Overseas sales by domestic defense companies are showing rapid growth, rising more than sixfold from three years ago. But their export volume remains small compared with major rivals such as Germany, and items are skewed toward ground weapons, prompting calls to expand investment in areas such as maritime and unmanned systems for "qualitative growth."
On the 26th, according to the Financial Supervisory Service's electronic disclosure, combined overseas sales last year in the defense sector for the four major defense firms—Hanwha Aerospace, Korea Aerospace Industries (KAI), LIG Defense&Aerospace (LIG D&A), and Hyundai Rotem—totaled 8.7828 trillion won. That is up 611% from combined overseas sales of 1.2345 trillion won in 2022, three years earlier.
In the first quarter of this year, the four firms' combined overseas sales were 1.9698 trillion won, a 1,693% surge from 109.8 billion won in the first quarter of 2022.
By company, Hanwha Aerospace sold flagship weapons such as the K9 self-propelled howitzer and Cheonmu to 10 countries including Poland and Egypt. As a result, overseas orders expanded from about 20 trillion won in 2022 to 37.2199 trillion won last year.
During the same period, LIG D&A increased exports of the Cheongung-II to Saudi Arabia and Iraq, lifting its order backlog from 12 trillion won to 26.2526 trillion won. Hyundai Rotem's order backlog also surpassed 10 trillion won last year for the first time since its founding. KAI's order backlog rose from 24.5961 trillion won in 2022 to 27.3437 trillion won last year.
Still, a note of caution is emerging in the defense industry over whether the rapid growth of the past three years can continue. The recent rise in revenue stems from previously signed delivery contracts, and exports are excessively concentrated in specific regions and items.
Countries that signed export contracts with Hanwha Aerospace for the K9 self-propelled howitzer number 11, and five countries use the Cheonmu. The Cheongung-II has been exported only to three Middle Eastern countries, and six countries use the FA-50. The K2 tank is operated only by Poland.
In contrast, Germany's Rheinmetall, considered a rival to domestic defense companies, has footholds in 30 countries worldwide and a higher overseas sales share than the combined four Korean firms. Last year, Rheinmetall's overseas sales share excluding Germany was 62%, higher than most domestic firms, whose shares were below half. Its overseas sales were €9.935 billion (about 17.5 trillion won), also exceeding the combined total of the four Korean defense firms.
Sweden's Saab, which competed with Hanwha Ocean in Poland's submarine program, posted overseas sales of about 7.6 trillion won in Hanwha terms, with an overseas sales share of 59%.
Hanwha Aerospace's overseas sales share last year was 47.2%, LIG D&A 19.9%, KAI 25.5%, and Hyundai Rotem 72.4%.
A defense industry official said, "German corporations are increasing output and scaling up, and Japanese defense companies are also seeking to expand recently," adding, "As export competition in the global defense market intensifies, the boom domestic companies enjoy may end before long."
Voices are growing in the industry to broaden export regions and diversify items into maritime weapons systems and other areas.
Domestic defense companies are pushing to expand export destinations to the United States and Southeast Asia, but notable order news has yet to emerge. In the maritime sector, the only ongoing project is HD Hyundai Heavy Industries' export of patrol vessels to the Philippines. Hanwha Ocean is seeking to win Canada's submarine program.
A former National Defense Committee official emphasized, "Domestic corporations tout cost-effectiveness, reliable on-time delivery, and collaboration with local firms as strengths, but what ultimately matters is qualitative growth," adding, "To boost defense competitiveness and scale up by building on the recent boom, full-scale investment by the government and corporations is essential."