KAI, bastion of South Korea’s fast-growing defense industry

SACHEON, South Gyeongsang Province – On a hot spring day in April, the roar of combat aircraft engines fills the air. It’s a normal day at Korea Aerospace Industries Ltd., or KAI as it is more commonly called. 

At a factory – three times the size of a soccer field – next to the area where test fighter jets fly over Sacheon every hour, technicians and engineers are busy assembling and inspecting the KF-21, a 4.5-generation supersonic fighter jet under development.

They are also working laboriously on the FA-50 light combat aircraft, the country’s key defense export item.

“The (aircraft) body is filled with hundreds of thousands of parts and electric wires that run for kilometers,” Lee Ho-kyu, head of Korea Aerospace’s fixed wing assembly technology team, said of the KF-21 aircraft.

The KF-21’s performance surpasses that of North Korea’s main fighter jet, the MIG-29, and is nearly on par with Europe’s next-generation fighter jet, the Eurofighter Typhoon, he said proudly.

KAI, Korea’s sole military aircraft manufacturer, and the Defense Acquisition Program Administration (DAPA) under the Defense Ministry are jointly developing the KF-21, Korea’s first supersonic fighter jet. The Korean defense companies are putting the final touches on the combat aircraft with technological help from US defense company Lockheed Martin Corp.

KAI and DAPA have invested a combined 8.8 trillion won ($6.6 billion) in the KF-21 project, which the country expects to take its defense industry to the next level.

KOREA, KEY PLAYER IN GLOBAL DEFENSE MARKET

Since the start of the Russia-Ukraine War, Korean defense companies have emerged as major defense players, engaging in active weapons export negotiations.

According to the Korea Institute for Industrial Economics and Trade (KIET) and Aviation Week, a global defense journal, the weapons acquisition budget worldwide is estimated at $680 billion this year and is forecast to grow to $700 billion by 2027 and $750 billion by 2032.

Recent data from the Stockholm International Peace Research Institute (SIPRI) showed that Korean defense exporters are rising rapidly in the global market.

Korean companies’ global weapons market share was 2.4% in the 2018-2022 period, up from 1.3% in the previous five-year period, the fastest growth rate among the world’s top 10 defense exporters.

Last year, Korea's defense industry posted a record $17 billion in exports, more than double its previous record of $7 billion in 2021, boosted by strong sales of the FA-50 fighter jets, the K2 Black Panther battle tanks and the K9 self-propelled howitzers.

Korean President Yoon Suk Yeol said last year his government aims to turn the country into one of the world’s four largest defense exporters.

CHALLENGES REMAIN

Korean defense companies are known for their cost-effective and cutting-edge technology in manufacturing weapons and fast delivery of such weapons.

In February, KAI said it aims to achieve 3.83 trillion won in revenue this year, up 37% from 2022, driven by sales of advanced fighter jets.

Orders for military equipment will reach 4.48 trillion won by the end of 2023, although some of this won’t be reflected in this year’s results, it said.

Last September, KAI signed a $3 billion deal to export 48 FA-50 fighter jets to Poland by 2028. In the long run, the company aims to sell 1,000 units of the FA-50 light combat aircraft worth 40 trillion won over the next decade.

Analysts say Korea needs to focus on value-added weapons with higher price tags to move up in the global rankings. 

“With the outbreak of the Russia-Ukraine war, NATO countries are backing German defense companies. Germany is one of the toughest rivals for us in our efforts to enhance our presence globally,” said KAI Chief Executive Kang Goo-young.

Other key export items of Korea’s defense industry include Hyundai Rotem Co.’s K2 Black Panther, a next-generation battle tank; Hanwha Defense Co.’s K9 self-propelled howitzers; LIG Nex1 Co.'s mid-range surface-to-air missile (M-SAM) system called Cheongung in Korean, or heaven’s bow; and Poongsan Corp.'s ammunition and artillery shells.

Write to Ik-Hwan Kim at lovepen@hankyung.com

In-Soo Nam edited this article.