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South Korean defence industry to increase expenditure at a CAGR of 7.3%

Press Release   •   Aug 29, 2013 10:55 BST

Expenditure within the South Korean defence industry has been forecast to reach a value of approximately $31 billion during 2013, and has been predicted to increase at a compound annual growth rate of 7.3% between 2013 and 2017.

Increasing threats from North Korea to use missiles against it, rising tensions in the Korean peninsula, and the modernisation of its armed forces to be able to deter external security threats are expected to drive South Korean military expenditure through to 2017.

The defense industry of South Korea, initially small in size and strategic scope at early point of its development, has steadily expanded its areas of competence over the years to become one of the largest and most self-sufficient defense industries in the modern world. Until the mid-1960s, Korea depended completely upon military aid and equipment from the United States for arming its military.

By 1990, Korea began producing most of its military equipment such as weapons, ammunition, communication equipment and vehicles through indigenous industrial endeavour, with self-sufficiency reaching 70% of all defensepurchases.

The South Korean government places increasing emphasis on technical cooperation and technology transfer, to ensure that the South Korean defence industry is not perceived as a sub-contracted supplier of low-technology parts. South Korea has changed its policies to achieve technology transfer in each of its defence deals to reduce its dependence on imports of advanced defence systems.

For complete ground weapon systems, Hyundai Rotem builds tanks such as K1 and K2 tanks, Samsung Techwin self-propelled howitzers such as K9, and Doosan DST armored vehicles such as K200 and K21. Kia Motors has traditionally specialized in the production of wheeled military vehicles. It also produced towed artillery systems as well as multiple-launch rocket systems.

Hanwha and Poongsan are other conglomerates that have deep connections to the defense industry by being major suppliers of ammunition and explosives. LIG Nex1 and Samsung Thales, the two largest defense companies in South Korea, are the main developers and producers of precision electronic systems.

The most important factors for the South Korean Ministry of Defence (MoD) when making purchasing decisions are price, technology transfer, and offsets. The South Korean MoD has adopted a new provision that requires the foreign contractor to provide assurances in advance, that the proposed technologies will be transferred to the country prior to the approval of the offset contract.

For more information on the South Korean defence industry, see the latest research: South Korean Defence Industry

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