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Advance K-radiation… Order backlog exceeded 100 trillion won
K9 · Cheongung Order Jackpot ‘Big 4 Performance’ also flewHanwha Aerospace 52兆, KAI 24兆, LIG Nex1 12兆, etc.
5-6 years of work already secured… Increased arms demand, export momentum this year
It was found that the order backlog of five major domestic defense companies exceeded 100 trillion won. This is because the high cost-effectiveness (price-performance) of K Defense products was highlighted in the wake of the war in Ukraine. Analysts say that there is a high possibility of winning additional orders as countries around the world are competitively increasing defense spending.
According to business reports submitted by major defense companies on the 24th, the defense order balances of five companies, including Hanwha Aerospace, Korea Aerospace Industries (KAI), LIG Nex1, Daewoo Shipbuilding & Marine Engineering, and Hyundai Rotem, totaled 100.4834 trillion won as of the end of last year. done. By company, Hanwha Aerospace, which produces K9 self-propelled howitzers, had the largest order backlog at 52,658.6 billion won. It was followed by KAI with 24.5961 trillion won, LIG Nex1 with 12.2651 trillion won, Daewoo Shipbuilding & Marine Engineering (special ship division) with 6.4213 trillion won, and Hyundai Rotem with 4.5423 trillion won. In the industry, it is evaluated that at least 5 to 6 years of work have been secured.
This is the result of sucking up arms demand, which has soared mainly in Europe after the war in Ukraine. According to the Stockholm International Peace Research Institute (SIPRI), a Swedish think tank, South Korea’s share of the global defense export market (2018-2022) was 2.4%, nearly doubling from the previous five years (1.3%). As a result, the defense industry’s operating profit last year more than doubled from the previous year. Hanwha Aerospace and LIG Nex1 posted record-breaking profits.
The industry is expecting an ‘order jackpot’ that surpasses last year’s this year as major countries around the world are expanding their defense spending. Most of the major countries, including the US (10%), Japan (26%), and India (13%), increased their defense spending budgets. Accordingly, the government has also raised its defense export target for this year to more than $17 billion (about 22 trillion won), a record high. Choi Gi-il, a military professor at Sangji University, said, “The competitiveness of K-Defense has been sufficiently proven.”
Increasing national defense spending in the war in Ukraine… “Good cost performance and no delay in delivery”
K9 self-propelled artillery, Cheongung, FA-50 fighter, love call for Korean weapons from Eastern Europe, etc.
○K Bangsan’s successive ‘order jackpot’
Major domestic defense companies recorded record-high performance last year one after another. Hanwha Aerospace, which exported K-9 self-propelled howitzers to Poland, recorded sales (consolidated basis) of 6.5396 trillion won and operating profit of 375.3 billion won last year. It increased by 18% and 36%, respectively, compared to the previous year. LIG Nex1 also posted an operating profit of 179.1 billion won thanks to strong sales of Cheongung-II, the highest ever. This is an increase of 84.3% compared to the previous year. Korea Aerospace Industries (KAI) failed to break the previous record, but its operating profit increased 143% year-on-year to 141.6 billion won. The company set its sales target for this year at 3,825.3 billion won, up 37.3 percent from last year (2,562.3 billion won).
The rapid increase in the performance of the defense industry is due to a large increase in exports. According to the Ministry of Trade, Industry and Energy and the Defense Acquisition Program Administration, exports from the domestic defense industry last year reached $17 billion (about 22 trillion won), more than doubling the previous record in 2021 ($7 billion). The government expects that exports will continue to grow this year and achieve performance that exceeds last year. In fact, KAI signed a contract with the Malaysian Ministry of Defense to export 18 FA-50s in February. This achievement was achieved in five months after winning a super-large contract worth $12.4 billion from Poland in November of last year.
○Value for money, high quality, and punctuality
Domestic defense companies are evaluated as having strengths in various aspects such as price, quality, and delivery in the global market. Hyundai Rotem recently delivered five K2 tanks to Poland three months ahead of schedule.
In addition to Poland, movements such as increasing defense spending and modernizing weapon systems are accelerating in Eastern Europe, such as Hungary and Bulgaria, and the export territories of domestic defense companies are expanding. In Southeast Asia, as Russian weapons, which had been the largest source of weapons in the past, are rapidly declining, Korean companies are rapidly emerging as an alternative. The British Economist evaluated on the 23rd (local time), “Starting from the war in Ukraine, the poor performance of Russian weapons was proven, and South Korea became the biggest winner.” Although China has moved to replace Russia, China’s arms sales in Southeast Asia have decreased by 40% (as of 2021) compared to five years ago.
Direct entry into Europe and the Middle East, where demand for the defense industry is high, is also on the rise. Hanwha Aerospace plans to establish a branch office in Warsaw, Poland in the first half of this year. The Korea International Trade Association is also considering establishing an additional Warsaw branch next year to support local businesses. Hanwha Systems opened an overseas branch in Abu Dhabi, United Arab Emirates (UAE) in January.
As the status of K Defense Industry rises, a face-to-face confrontation with Germany, a traditional military powerhouse, is forming in some regions. Hanwha Aerospace is known to be competing with a German company for orders for the Australian Army’s Redback Infantry Fighting Vehicle (IFV). An official from the defense industry said, “Export contracts have so many variables that they can be said to be ‘on thin ice’ until they are finalized.” “We are making company-wide efforts to win additional orders.”
Reporter Jang Seo-woo suwu@hankyung.com
