As Europe, emerging as a major buyer in the global arms market, raises barriers to winning contracts by demanding local production from defense corporations in each country, Korea's defense industry is moving to respond aggressively. Some are building factories and announcing multitrillion-won investment plans, while others are actively pursuing strategic collaboration with European defense corporations. The judgment is that quickly securing production facilities and more within Europe is necessary to establish a long-term revenue base.
According to DefenseRomania, a Romanian defense outlet, on the 3rd, Son Jae-il, head of Hanwha Aerospace, said at the groundbreaking ceremony for the H-ACE Europe plant in Dâmbovița County on the 13th, "We plan to invest €1.3 billion (about 2.2 trillion won) in this plant," adding, "This investment will create more than €14 billion in economic value, including production spillover effects and added value." This is the first time Hanwha Aerospace has disclosed the long-term investment scale for the Romania plant.
Hanwha Aerospace plans to raise the localization rate to as high as 80% through this plant. It will produce K9 self-propelled howitzers and K10 armored ammunition resupply vehicles and plans to make infantry fighting vehicles (IFVs), long-range precision strike systems, and unmanned ground vehicles (UGVs) here in the future.
The Romanian government is pushing a next IFV program to sequentially introduce more than 300 armored vehicles, and Hanwha Aerospace and Germany's Rheinmetall are competing for it. If Hanwha Aerospace is finally selected, the plan is to produce the entire volume locally.
Hanwha Aerospace's pledge to inject funds in the trillion-won range into local production is meant to break down Europe's increasingly high barriers to contract awards. The European Union (EU) is running SAFE, a €150 billion low-interest, long-term loan program for member states' rearmament. For European countries to use this money to buy weapons, at least 65% of the components of the weapons they intend to purchase must be made in Europe.
This is why Son said, "We have secured a position that can meet SAFE requirements institutionally and legally," and emphasized, "SAFE prioritizes production within Europe and deep localization, and the Romania plant was built according to these principles."
A senior official at Poland's Ministry of State Assets said in a recent interview with Bloomberg News, "We will not be satisfied with simply hosting an assembly line," adding, "Technology transfer is necessary and we must become part of the global supply chain."
Other domestic defense corporations are also tightening their connections with Europe on the ground. Hyundai Rotem decided to produce 61 of the 64 K2 tanks it won in Poland last year locally. When talks begin this year on a third contract, local production is also expected to be a key condition.
LIG Nex1 set up a Europe representative office in Munich, Germany, in September last year. Using this as a base, it plans to fully pursue cooperation in research and development and production with major European defense corporations starting this year. Korea Aerospace Industries (KAI) is reviewing building maintenance, repair and overhaul (MRO) hubs and a flight training center. This is likewise a move to win orders.
The domestic defense industry believes it must stake everything on expanding its dominance in the European market this year as well. An industry official said, "Europe is rebuilding its defense industry, which had been in a slump for some time, and the work will be completed in about three to five years," adding, "If K-defense is expanded as quickly as possible during this period, it will be possible to secure a solid foundation for long-term revenue by additionally winning follow-on volumes and support."