The projection for an increase in global defense spending initiated by President Trump's statement that 'there is no such thing as free security' is acting as a boon for domestic small and medium-sized defense corporations.
According to the Korea Defense Industry Association on the 13th, as of the end of 2023, there are 65 small and medium-sized defense corporations in the country. These corporations have recently recorded a sharp growth in performance. Revenues for the 65 small and medium-sized defense corporations, which were approximately 5.4 trillion won in 2021, increased by 24% to about 6.72 trillion won in 2023. During the same period, operating profits rose from about 272 billion won to approximately 515.4 billion won, an increase of 89%.
Although the growth of the 18 large defense corporations, including Hanwha Aerospace, has not reached that level, small and medium-sized defense corporations continue to play a 'waist' role in the K-defense ecosystem. While these companies produce finished goods of weapons systems on their own, about 80% of them supply related components to large corporations.
Large defense corporations recorded a sales volume of 13.475 trillion won in 2023, a 28% increase compared to 2021, while operating profits during the same period surged by 193% to 1.322 trillion won. The growth was substantially influenced by increased exports to countries such as Poland.
◇Small and medium-sized enterprises as the 'waist' of the K-defense ecosystem
The reason small and medium-sized defense corporations have been able to grow, similar to large corporations, lies in their quality, price, and delivery competitiveness. This is referred to as QCD (Quality-Cost-Delivery). The aim is to sell weapons systems or components with good performance at reasonable prices. Their strong ability to meet rapid delivery schedules desired by customers is also a key advantage.
This came from the K-defense ecosystem where small and medium-sized enterprises supply components for weapons systems to large corporations. A source from the defense industry noted, 'Like other manufacturing industries, K-defense also has a cooperative structure between large and small to medium-sized companies,' and added, 'Large defense corporations cannot create weapons systems alone.'
Samyang Comtech, which produces bulletproof products to protect equipment from enemy attacks, supplies its products to large corporations. The company's bulletproof products are mounted on Hyundai Rotem's 'K2 tank,' Hanwha Aerospace's multiple rocket launcher 'Cheonmu,' and Korea Aerospace Industries' (KAI) utility helicopter 'Surion.'
There are also small and medium-sized defense corporations that produce finished goods of weapons systems and build competitiveness. These include Kyung Chang Industrial, which manufactures bulletproof helmets, SNT Motiv, which produces rifles and machine guns, and Covico, which produces wheeled armored vehicles (KMPV) that have mobility with bulletproof capabilities.
◇Increase in global defense demand initiated by Trump… Opportunity for South Korea
The recent assumption of power by the Trump administration has also created a positive outlook for small and medium-sized K-defense corporations, predicting the end of the role of the U.S. as the 'police of the world.'
President Donald Trump is sending a message to the world that 'the U.S. will no longer protect you.' In response, European countries are increasing their defense budgets to strengthen their own security.
This situation could serve as an opportunity for domestic small and medium-sized defense corporations. As exports increase, centered around large corporations, the expected trickle-down effect means that the benefits will also flow to small and medium-sized corporations that have established the K-defense ecosystem.
Professor Jang Won-jun, who specializes in defense industry convergence at Jeonbuk National University, said, 'For countries that need to rapidly enhance their defense capabilities, K-defense with a fast delivery competitiveness can be a good choice,' and noted, 'The fact that K-defense has built a good relationship by supplying tanks and Cheonmu to Europe is also a positive factor.'
Professor Jang also emphasized that 'the defense export strategy of government-to-government (G2G) is important for customers that are governments or militaries,' and urged, 'It is essential to consider establishing support centers for small and medium-sized defense corporations to assist those facing difficulties in entering overseas markets compared to large corporations.'