South Korea has emerged as one of the world’s fastest-growing arms producers and, more recently, arms exporters. Four South Korean companies appear in the SIPRI Top 100 list of arms producers with the biggest arms sales revenues in 2024: the Hanwha Group, LIG Nex1, Hyundai Rotem and Korea Aerospace Industries (KAI), whose combined arms revenues increased by 30 per cent in 2023–24.
South Korean producers like these have become familiar names in European and global arms procurement discussions. According to SIPRI’s arms transfers data, South Korean arms export volumes more than doubled between 2010–14 and 2020–24.
The marked growth of the South Korean arms industry (known locally as K-Bangsan) owes much to successive national governments embracing an interventionist arms industrial policy, along with the success of South Korean producers in leveraging opportunities in overseas markets, particularly since 2022. However, the high degree of state involvement—and investment—in South Korea’s arms industry is not without risks.
This backgrounder explores the combination of domestic drivers and international circumstances that have enabled the South Korean arms industry’s rapid growth, and the challenges that lie ahead.
A state-led development model
While a 1953 armistice halted combat between the two Koreas, they have remained technically in a state of war ever since. This unresolved security situation, defined by a persistent threat from North Korea, became the fundamental driver of South Korea’s post-war arms industrial policy.
For the first two decades after the armistice, South Korea was fully dependent on military support from the United States to meet its defence needs. The risks of this dependence were exposed when the USA reduced its troop presence on the Korean Peninsula in the early 1970s under the Nixon Doctrine. In response to this apparent sign that the USA was becoming a less reliable security guarantor, President Park Chung-hee initiated a campaign to achieve self-reliant national defence (jaju gukbang) which was linked to a rapid industrialization policy, the Heavy and Chemical Industry drive.
This drive included the first steps towards military import substitution, focused on licensed production and simple assembly of items such as ammunition and basic infantry weapons. While the USA increased military assistance to South Korea to compensate for the troop reductions, successive South Korean administrations have continued to invest heavily in building up the indigenous arms industrial base.
The evolution of South Korea's arms industry was typical of the ‘developmental state’ industrialization model, characterized by heavily state-led planning and intervention, which was also adopted by several other East Asian countries in the wake of World War II. At first, South Korean arms producers focused on manufacturing US-designed weapons under licence, including small arms, anti-tank rockets and artillery. Licensed production of US-designed weapons facilitated technology transfer and helped the arms industry develop. By leveraging the growing civilian industrial base in South Korea, the government and companies were able to absorb manufacturing processes, upgrade knowledge and facilities, and thus gradually build up the South Korean arms industry.
A clear division of roles emerged. The government was not only the main customer but also took the lead in research, development and testing. Arms companies—chiefly large, family-run conglomerates (known as chaebols) producing both civilian and military goods—manufactured designs provided mostly by the Agency for Defense Development (ADD), as well as carrying out maintenance, repair and overhaul. The ADD falls under the Defense Acquisition Program Administration (DAPA), which oversees and coordinates the entire arms procurement and acquisition process, including the activities of private manufacturers.
This arrangement created a tightly integrated, state-centred development model in which government-affiliated agencies became responsible for the riskiest and most capital-intensive stages of arms development and production, allowing private companies to focus on prototype development and mass production capacity. Although South Korean firms have begun expanding their own R&D efforts in recent years, the legacy of this model is still large.
South Korea’s arms procurement spending and arms industry revenues have both grown substantially over the past decade, although their trajectories have not always moved in parallel. For example, procurement spending rose steadily between 2015 and 2021, while the arms revenues of the five biggest South Korean arms producers fluctuated, before rising sharply from 2022 while procurement spending remained level (see figure 1). In 2024 South Korea’s military spending was US$47.6 billion, 30 per cent more than in 2015. Its military procurement spending increased by 33 per cent in the same period to reach $13.2 billion, under a large-scale programme aimed at enhancing air defence and pre-emptive strike capacities against North Korean ballistic and nuclear missiles. In the same period, the arms revenues of the five biggest arms producers grew by more than 92 per cent, reaching $15.2 billion, due to sustained domestic demand and a surge in export deals, as well as various mergers and acquisitions.
K-Bangsan’s growing exports
While domestic procurement still accounts for most of the arms revenues of South Korean producers, revenue growth since 2022 has principally been driven by arms exports. The surge in exports has been fuelled by several European states seeking to replace materiel sent to Ukraine as military aid and to modernize their arsenals in response to the growing perceived threat from Russia. With European arms producers struggling to expand output quickly, South Korean suppliers benefited from the urgent new demand by offering short turnaround times, competitive pricing and generous technology transfer terms that traditional suppliers in the region were unable to match in the short term. As a result, for the first time, Hanwha Group—South Korea’s largest arms producer—earned more from exports than from domestic sales in 2024.
In 2020–24 South Korea ranked as the world’s 10th largest exporter of major arms, accounting for a 2.2 per cent share of global exports, up from 0.9 per cent a decade earlier. The intervening period saw significant changes in both the range of systems exported (figure 2) and the number of recipient states. Until 2015–19 South Korea exported mainly artillery systems, ships and aircraft. In 2020–24 the mix of exports expanded to include armoured vehicles, missiles and air defence systems. Exports of armoured vehicles, artillery systems and missiles in 2020–24 aligned with European procurement needs following Russia’s full-scale invasion of Ukraine, while the air defence systems were part of a large order by the United Arab Emirates.
In 2010–14 more than 90 per cent of South Korea’s major arms exports went to either Türkiye or Indonesia, while in 2020–24 the list of recipients included 23 states including several in Europe, Africa and Latin America (figure 3). More than half of South Korea’s major arms exports in 2020–24 went to Europe, with Poland alone accounting for 46 per cent.
The South Korean arms industry has now become an important component of national economic and foreign policy. The government promotes arms exports as both an industrial priority to reduce the unit costs through economies of scale in domestic production, and a foreign policy strategy to deepen ties with partners in Europe, South East Asia and the Middle East. Recent agreements include a defence cooperation memorandum of understanding (MOU) with Saudi Arabia and a Security and Defence Partnership with the European Union (EU) in 2024; an MOU on defence with Türkiye signed last month; and earlier cooperative frameworks with India and Indonesia. These reflect South Korea’s broader effort to diversify its defence partnerships.
A range of factors lie behind South Korean producers’ competitiveness in the global arms market. Two of these can be linked directly to the long-standing arms industrial model: short turnaround times and flexibility.
A combination of the long-standing division of labour in the South Korean arms industry and reliable demand from the national military have enabled producers to develop mass production capacity and localized supply chains. Production lines are streamlined and cost-efficient, often highly automated and modular. For example, at Hanwha Aerospace’s new ‘smart factory’ in Changwon, South Korea, around 70–80 per cent of welding work on the ground weapon systems built there is reportedly done by automated systems.
Production lines can also be quickly adapted to produce new designs to meet a customer’s needs and then manufacture at scale. As an illustration, an initial batch of 10 K2 main battle tanks and 24 K9 self-propelled howitzers was delivered to Poland just three months after the contract was signed, and bulk deliveries numbering in the hundreds are planned. This contrasts with industries in many other countries that needed time to ramp up production after 2022, experiencing supply chain disruptions and restarting or expanding production lines only after new contracts were signed.
Furthermore, South Korean arms firms have utilized established mechanisms such as localized production, joint ventures and offsets to build enduring strategic partnerships with foreign firms and customers. This approach has been effective in Poland, where South Korean producers have been well positioned to operate within the ‘Polonization’ policy aimed at modernizing Poland’s arms forces and strengthening the domestic arms industrial base by involving local firms in the manufacture and delivery of imported weapon systems. For example, in 2023 Hyundai Rotem formed a consortium with Polska Grupa Zbrojeniowa (PGZ) for production of a Polonized version of the K2. Similarly, in September this year, Hanwha Aerospace and Poland’s WB Group established a joint venture for localized production of CGR-080 guided missiles. This active, localization-oriented strategy helps to meet local industrial participation requirements and aligns with Europe’s broader protectionist industrial policies.
South Korean firms have pursued similar approaches outside Europe. In Peru, Hyundai Rotem has constructed a $270 million assembly plant for K2 tanks and K808 armoured vehicles and secured exclusive rights to supply imported land systems to the country. Taken together, these initiatives reflect South Korea’s strategy of coupling arms exports with industrial and technological cooperation, which has contributed to its growing role as a supplier in the global arms market.
Challenges and risks on the horizon
South Korea’s arms industrial policy has long had its critics. Despite the remarkable growth that the South Korean arms industry has achieved in recent years, its long-term sustainability remains uncertain.
The South Korean case highlights the advantages and limitations of a strong state-directed model of rapid arms industrial development under conditions of insecurity. As states in Europe and elsewhere move to expand their own arms industrial bases, it is worth considering the structural, strategic and normative risks embedded in the South Korean approach.
Like the developmental state model more broadly, South Korea’s approach to arms industry development has several structural vulnerabilities. One persistent issue is the high degree of dependence on the domestic market and state-led R&D. Although recent reforms have sought to shift away from this state-centred model, its legacy persists. The state’s prominent role in R&D for military procurement weakens the incentive for private producers to build their own R&D capacity, except when related to production methods. This is a particular problem when it comes to developing next-generation, cutting-edge military technologies whose adoption by the Republic of Korea Armed Forces is uncertain. As global demand and technology priorities extend beyond immediate geopolitical concerns, this could leave South Korean producers at a disadvantage if they fail to build innovation capabilities. Similar challenges are likely to confront European efforts to rebuild arms production through EU- or state-backed initiatives, which risk reproducing the same tensions between short-term output goals and longer-term innovation capacity.
Another looming challenge is that South Korea may find it increasingly difficult to sell into international markets. South Korean producers face new regulatory and market challenges in Europe as the EU seeks to strengthen supply chains within the region. For example, the Security Action for Europe (SAFE) regulation adopted in May and the provisional agreement on the European Defence Industry Programme (EDIP) from November both restrict financial assistance for arms procurement where non-EU components account for over 35 per cent of the estimated value of the end product. Once European production capacity ramps up, South Korean firms may face additional barriers. Similar protectionist tendencies exist in the United States, such as technologies requiring US International Traffic in Arms Regulations (ITAR) clearance, as well as in India and Türkiye, which could limit potential export growth in those key markets.
Finally, while technology transfer and localized production arrangements can help secure export contracts, they also come with strategic risks. When the partner state has an advanced industrial base, technology transfer and localized production arrangements can accelerate the development of indigenous weapon designs and production capacity, potentially making it a competitor in global markets. This dynamic is evident in the case of Türkiye, which is now looking to secure a larger share of arms exports, and Türkiye’s Altay main battle tank, developed with technology transferred from South Korea’s K2 platform, could become a competitor to the K2.
Balancing the short-term gains from securing contracts through generous industrial cooperation against the long-term risks of creating new competitors will remain a key challenge for the South Korean arms industry and raises broader questions about the sustainability of its current export strategy.
ABOUT THE AUTHOR(S)
Minkyeong Kim was a SIPRI-Korea Foundation intern in the China and Asia Security Programme
Xiao Liang is a Researcher in the SIPRI Military Expenditure and Arms Production Programme.
South Korea has emerged as one of the world’s fastest-growing arms producers and, more recently, arms exporters. Four South Korean companies appear in the SIPRI Top 100 list of arms producers with the biggest arms sales revenues in 2024: the Hanwha Group, LIG Nex1, Hyundai Rotem and Korea Aerospace Industries (KAI), whose combined arms revenues increased by 30 per cent in 2023–24.
South Korean producers like these have become familiar names in European and global arms procurement discussions. According to SIPRI’s arms transfers data, South Korean arms export volumes more than doubled between 2010–14 and 2020–24.
The marked growth of the South Korean arms industry (known locally as K-Bangsan) owes much to successive national governments embracing an interventionist arms industrial policy, along with the success of South Korean producers in leveraging opportunities in overseas markets, particularly since 2022. However, the high degree of state involvement—and investment—in South Korea’s arms industry is not without risks.
This backgrounder explores the combination of domestic drivers and international circumstances that have enabled the South Korean arms industry’s rapid growth, and the challenges that lie ahead.
A state-led development model
While a 1953 armistice halted combat between the two Koreas, they have remained technically in a state of war ever since. This unresolved security situation, defined by a persistent threat from North Korea, became the fundamental driver of South Korea’s post-war arms industrial policy.
For the first two decades after the armistice, South Korea was fully dependent on military support from the United States to meet its defence needs. The risks of this dependence were exposed when the USA reduced its troop presence on the Korean Peninsula in the early 1970s under the Nixon Doctrine. In response to this apparent sign that the USA was becoming a less reliable security guarantor, President Park Chung-hee initiated a campaign to achieve self-reliant national defence (jaju gukbang) which was linked to a rapid industrialization policy, the Heavy and Chemical Industry drive.
This drive included the first steps towards military import substitution, focused on licensed production and simple assembly of items such as ammunition and basic infantry weapons. While the USA increased military assistance to South Korea to compensate for the troop reductions, successive South Korean administrations have continued to invest heavily in building up the indigenous arms industrial base.
The evolution of South Korea's arms industry was typical of the ‘developmental state’ industrialization model, characterized by heavily state-led planning and intervention, which was also adopted by several other East Asian countries in the wake of World War II. At first, South Korean arms producers focused on manufacturing US-designed weapons under licence, including small arms, anti-tank rockets and artillery. Licensed production of US-designed weapons facilitated technology transfer and helped the arms industry develop. By leveraging the growing civilian industrial base in South Korea, the government and companies were able to absorb manufacturing processes, upgrade knowledge and facilities, and thus gradually build up the South Korean arms industry.
A clear division of roles emerged. The government was not only the main customer but also took the lead in research, development and testing. Arms companies—chiefly large, family-run conglomerates (known as chaebols) producing both civilian and military goods—manufactured designs provided mostly by the Agency for Defense Development (ADD), as well as carrying out maintenance, repair and overhaul. The ADD falls under the Defense Acquisition Program Administration (DAPA), which oversees and coordinates the entire arms procurement and acquisition process, including the activities of private manufacturers.
This arrangement created a tightly integrated, state-centred development model in which government-affiliated agencies became responsible for the riskiest and most capital-intensive stages of arms development and production, allowing private companies to focus on prototype development and mass production capacity. Although South Korean firms have begun expanding their own R&D efforts in recent years, the legacy of this model is still large.
South Korea’s arms procurement spending and arms industry revenues have both grown substantially over the past decade, although their trajectories have not always moved in parallel. For example, procurement spending rose steadily between 2015 and 2021, while the arms revenues of the five biggest South Korean arms producers fluctuated, before rising sharply from 2022 while procurement spending remained level (see figure 1). In 2024 South Korea’s military spending was US$47.6 billion, 30 per cent more than in 2015. Its military procurement spending increased by 33 per cent in the same period to reach $13.2 billion, under a large-scale programme aimed at enhancing air defence and pre-emptive strike capacities against North Korean ballistic and nuclear missiles. In the same period, the arms revenues of the five biggest arms producers grew by more than 92 per cent, reaching $15.2 billion, due to sustained domestic demand and a surge in export deals, as well as various mergers and acquisitions.
K-Bangsan’s growing exports
While domestic procurement still accounts for most of the arms revenues of South Korean producers, revenue growth since 2022 has principally been driven by arms exports. The surge in exports has been fuelled by several European states seeking to replace materiel sent to Ukraine as military aid and to modernize their arsenals in response to the growing perceived threat from Russia. With European arms producers struggling to expand output quickly, South Korean suppliers benefited from the urgent new demand by offering short turnaround times, competitive pricing and generous technology transfer terms that traditional suppliers in the region were unable to match in the short term. As a result, for the first time, Hanwha Group—South Korea’s largest arms producer—earned more from exports than from domestic sales in 2024.
In 2020–24 South Korea ranked as the world’s 10th largest exporter of major arms, accounting for a 2.2 per cent share of global exports, up from 0.9 per cent a decade earlier. The intervening period saw significant changes in both the range of systems exported (figure 2) and the number of recipient states. Until 2015–19 South Korea exported mainly artillery systems, ships and aircraft. In 2020–24 the mix of exports expanded to include armoured vehicles, missiles and air defence systems. Exports of armoured vehicles, artillery systems and missiles in 2020–24 aligned with European procurement needs following Russia’s full-scale invasion of Ukraine, while the air defence systems were part of a large order by the United Arab Emirates.
In 2010–14 more than 90 per cent of South Korea’s major arms exports went to either Türkiye or Indonesia, while in 2020–24 the list of recipients included 23 states including several in Europe, Africa and Latin America (figure 3). More than half of South Korea’s major arms exports in 2020–24 went to Europe, with Poland alone accounting for 46 per cent.
The South Korean arms industry has now become an important component of national economic and foreign policy. The government promotes arms exports as both an industrial priority to reduce the unit costs through economies of scale in domestic production, and a foreign policy strategy to deepen ties with partners in Europe, South East Asia and the Middle East. Recent agreements include a defence cooperation memorandum of understanding (MOU) with Saudi Arabia and a Security and Defence Partnership with the European Union (EU) in 2024; an MOU on defence with Türkiye signed last month; and earlier cooperative frameworks with India and Indonesia. These reflect South Korea’s broader effort to diversify its defence partnerships.
A range of factors lie behind South Korean producers’ competitiveness in the global arms market. Two of these can be linked directly to the long-standing arms industrial model: short turnaround times and flexibility.
A combination of the long-standing division of labour in the South Korean arms industry and reliable demand from the national military have enabled producers to develop mass production capacity and localized supply chains. Production lines are streamlined and cost-efficient, often highly automated and modular. For example, at Hanwha Aerospace’s new ‘smart factory’ in Changwon, South Korea, around 70–80 per cent of welding work on the ground weapon systems built there is reportedly done by automated systems.
Production lines can also be quickly adapted to produce new designs to meet a customer’s needs and then manufacture at scale. As an illustration, an initial batch of 10 K2 main battle tanks and 24 K9 self-propelled howitzers was delivered to Poland just three months after the contract was signed, and bulk deliveries numbering in the hundreds are planned. This contrasts with industries in many other countries that needed time to ramp up production after 2022, experiencing supply chain disruptions and restarting or expanding production lines only after new contracts were signed.
Furthermore, South Korean arms firms have utilized established mechanisms such as localized production, joint ventures and offsets to build enduring strategic partnerships with foreign firms and customers. This approach has been effective in Poland, where South Korean producers have been well positioned to operate within the ‘Polonization’ policy aimed at modernizing Poland’s arms forces and strengthening the domestic arms industrial base by involving local firms in the manufacture and delivery of imported weapon systems. For example, in 2023 Hyundai Rotem formed a consortium with Polska Grupa Zbrojeniowa (PGZ) for production of a Polonized version of the K2. Similarly, in September this year, Hanwha Aerospace and Poland’s WB Group established a joint venture for localized production of CGR-080 guided missiles. This active, localization-oriented strategy helps to meet local industrial participation requirements and aligns with Europe’s broader protectionist industrial policies.
South Korean firms have pursued similar approaches outside Europe. In Peru, Hyundai Rotem has constructed a $270 million assembly plant for K2 tanks and K808 armoured vehicles and secured exclusive rights to supply imported land systems to the country. Taken together, these initiatives reflect South Korea’s strategy of coupling arms exports with industrial and technological cooperation, which has contributed to its growing role as a supplier in the global arms market.
Challenges and risks on the horizon
South Korea’s arms industrial policy has long had its critics. Despite the remarkable growth that the South Korean arms industry has achieved in recent years, its long-term sustainability remains uncertain.
The South Korean case highlights the advantages and limitations of a strong state-directed model of rapid arms industrial development under conditions of insecurity. As states in Europe and elsewhere move to expand their own arms industrial bases, it is worth considering the structural, strategic and normative risks embedded in the South Korean approach.
Like the developmental state model more broadly, South Korea’s approach to arms industry development has several structural vulnerabilities. One persistent issue is the high degree of dependence on the domestic market and state-led R&D. Although recent reforms have sought to shift away from this state-centred model, its legacy persists. The state’s prominent role in R&D for military procurement weakens the incentive for private producers to build their own R&D capacity, except when related to production methods. This is a particular problem when it comes to developing next-generation, cutting-edge military technologies whose adoption by the Republic of Korea Armed Forces is uncertain. As global demand and technology priorities extend beyond immediate geopolitical concerns, this could leave South Korean producers at a disadvantage if they fail to build innovation capabilities. Similar challenges are likely to confront European efforts to rebuild arms production through EU- or state-backed initiatives, which risk reproducing the same tensions between short-term output goals and longer-term innovation capacity.
Another looming challenge is that South Korea may find it increasingly difficult to sell into international markets. South Korean producers face new regulatory and market challenges in Europe as the EU seeks to strengthen supply chains within the region. For example, the Security Action for Europe (SAFE) regulation adopted in May and the provisional agreement on the European Defence Industry Programme (EDIP) from November both restrict financial assistance for arms procurement where non-EU components account for over 35 per cent of the estimated value of the end product. Once European production capacity ramps up, South Korean firms may face additional barriers. Similar protectionist tendencies exist in the United States, such as technologies requiring US International Traffic in Arms Regulations (ITAR) clearance, as well as in India and Türkiye, which could limit potential export growth in those key markets.
Finally, while technology transfer and localized production arrangements can help secure export contracts, they also come with strategic risks. When the partner state has an advanced industrial base, technology transfer and localized production arrangements can accelerate the development of indigenous weapon designs and production capacity, potentially making it a competitor in global markets. This dynamic is evident in the case of Türkiye, which is now looking to secure a larger share of arms exports, and Türkiye’s Altay main battle tank, developed with technology transferred from South Korea’s K2 platform, could become a competitor to the K2.
Balancing the short-term gains from securing contracts through generous industrial cooperation against the long-term risks of creating new competitors will remain a key challenge for the South Korean arms industry and raises broader questions about the sustainability of its current export strategy.
ABOUT THE AUTHOR(S)