DEFENSE INDUSTRY MONITOR KOREA

Photos of XK2

2010-03-06T07:44:00.000-08:00

Photos of Korea's XK2 tank, courtesy of the Defense Acquisition Program Administration (DAPA). For more, click here.

Doosan DST Pursuing Export Traction

2010-03-05T10:21:00.000-08:00

Doosan DST's K-21 Next Infantry Fighting Vehicle (NIFV).

Doosan DST, a spin-off from Doosan Infracore, may achieve greater export traction with its ground vehicle products. According to a local media report, Doosan DST has submitted bids to export armored vehicles to Colombia and Malaysia. Primary contractor selection for the two procurement programs are expected during the 1st half of 2010 and by end of March 2010, respectively. Doosan DST may also enter into talks with the United Arab Emirates (UAE) over the K-21 Next Infantry Fighting Vehicle (NIFV) and with Libya over the K-200A1 fighting vehicle.

In 2009, Doosan DST signed export agreements with Indonesia and Iraq to supply armored vehicles.

LIG Nex1 and Samsung Thales Credit Rating Upgraded

2010-03-05T09:42:00.000-08:00

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.

LIG Nex1 Donates to Haiti Cause

2010-03-05T08:20:00.000-08:00

LIG Nex1, a major manufacturer of missiles and sensor systems, donated approximately USD 48,000 to UNICEF in order to assist in the Haiti relief effort.

Defense Export Milestone Set Despite Economic Downturn

2010-02-06T08:53:00.000-08:00

The PKX fast attack craft may be the most likely

major Korean defense export item for 2010.

The state-run Defense Acquisition Program Administration (DAPA) announced earlier this year that Korean defense exports in 2009 reached an all-time high of USD 1.17 billion, following several years of unprecedented growth. While modest relative to major defense exporting nations, the Korean defense industry achieved such a milestone during the height of the global economic crisis.

While Korea began exporting defense products in 1975, export figures only began soaring in 2006. Increasing from USD 253 million in 2006 to USD 845 million in 2007, the export figure broke the elusive USD 1 billion barrier in 2008 for the first time in history.

The increasing export figures may be attributed to the increasing number of foreign customers and growing array of internationally attractive defense products. Having exported to 46 countries in 2007, the figure grew to 59 in 2008, and 74 in 2009.

In 2009, the United States (US) was the single largest export destination with USD 390 million worth of exported products which included, among others, ammunitions, parts for aircraft engines and communications equipment, as well as wings for the A-10 Thunderbolt II.

The highest grossing export products for 2009 were USD 224 million worth of ammunitions to 18 countries, followed by USD 85 million worth of communications equipment to Iraq, USD 75 million submarine overhaul contract with Indonesia, and approximately USD 65 million submarine combat management system to Germany.

A discouraging indication may be evident in that ammunitions, a less sophisticated product type, continue to constitute a rather large proportion of exported defense products. Korea may expand and eventually solidify its footing in the international defense export market should its defense contractors exhibit greater ambition in exporting more sophisticated platforms and weapons systems.

Providing potential to break this trend, or what has become more of a tradition, are the Korea Aerospace Industries (KAI) T-50 5th generation trainer jet, the Samsung Techwin K-9 self-propelled artillery, and various naval ship export opportunities. And, the Korean defense industry may see export success in all three product areas in 2010. In turn, DAPA's 2010 export projection was raised to USD 1.5 billion, a 28% increase from 2009.

The T-50 and the K-9 have been reported as candidates for sale in 2010 to Singapore and Australia, respectively. However, the most likely deal to be signed in 2010 may be the export of a single unit Patrol Killer eXperimental (PKX) guided missile fast attack craft. Known in the Republic of Korea Navy (ROKN) as the Yun Yeong-Ha class, Korean media reports indicate that export of the 450-ton ship to Kazakhstan may be imminent. A media report also indicated potential export to Azerbaijan.