LIG Nex1 and Samsung Thales Credit Rating Upgraded

The launch ceremony of a KDX-2 destroyer. KDX-2's have been equipped with LIG Nex1's license-manufactured sensors and Samsung Thales' combat management system. Six KDX-2's are currently in service in the Republic of Korea Navy (ROKN).

Two major Korean defense contractors, LIG Nex1 and Samsung Thales, recently had their credit ratings elevated to AA-. As the two companies stand as two of several defense majors in Korea, who usually enter bids as primary contractors, the contributing factors were known to have been partially associated with the country's projected defense budget increase, based upon the high likelihood of continued military modernization programs over the long term for Korea's navy, army and air force. Historically, Korea has seen consistent increases in defense spending. Since the end of the Korean War, the country's defense budget has never decreased with the exception of 1999.


The revenues of both LIG Nex1 and Samsung Thales are known to rely predominantly on domestic contracts, whereas exports constitute a rather small proportion. In turn, the two companies' growth has its foundation in domestic defense procurement. According to a local media report, Korea's 10 major defense companies, usually an affiliate of a conglomerate ('jaebol'), will have received by year's end approximately 80% of the Defense Ministry's approximately USD 9 billion (KRW 9.1 trillion) procurement budget for 2010.


However, over the next decade, the two companies' export initiative potential should grow, potentially adding another significant revenue stream. Over the next 10 years, the two companies are expected to launch a range of sophisticated and exportable defense products, consisting of indigenous combat management and communications systems, as well as missiles and sensors manufactured with far greater proportion of domestic parts. The international defense export market, particularly for naval systems, are expected to grow over the next several decades, as both developed and developing countries look to acquire new platforms and weapons systems, particularly in Asia.