K-defense firms set to hit record Q1 sales, but Europe's wagon-circling risks growth

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K-defense firms set to hit record Q1 sales, but Europe's wagon-circling risks growth

Published: 05 May. 2025, 20:06

Audio report: written by reporters, read by AI

A K9 self-propelled howitzer made by Hanwha Aerospace is seen tearing through a desert in the Middle East on Feb. 2. [HANWHA AEROSPACE]

Driven by a series of successful arms export deals, Korea’s four major defense firms are projected to post record-breaking combined sales exceeding 8 trillion won ($5.7 billion) in the first quarter of this year.

With their combined order backlogs nearing 100 trillion won, analysts say continued growth will depend on diversifying export markets.

Following earnings announcements by Hanwha Aerospace and Korea Aerospace Industries (KAI) in April, expectations for Hyundai Rotem and LIG Nex1 — slated to report this month — remain high, according to market tracker FnGuide on Monday.

The combined first quarter revenue of the four defense firms is projected to reach 8.26 trillion won.

If projections hold, this would mark a new quarterly record, surpassing the 7 trillion won barrier set just one quarter earlier. Their combined operating profit is forecast at 859.7 billion won, more than four times the 197.1 billion won posted in the same period last year.

Weapon exports were the primary growth driver. Hanwha Aerospace, which exports K9 self-propelled howitzers and Chunmoo multiple rocket launchers to Eastern Europe, saw sales surge 279 percent on year to 5.48 trillion won, while operating profit jumped 3,068 percent to 560.8 billion won.

While KAI’s total sales, at 699.3 billion won, and operating profit, at 46.8 billion won, declined 5.5 percent and 2.5 percent, respectively, due to sluggish domestic demand, export sales of FA-50 fighter jets to Poland and Malaysia rose 88.9 percent to 171.1 billion won.

Korea Aerospace Industries (KAI) CEO Kang Goo-young, fourth from left, speaks to visitors at the KAI booth during the 10th International Exhibition of Technology for Defense and Prevention of Disasters in Lima, Peru, on April 25. [KOREA AEROSPACE INDUSTRIES]

Expectations are also high for Hyundai Rotem and LIG Nex1, which will release their first quarter earnings this month. Hyundai Rotem is expected to post sales of 1.28 trillion won and operating profit of 187.3 billion won, representing on-year increases of 70.7 percent and 319.2 percent, respectively, according to FnGuide. The company signed a deal in 2022 to export 180 K2 tanks to Poland and is scheduled to complete all deliveries this year.

LIG Nex1’s sales are expected to grow 5.3 percent to 804.2 billion won, while operating profit may dip 3.3 percent to 64.8 billion won. The company’s exports of the Cheongung-II missile defense system to the United Arab Emirates (UAE) and Saudi Arabia through deals reached between 2022 and 2024 are now beginning to be reflected in the firm's revenue reading.

The growth trend in Korea’s defense sector is expected to continue. Recent disclosures from the four major defense firms show a combined backlog of 94.9 trillion won — enough to keep production lines running for the next three to five years.

These firms are also actively pursuing new markets in Canada, Latin America and Southeast Asia. HD Hyundai Heavy Industries and Hanwha Ocean have formed a “One Team Korea” partnership to bid on a Canadian submarine project, potentially worth up to 60 trillion won.

Canadian broadcaster CBC highlighted Korea’s defense capabilities on Sunday, with Dave Perry, president of the Canadian Global Affairs Institute, telling the outlet that “[Korea has] got a track record already at being able to provide huge amounts of equipment in very short order,” making particular note of the K9 self-propelled howitzer.

Participants receive education sessions on the K9 self-propelled howitzers during a program hosted by the Korean military at a base in Daejeon on Nov. 22, 2024. [NEWS1]

Hyundai Rotem is pushing to export K2 tanks to Peru, and KAI is reportedly in discussions with Saudi Arabia, the UAE and the Philippines for the first exports of its domestically developed KF-21 supersonic fighter jet.

As Korean defense firms expand overseas, competition with established defense giants in Europe becomes inevitable. Europe is home to major defense contractors such as Germany’s Rheinmetall, the maker of Leopard tanks, France’s Dassault, the maker of Rafale fighter jets, as well as Britain's BAE Systems and Italy’s Leonardo.

In March, the European Commission unveiled an 800 billion euro ($906 million) rearmament plan for Europe, allocating 150 billion euros specifically for the purchase of European-made weapons.

European Commission President Ursula von der Leyen, right, speaks during a press conference in Belgium on March 9. [YONHAP]

At the time, Commission President Ursula von der Leyen said, “If 80 percent of military funding flows abroad, it is not good for Europe,” calling for greater intra-European defense cooperation.

Experts emphasize the need for tailored export strategies by region.

“Since Korea’s entry into the Polish market, European defense firms have intensified efforts to check Korea’s expansion,” said Jang Won-joon, a defense industry professor at Jeonbuk National University. “In Europe, Korea should leverage its strength in fast delivery; in Africa and Latin America, it should offer local infrastructure investments to diversify export markets.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY OH SAM-GWON [[email protected]]