On February 23, 2023, the newly received South Korean K9 Thunder howitzer was photographed before a military exercise at the Torun training ground.
Wojty Kradwanski | AFP | Getty Images
South Korea is famous for many things. Korean pop music, Korean dramas and Korean food have taken the world by storm.
Now, a new face from South Korea is about to make a splash in investors’ portfolios – defense stocks.
Shares in these military manufacturing companies have been soaring this year, driven by a flood of arms orders from other countries.
Most of the leaders in the field, namely Hanwha Aerospace, Korea Aerospace Industries, Hyundai Rotem and LIG Nex1, have recorded significant growth so far this year.
Statistics come from Stockholm International Peace Research Institute The report shows that world military expenditure will grow for the ninth consecutive year in 2023, growing by 6.8% compared with the same period last year, totaling US$2.44 trillion. The institute added that this was the largest year-on-year increase since 2009 and pushed global spending to record levels.
Sang Hun Seok, visiting fellow for the Indo-Pacific region at the Royal United Services Institute, a British policy think tank, explained to CNBC that steady growth in global spending, coupled with increasing geopolitical uncertainty, provides opportunities for South Korean arms manufacturers. global market.
“South Korea’s status as a defense industry powerhouse is supported by actual figures,” April report A report by the Italian Institute of International Politics pointed out that the country’s arms exports have continued to grow, increasing from US$2 billion in the late 2010s to US$3 billion, and to US$7.3 billion in 2021.
South Korea’s arms exports will further climb to $17.3 billion in 2022, and despite a slight decline to $14 billion in 2023, South Korea’s arms exports will exceed $20 billion in 2024. August report From the media Chosun Ilbo.
In addition, an increasing number of countries are importing defense products from Asia’s fourth-largest economy. “Chosun Ilbo” stated that only 4 countries will import South Korean weapons in 2022, but this number will increase to 12 in 2023.
Interest in South Korean weapons can be explained by the slogan “cheaper, better, faster”. Analysts told CNBC that South Korean weapons are essentially considered cheaper, faster to produce, and nearly as good as other countries’ top-tier weapons.
cheaper
The first reason is of course cost. RUSI’s Seok puts it simply: “Korean exports are very cost-effective.” For example, a PAC-3 interceptor missileAccording to reports, the cost of each missile used in the US Patriot surface-to-air missile system is approximately US$4 million.
He pointed out that the Tianluo interceptor missile manufactured by South Korea’s LIG Nex1 has similar performance to the PAC-3, but the cost is only one-third of the latter.
The high cost of such weapons came into focus during the Russia-Ukraine war, when Moscow launched numerous drone and missile attacks on Ukraine, some involving more than 100 drones.
one Center for Strategic and International Studies 2022 Report Underscoring the difference: “It might be reasonable to launch a missile worth $4 million against a Russian cruise missile worth $250,000 if the missile can hit a sensitive target. But firing a missile worth $50,000 against an Iranian Shahed-136 unmanned aerial vehicle It may not be reasonable for an aircraft to launch a $4 million missile.
Although U.S. weapons systems are known for their top-notch capabilities, Bruce Bennett, a senior defense analyst at the U.S. think tank RAND Corporation, said that due to the high cost of U.S.-made weapons, most countries cannot afford them. “So South Korea offers a much cheaper weapon with almost as good performance, which is very attractive to many countries,” he said.
hurry up
Cost-effective weapons are great, but weapons orders don’t protect a country. Only when a weapon reaches a country and becomes effective within that country can it contribute to its defense.
Hoshik Nam, an assistant professor in the Department of Sociology and Political Science at Jacksonville State University, told CNBC that since South Korea is still officially at war with North Korea, South Korea continues to invest heavily in its defense industry and is fully prepared. Demand grows.
Therefore, “this continued investment has allowed the industry to maintain strong production capacity, unlike some Western countries that shrunk their military production lines after the Cold War.”
For example, Poland ordered 48 FA-50s from KAI in 2022 to supplement its fighter platform. A number of former Soviet fighters were donated to Ukraine.
Mariusz Blaszczak, Deputy Prime Minister and Defense Minister of Poland, said that the FA-50 was chosen because of KAI’s ability to deliver the aircraft quickly. It is reported that In an interview with Polish media.
Reportedly 12 FA-50s have been delivered Korean stock will be used for production by the end of 2023, with the remainder to be manufactured to Polish specifications and delivered starting in 2025.
JSU’s Nam said the FA-50 is also highly compatible with the U.S.-made F-16 fighter jets also operational in Poland, an attraction for countries seeking cost-effective alternatives and faster procurement timelines force choice.
(almost) better
In general, Korean weapons are not the cream of the crop, but in addition to their cost-effectiveness, their compatibility with many systems and their high reliability make them attractive to buyers.
JSU’s Nam said that because South Korea holds regular joint military exercises with the United States, South Korean weapon platforms are highly compatible with US and NATO systems, allowing countries to simplify logistics when acquiring South Korean weapons.
Nam also added that South Korean systems have significant reliability advantages compared to Russian or former Soviet weapons systems, because having a wider customer base also means a wider network to support the service system.
RUSI’s Seok said South Korean defense companies have also offered very generous terms in other areas, such as technical cooperation, local production and financing. The company is also very proactive in adapting to buyers’ changing needs and provides extensive after-sales support, he said.
RAND’s Bennett points to the example of India, which signed a localization agreement with South Korea The 2015 K9 Thunder (locally known as K9 Vajra-T).
He said India has traditionally purchased Russian weapons, but Russia was unable to provide support, such as maintenance and spare parts, for the systems it sold.
“So the Korean approach is, from the beginning, we make sure we have a viable supply chain. Let us provide maintenance. We will send people around the world to help you get maintenance capabilities, supply chain, your spare parts,” Bei said. Nate said.
