SEOUL -- First came glitzy, boppy K-pop. Then came soapy, soppy K-drama. Now, according to South Korean President Yoon Suk Yeol, it is time for another K-moniker for a new, more pessimistic era, as the country with a relentlessly global brand seizes another booming export niche: weapons.
"I support the bold challenge of K-Defense," Yoon wrote in the guest book during a December visit to the offices of Hanwha Aerospace, one of the standout companies in South Korea's burgeoning defense industry. In a shiny industrial area outside the capital called Pangyo Techno Valley, also home to tech giants Naver and Kakao, Yoon posed for pensive photos while admiring hulking aircraft engines.
"Some people have considered the defense industry to be a war industry and have had negative opinions about it," read Yoon's message. "In fact, the defense industry is a peaceful industry that shares our values in the global security system while guaranteeing the safety of our allies and people who respect the international order."
South Korean exports are mainly driven by semiconductors, cars and boy bands. But in recent years, the country's defense companies, whose skills have been honed amid a seven-decade-old confrontation with North Korea, have raised their global profiles with the signing of landmark deals.
At the Hanwha event, Yoon said a strong defense industry could contribute both to South Korea's national security and to its economy through job creation.
The president's presence at the event -- a strategizing session for defense exports attended by officials from the government, military and private sector -- demonstrated the growing importance of the industry and the close alignment of government and business in projecting it abroad.
Already a powerhouse for technology like chips and batteries, South Korea is now the world's ninth-largest arms exporter, with the volume of its exports up 74% in the five years from 2018 to 2022. In 2022, Yoon announced his goal of taking the world's fourth spot by 2027.
Enemies close
At home, South Korea's defense industry is rooted in the need to guard against its heavily armed neighbor, North Korea. In addition to its arsenal of nuclear weapons, under leader Kim Jong Un, the North has tested ever newer and more sophisticated arms. Last year it put its first reconnaissance satellite into orbit. North Korea in January claimed to have also successfully test-flown a new solid-fuel intermediate-range missile tipped with a hypersonic warhead and tested an underwater drone system capable of carrying a nuclear warhead.
In the face of this threat, South Korea has developed a huge weapons manufacturing infrastructure that is increasingly looking abroad for business opportunities and building a reputation for being able to fill orders quickly at a time of backlogs in other parts of the world.
As the Ukraine war creates a global shortage of artillery shells, South Korean companies have seen orders rise to replace inventories shipped to Kyiv. "South Korean companies have carved out a niche where they're providing materials that are not necessarily at the highest end technologically, but at a more affordable price," Euan Graham, a senior analyst at the Australian Strategic Policy Institute, told Nikkei Asia.
"The country has an industrial infrastructure whereby it can quickly provide arms to countries that need them, and buying from Korea is good policy from a value-for-money perspective," Graham said.
The defense branch of the Hanwha conglomerate produces artillery, armored vehicles, air defense and amphibious systems. In December, Hanwha Aerospace signed a deal worth more than $2.6 billion to supply 152 K9 self-propelled howitzers to Poland by 2027. When announcing that deal, the Polish government said Russia's aggression in Ukraine had inspired it to bolster its military might: "Only the heroism of a soldier equipped with modern, effective weaponry is in a position to halt Russian imperial ambition."
That deal is part of a framework agreement signed in 2022 to supply 672 K9 howitzers and 288 Chunmoo multiple rocket launchers to the European nation. That deal, worth $22 billion, was the biggest ever signed by a South Korean defense company and was touted domestically as a landmark in the country's development as a player in the global arms trade. Hanwha declined Nikkei's request for comment.
Also leading the charge is Korea Aerospace Industries, which recently inked an agreement worth more than $1 billion to supply attack helicopters to the South Korean army. The company is also working to begin production of the KF-21 fighter aircraft this year, as part of a 10-year development project worth around $178 million.
LIG Nex1, another major defense company, will export mid-range surface-to-air missiles (M-SAM II) to Saudi Arabia as part of a deal worth $3.2 billion announced earlier this month. LIG Nex1 recently announced an agreement with Hyundai Rotem, another domestic company, to share data toward the goal of winning more contracts in the Middle East.
Such companies work closely with the government, with the Ministry of National Defense often announcing the details of overseas deals.
The Ukraine effect
South Korea's arms industry has seen its profile rise amid Russia's invasion of Ukraine. Before the war, argues military analyst Kim Dae-young, defense companies were focused on the home market, where demand is waning. "But since the war in Ukraine, the perceptions of domestic defense companies have changed," Kim told Nikkei Asia, "and those companies have been revived."
European allies of Ukraine lacked the stocks and the industrial capacity to quickly replenish shells. This created an opening for South Korea to provide munitions, which ended up in Ukraine via a back-channel agreement with the U.S.
The Ukraine conflict brings up a key complication in South Korea's efforts to become a defense-industry powerhouse: The country's Foreign Trade Act prohibits the export of arms that will be used in war zones. The legislation was passed in 1957, when South Korea was recovering from the 1950-53 Korean War. As a relatively small export-oriented economy, South Korea throughout its history has feared the potential backlash that could come with taking sides in a conflict.
South Korea's careful stance in Ukraine, for example, has avoided provoking Russia. In the first year of the Ukraine war, South Korea provided around $100 million worth of aid to Ukraine, including generators and medical equipment. But Seoul refused to provide military items such as anti-tank and anti-aircraft weapons, despite direct requests by Ukrainian President Volodymyr Zelenskyy during addresses to South Korea's National Assembly.
Early in February, Russian Ambassador to Seoul Georgy Zinoviev said in an interview with local media that South Korea continuing to refrain from providing lethal aid to Ukraine was integral to the bilateral relationship not hitting "rock bottom."
"This stance of South Korea is very important," Zinoviev said, "Because Korea is sticking to this position, we are able to maintain bilateral relations at this level."
Via this approach, "South Korea is not technically arming Ukraine, but by backfilling the U.S. supplies it has allowed Ukraine to remain in the fight," said Graham, the analyst. "South Korea has been very useful in the Ukraine war because it has a significant industrial infrastructure to produce munitions, unlike a lot of NATO countries that have allowed their infrastructures to downgrade," he added.
Seoul's role in the Ukraine war has highlighted its potential as a fast and reliable arms exporter, said Oskar Pietrewicz, a senior analyst in the Asia-Pacific Programme at the Polish Institute of International Affairs. "South Korea stands out from its competitors, especially the German ones, in terms of speed of delivery," he told Nikkei. "For countries such as Poland -- which are on NATO's eastern flank and supporting Ukraine with arms supplies -- speed of delivery is crucial.
"Equally important is the compatibility of South Korean equipment with NATO standards, as South Korea's arms industry has worked closely with the U.S. for years."
To maneuver around the domestic restriction on exports, South Korea has entered into arrangements whereby it shipped large numbers of 155-millimeter shells to the U.S., allowing the U.S. to replenish its own stocks and ship shells to Ukraine for use in battle. Seoul has stuck to its position of providing only non-lethal aid to Ukraine in part out of consideration for its business interests in Russia, where flagship companies such as Samsung, Hyundai Motor and LG Electronics have operations.
Despite South Korea's cautious stance on Ukraine, tensions between Moscow and Seoul have escalated in recent months as Russia and North Korea have increased military cooperation. Russia has used North Korean ballistic missiles on the battlefields of Ukraine on at least two recent occasions. The large military stockpiles that both the South and North have built up in anticipation of a potential conflict between each other are now being utilized to provide arms to opposite sides of the Russia-Ukraine war.
The top diplomats of more than a dozen countries, including the U.S. and South Korea, issued a statement last month condemning "in the strongest possible terms" Russia's procurement of North Korean ballistic missiles and use of those missiles in Ukraine. "The transfer of these weapons increases the suffering of the Ukrainian people, supports Russia's war of aggression, and undermines the global non-proliferation regime," the statement says.
"The U.S. and its allies should also be concerned about North Korea's arms trade," said Leif-Eric Easley, professor of international studies at Ewha Womans University in Seoul. "Pyongyang could be marketing its missiles for export while adjusting its indigenous programs to take advantage of technologies imported from Russia."
Too much, too soon?
Domestic critics also argue that South Korea's history of suffering a brutal civil war in the early 1950s and its ongoing tense standoff with North Korea make it inappropriate for the country to tout itself as a weapons manufacturer.
"South Koreans have been suffering from the effects of war for 70 years now, and we remember how war kills and destroys livelihoods," Kim Han Min-yeong, a researcher at Peacemomo, a civic group, told Nikkei. "We have to remember this history, and it's our responsibility to stop war because we understand how evil it is."
Said Hwang Soo-young, an activist with People's Solidarity for Participatory Democracy: "Our government is promoting this as 'K-defense' while using the slogan 'peace through strength,' but it's not realistic to expect that having countries arm themselves more heavily will somehow lead to peace. Peace is achieved through dialogue and negotiations."
There is, however, little mainstream resistance to the growth of the arms industry. Analysts expect South Korea to continue supplying Ukraine with munitions via fig-leaf arrangements with the U.S. while treading carefully to not openly violate domestic laws or antagonize Russia.
"South Korea is likely to continue its current approach of selling munitions to other states that are supplying military aid directly to Ukraine so that any lethal South Korean assistance remains indirect to the Ukrainian war effort," Terence Roehrig, a professor of national security affairs at U.S. Naval War College, told Nikkei. "These sales will make a contribution to Kyiv's defense efforts, but without large-scale, direct military assistance from the United States and the West, it will not be enough."
In response to a query from Nikkei, South Korea's foreign ministry said, "South Korea has provided humanitarian and financial aid to Ukraine as a member of international society." The official declined to answer questions as to whether Seoul might budge from its position of not providing lethal aid to Ukraine. The war appears set to drag on, with the International Institute for Strategic Studies recently estimating that "Russia will be able to sustain its assault on Ukraine at current attrition rates for another 2-3 years, and maybe even longer."
The next battle for the South Korean defense industry is playing out in the halls of the country's legislature. The $22 billion deal with Poland has run into delays due to gaps in funding from export credit agencies. Deliveries of the weapons have started but the execution of part of the deal is contingent upon a loan to Poland from the Export-Import Bank of Korea. Both countries have said they are committed to working out funding and fulfilling the agreement.
Pietrewicz from the Polish Institute of International Affairs said defense cooperation between Poland and South Korea is still "promising. ... There are no concerns about the cancellation of contracts."
South Korea's two main political parties are currently wrangling over the details of legislation make it easier to lend to purchasers of South Korean weapons and to avoid delays. The proposed bill would raise the size of loans that Export-Import Bank of Korea could extend to a single borrower, which internal bank regulations currently cap at 40% of its equity capital.
The ruling People Power Party is contending that the bill must urgently be passed to protect a key industry, while the main opposition Democratic Party -- which holds a majority in the legislature -- argues that the bill could lead to excessive amounts of state funds being tied up in the arms sector.
South Korea is set to hold key legislative elections in April, meaning the bill could be held up by partisan quarreling for the time being.
The delay also raises concern over whether the South Korean industry can expect a continuation of the boom times that began with the war in Ukraine. "The nature of the arms sector is that, because deals are so big, the industry is very bumpy, meaning you can have really good years followed by quiet years," Erik Mobrand, a professor and expert on South Korean politics at Seoul National University, told Nikkei.
"There are questions about the market itself and how much space there is for South Korean manufacturers long term."