South Korea, better known for making tiny electronic devices than lethal weapons, has set its sights on taking fourth spot in the global defense market. That target is within reach, but it would need to lean even more heavily on its tech prowess.
When Ukraine’s stock of munitions started to fall low last year as Russia’s invasion ground on, it turned to allies for more. That meant Western partners including the US. Yet not even the world’s largest military power has an infinite supply. Enter South Korea, which started shipping thousands of artillery shells to replenish US stockpiles — rather than directly to Ukraine — to avoid the appearance of taking sides.
Decades of facing down North Korea, which is close to becoming a nuclear power, has forced Seoul to slowly build its own capabilities instead of relying heavily on the US. From self-sufficiency and stockpiling, South Korea has morphed into a global exporter.
The war in Eastern Europe helped Seoul more than double weapons sales last year, not only to the US and Ukraine, but to neighboring countries that increasingly fear Russia’s aggression. Last year, Hyundai Rotem Co and Hanwha Defense Systems Corp sealed deals with Poland totaling US$5.8 billion to sell tanks and howitzers.
The key to breaking into the top ranks would be to focus on the skill sets that make South Korea unique among rivals. It is home to global leaders in memory and storage chips, displays and smartphones. These do not seem like weapons-related businesses, but the changing face of military conflict and the increasing importance of technology in everything from handguns to drones and missiles make them a good foundation for growth.
Among the items being rushed from the US to Israel at the outbreak of conflict with Hamas were smart bombs. What makes these munitions different are the circuits inside, and South Korea has been at the forefront of developing and manufacturing these miniature systems. Most of the sensors and chips needed in advanced weapons can be found in the devices and components made by the likes of Samsung Electronics Co, SK Hynix Corp and LG Electronics Inc.
South Korea ranked ninth in major global arms exports from 2018 to last year, the Stockholm International Peace Research Institute (SIPRI) said.
Its 74 percent growth from the prior five-year period was among the fastest in the world. Those Polish deals add to recent sales of howitzer artillery to Egypt, Estonia, Finland and Norway, as well as ships to Peru, making South Korea a truly global weapons supplier.
Yet it must leapfrog the UK, Italy, Germany and China if it is to reach South Korean President Yoon Suk-yeol’s goal of hitting fourth spot.
To date, its largest market is in its own backyard. Overall, Asia and Oceania accounted for 63 percent of the nation’s exports in the five-year period from 2018 to last year, SIPRI said.
The Philippines, India, Thailand and Indonesia are its key customers.
“A growing perception of China as a threat is the main driver of arms imports” in the region, leading to the highest level of procurement in 30 years, an amount likely to remain high for at least the next five years, SIPRI wrote.
Artillery has been the mainstay of Seoul’s arms exports for the past two decades. New challenges from Pyongyang should be the impetus for further combining weapons and technology, and carving out a bigger niche for itself. In December last year, five drones from North Korea crossed into South Korea’s airspace, where they hung around for hours while Seoul unsuccessfully scrambled to intercept them. Among the responses to this, and other threats, was a pledge in April to boost military research and development spending to 10 percent of the national defense budget within five years, from 8 percent in 2021.
It is now building a South Korean version of Israel’s Iron Dome for defense against North Korean rockets, while local companies have developed radar, laser-guidance and infrared tracking systems for use in air, land and sea deployments.
Korea Aerospace Industries in February won a deal to sell 18 of its FA-50 light combat jets to Malaysia for US$920 million, a contract that could expand to 36 jets.
The Philippines has chosen HD Hyundai Heavy Industries to supply frigates and patrol ships for a total cost of more than US$900 million, and Thailand has turned to South Korea for frigates and training aircraft, the International Institute for Strategic Studies (IISS) said last month.
All told, South Korean companies have signed more than US$8 billion in deals to supply complex defense systems, including submarines and fighter jets, to customers in Southeast Asia, the IISS said.
More needs to be done. The sector still leans heavily on foreign know-how, including imported technology used in missile and guidance systems. Engines for its indigenous fighter jet come from the US.
This struggle is not insurmountable. As recently as 20 years ago, South Korea was neck-and-neck with the US, Japan and Taiwan in semiconductors and electronics — now it has caught up and surpassed most of them. Its next step would be to take that technological momentum and apply it to the global arms industry, one where there will always be demand.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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