The last few years have seen a surge in defense spending, particularly in regard to conventional defense technologies. “We’ve had a huge increase in demand from our European allies and partners over the last few years since the … invasion by the Russians in Ukraine,” Defense Security Cooperation Agency director James Hursch observed recently. U.S. industries are not the only suppliers benefiting from this surge in demand. South Korea has also dramatically expanded its global role as a defense technology supplier. In 2023, South Korea became one of the top 10 arms exporters in the world, exporting $14 billion worth of defense technology to 12 countries.
The South Korean government is ambitious in seeking to become the world’s fourth-largest arms exporter by 2027. The Korean defense industry has succeeded so far on account of its active arms exports, flexible conditions, and joint production, as well as consistent diplomatic support. But there are a number of potential challenges to its current trajectory: the upcoming U.S. presidential election, the Ukraine war, and competition with other major arms exporters. One promising market for Korean defense platforms and systems is Latin America, exemplified by a recent shipbuilding contract with Peru. By maintaining the current strategy that aligns with the unique needs of Latin American countries, the South Korean defense industry could diversify its market and better prepare for an unpredictable future.
Recent Contracts
Since the Russian invasion of Ukraine, South Korean defense exports have expanded significantly. From 2018 to 2022, South Korean arms exports increased by over 70 percent compared to the 2013–2017 period. More specifically, the significant increase occurred from 2021 onward within the 2018–2022 period. Until 2020, the country’s exports typically ranged from $2–3 billion, but in 2021, they surged to $7.3 billion, then to $17.3 billion in 2022, and $14 billion in 2023. By March 2024 South Korea had become the 10th largest exporter of major arms. In addition, South Korea is the second-largest provider for six countries out of the 40 largest importers in 2019–2023: Indonesia, New Zealand, Norway, Poland, Thailand, and the United Kingdom. It is the top supplier to the Philippines.
A record arms deal occurred in 2022 through a framework agreement with Poland, amounting to $22 billion, after the outbreak of the war in Ukraine. Since then, the Korean defense industry has significantly diversified its export destinations. After the exports to Poland, several European countries neighboring Russia, including Estonia, Finland, and Norway, purchased weapons from South Korea, In July 2024, Romania confirmed the purchase of 54 K-9 self-propelled howitzers and 36 K-10 ammunition resupply vehicles totaling $920 million. The provision of weapons to European countries holds symbolic importance, signifying that South Korea has become “a new democracy’s arsenal.”
Besides Europe, there has been a significant increase in exports to Arab countries, while the types of exported weapons are also more diverse. In 2021 and 2022, the United Arab Emirates, Egypt, and Saudi Arabia had major arms deals with South Korea. The weaponry sold includes K-9s for Egypt, the Chunmoo rocket launcher for the United Arab Emirates and Saudi Arabia, and the Cheongung II medium-range surface-to-air missile for the United Arab Emirates. This year, Saudi Arabia will also import the KM-SAM to bolster its air defense systems. The future looks promising. According to the Stockholm International Peace Research Institute’s database, South Korea is scheduled to export the largest amount of artillery and tanks among the 10 largest exporters after 2023.
South Korea’s growing exports partly fill the gap created by the decline in Russian arms exports. Russia has experienced a significant decrease in its arms exports, exacerbated since 2020, due to multiple factors, including U.S. export controls and the obvious need to prioritize its own war effort. In response, South Korea has successfully started exporting weapons to former recipients of Russian arms, such as Egypt and Vietnam.
Staying Strong
The South Korean defense industries export weapons and actively collaborate with the recipient countries by transferring technologies and overseas production. Korea Aerospace Industries has an agreement to jointly develop a military cargo aircraft with the United Arab Emirates’ Tawazun, while Hyundai Heavy Industries is participating in the Saudi government’s frigate project with International Maritime Industries, a joint venture established by Hyundai Heavy Industries and Saudi Aramco. Additionally, the South Korean defense industry has started to offer “all-in-one” package deals that include non-military products alongside significant arms deals. For example, in 2019, Hyundai Rotem provided Poland not only with K9 tanks but also trams. In a recent deal with Romania, the company may supply trams that could modernize the country’s road and railway networks.
In July 2024, South Korea strengthened its ties with NATO to support its arms exports. It has become the first Asian country to agree to recognize military airworthiness certification with NATO, which is expected to facilitate collaboration in the defense sector. Additionally, as a member of the IP4 (Indo-Pacific 4), South Korea will cooperate with NATO more in terms of “supporting Ukraine, cyber defense, countering disinformation, and technology.” This close collaboration is expected to increase military cooperation with the alliance in the future.
The Uncertain Future
Several international and domestic factors could positively or negatively impact the future of South Korean defense businesses. These include the U.S. presidential election, competition with major arms exporters, particularly for the European market, and uncertainty in securing a skilled research and development workforce in South Korea.
First, if a second Trump administration continued to emphasize Europeans paying their “fair share” of defense costs, many European countries might increase investment towards domestically developed defense systems and weapons. This shift, combined with the growing caution regarding Korean weapons among European countries, could reduce their purchases of South Korean arms. On the other hand, a Harris administration may not significantly impact the South Korean defense industry’s course, provided it continues with President Joe Biden’s foreign arms sale policy. Vice President Kamala Harris has previously committed to stand with Ukraine. European demand for additional defense technology and weapons from South Korea would also hinge on the future of the conflict in Ukraine. If the conflict ends it would likely diminish European arms purchases. Yet tensions between European governments and Russia will likely continue, allowing Korean industries to still secure contracts.
Increasing competition among different countries could also jeopardize the performance of the Korean defense industry. For example, neighboring countries such as Japan are also trying to boost their arms export businesses. In 2023, the Japanese government revised the Three Principles on Transfer of Defense Equipment and Technology, making it easier to export completed non-lethal and lethal technology to foreign countries if certain conditions are met. As Japanese weapons start to be exported more widely, South Korean defense firms may lose some market share. At the earliest, this could occur within 5–10 years. Additionally, more European countries are emphasizing the expansion of their defense industries. France’s President Emmanuel Macron has insisted that to build European sovereignty and long-term autonomy, Europe should be responsible for developing its defense industry rather than relying on U.S. or South Korean weapons.
Third, there are ongoing concerns about the future of South Korea’s defense industries, particularly in securing a skilled research and development workforce. The country’s largest defense companies are already experiencing significant shortages of research and development experts. This is mainly due to limited salaries, unstable job security from project-based approaches, restrictions on private-sector employment for former military personnel and researchers, and high demand for security maintenance. These challenges could hinder the industry’s ability to develop and acquire advanced technologies, such as aircraft engines, which may see higher demand and profitability in the future. Recognizing these challenges, some companies, such as Hanwha Aerospace, have established branches in other countries to secure a skilled workforce. However, not all defense companies have the budget and resources to pursue this option. These workforce-related issues cast uncertainty over the future of South Korea’s defense industry and could become a more prominent problem once the current high demand for weapons decreases and stabilizes.
Latin America: Land of Opportunity
Amid these potential factors that could negatively affect the Korean defense industry’s future, what kind of strategy should the industry adopt? One strategy could be to further diversify its list of customers by approaching new markets, particularly in Latin America.
One of the primary characteristics of the Latin American defense market is the lack of vast defense budgets compared to Europe or the Arab world. Hence, while arms sales can help cement defense relations, they may not be highly profitable for exporters in the short term. However, arms sales are not necessarily one-time transactions: Their repercussions can extend over a longer period. Considering the lock-in effect, securing the market early can be much more profitable in the long term, even if revenues in the short term are more modest or marginal. For this reason, major European defense industries focus on technical knowledge transfers and offset agreements with South American defense ministries and militaries to maintain their engagement and solidify partnerships. For example, European defense industries have secured contracts with Latin American militaries by focusing on technological transfer and teaching regional defense industries the “know-how.” Brazilian shipyards and France’s Naval Group have teamed up to manufacture four Scorpene-class submarines and one nuclear-powered submarine for the Brazilian navy. Meanwhile, the Dutch shipyard Damen is partnering with the Colombian shipbuilding corporation COTECMAR to build frigates for the Colombian fleet.
The South Korean defense industry follows a similar strategy, focusing on joint production. It has slowly developed partnerships with Latin American countries, specifically with Peru. In April, Hyundai Heavy Industries and the Peruvian shipyard SIMA signed a contract valued at around $460 million to manufacture one frigate, two landing craft units (described by SIMA as a multi-role vessel and an auxiliary transport vessel), and an offshore patrol vessel by 2029. The sale will solidify Korean-Peruvian defense relations. Peru’s air force operates a fleet of Korean Aerospace Industries’ KT-1 Woongbi trainer aircraft, locally called KT1P, manufactured by the air force’s maintenance service department (SEMAN). Similarly, the Peruvian army plans to purchase 30 8×8 White Tiger armored vehicles from Hyundai Rotem.
The South Korean defense industry has also focused on technology transfers to its Peruvian partners. The Hyundai Heavy Industries contract with SIMA is significant not only because it is the first of its kind for South Korea with Latin America, but also because, from the Peruvian side, their shipyard will learn how to build frigates and more complex systems. If the production of the four vessels is successful, Lima could continue relying on Seoul for new ships and maybe even submarines, provided they are manufactured in Peru. This successful collaboration with Peruvian counterparts could help develop future partnerships and sales agreements with other countries in Latin America. Other regional air forces, namely those of Colombia and Peru, are looking to modernize their fleet of primary combat aircraft. The Colombian air force, for example, flies Israel Aircraft Industries Kfir warplanes, which are around four decades old, while the Peruvian air force flies a mixed fleet of old Mirage 2000s, MiG-29s, and Su-25s. Both services seek replacements, and Seoul could offer the KF-21 Boramae fighter aircraft. A successful partnership with Peru could be highly profitable, not just in terms of revenue, in the future.
South Korea’s approach to Latin America has a unique aspect that could facilitate future collaborations: donations. Over the past decade, Seoul has donated corvettes and patrol vessels to Colombia, Ecuador, Peru, and, most recently, Uruguay. Seoul could continue to use donations to establish relations with South American navies, hoping to sell vessels and other maritime systems in the future.
Besides South Korea, there are two major donors to the countries in Latin America: China and the United States. However, their donations are different and do not necessarily overwhelm or negate the effect of South Korean ones. Over the past decade, Beijing has donated mostly non-lethal technology, including small patrol boats, transport vehicles, and equipment for humanitarian assistance and disaster relief. Recipient countries include Guyana, Peru, and Uruguay. While donations arguably help diplomatic and military-to-military relations, Beijing has yet to enter the Latin American defense market. Attempts to sell warplanes and armored vehicles to Argentina, for example, have not been successful despite generally cordial diplomatic relations and strong trade between Beijing and Buenos Aires. Meanwhile, Washington continues to be a major, if not the premier, supplier of military technology to Latin American and Caribbean militaries. Donations this year include drones to El Salvador, an ongoing project to manufacture a fleet of 13 near coastal patrol vessels for U.S. allies across the Greater Caribbean, and armored vehicles to Uruguay for peacekeeping operations. These examples do not include direct sales between regional Ministries of Defense and U.S. defense companies. However, given the nature of the inter-American system and U.S. relations with (most) Western Hemisphere nations, Washington stands in a different category than other countries, like South Korea or China, who seek to break into the region’s defense markets.
In other words, donating military technology is another tool governments and militaries can utilize to strengthen relationships or develop new ones. Donating decommissioned corvettes and patrol boats may help Seoul gain South American clients for Korean-made maritime platforms, a promising market given regional maritime security threats, challenges, and the necessity to modernize fleets. While Beijing and Washington have donated some vessels to Greater Caribbean militaries, Seoul’s donation of bigger assets may be a deal-breaker to secure future customers.
Arguably, Seoul is already seeking more partners in the region. For example, the Korean ambassador to the Dominican Republic, Sangryul Lee, met with their air force commander, Maj. Gen. Carlos R. Febrillet Rodríguez, in early July. They pledged to continue bilateral cooperation, though no specific defense project was reportedly discussed. Certainly, other defense manufacturing countries hold similar meetings across the region, while extra-regional defense companies participate in defense expos like Brazil’s Latin America Aerospace and Defense, Chile’s Feria Internacional del Aire y del Espacio, or Colombia’s Expodefensa. South Korea is seeking new customers and partners, but should remember that there are many other domestic, regional, and extra-regional suppliers.
To access the Latin American market, South Korean defense industries should continue the collaborative work and offer further donations and technology sharing based on the unique challenges and defense priorities of Latin American countries.
Final Thoughts
South Korea has recently increased and diversified the sale of defense systems and platforms. The country now ranks among the top 10 global exporters, and its status and profit margin (including revenue) could increase in the coming years. It is not an exaggeration to argue that South Korea’s defense industry is enjoying a new golden age.
The war in Ukraine and tensions among global military powers have caused a surge in developing new defense technologies. Unmanned systems, loitering ammunition, artificial intelligence, cyber and electronic warfare, and next-generation combat aircraft are hot topics of conversation. Similarly, the procurement of conventional weaponry is increasing across Europe and elsewhere. However, to fully understand the current and future trends of arms transfers, it is essential not solely to focus on the systems or platforms themselves and their customers but also on the producers and exporters.
Given the increasing competition in the global defense market, now is the right time for South Korea to seek new partners, with Latin American countries emerging as promising candidates. Besides exploring new export destinations, the defense industry should pursue partnerships with regional countries for joint production. Also, South Korea should continue its successful strategy of donating weapons to expand its potential markets in Latin America. These efforts could provide a more secure market for the South Korean defense industry.
Hoshik Nam is an assistant professor of political science at Jacksonville State University. He previously served as an active-duty enlisted member of the Korean Army at the Republic of Korea-United States Combined Forces Command. He received a Ph.D. in political science from the University of Iowa.
Wilder Alejandro Sánchez is president of Second Floor Strategies, a consulting firm in Washington. He monitors defense and security, geopolitical, and trade issues across Central Asia, Eastern Europe, and the Western Hemisphere. He is a non-resident senior associate in the Americas program at the Center for Strategic and International Studies.
Image: Michel Temer via Wikimedia Commons
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Publish date : 2024-08-20 20:30:00
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