned teaming combat systems with products such as the Arion-SMET multipurpose unmanned vehicle. The company has agreed to jointly pursue development and overseas sales of unmanned aircraft and advanced engines with KAI.
Hyundai Rotem's HR-Sherpa multipurpose unmanned vehicle, which applies artificial intelligence, autonomous driving and electrification technologies to carry out missions such as reconnaissance and cargo transport, is drawing interest from overseas buyers. LIG D&A is building capabilities in unmanned surface vessels, including autonomous navigation, obstacle avoidance and remote command and control, centered on its Haegeom series of maritime reconnaissance craft developed in collaboration with Palantir.
