Defense Industry

The defense industry is an industry responsible for the research, development, production, and export of weapons and military equipment, and it has a significant impact on national security and the ec

Defense Industry

Overview

The defense industry (軍需産業) refers to the industry that researches, develops, produces, and sells weapon systems, ammunition, and military equipment necessary for national security. It is also called the defense industry (防衛産業) and serves as a core foundation of national security as well as a high-tech, knowledge-intensive industry with substantial economic ripple effects. Major countries foster their defense industries and actively support exports, considering their strategic value.

Main Content

Concept and Scope

In a narrow sense, the defense industry refers to industries that directly produce combat weapon systems (land, naval, aviation, and space). In a broad sense, it includes industries that provide all goods and services required by the military, such as maintenance, logistics, information and communications, and facilities. Major fields range from the K2 tank, K9 self-propelled howitzer, Aegis destroyers, submarines, fighter jets (KF-21), missiles, C4ISR (command, control, communications, computers, intelligence, surveillance, and reconnaissance) systems, to clothing such as combat uniforms and bulletproof vests.

Characteristics

The defense industry has several unique characteristics. First, demand is mostly monopolistic procurement by the government (Ministry of National Defense), which can lead to market failure. Second, it requires enormous research and development (R&D) investment and is a concentration of cutting-edge technology. Third, it involves military secrets, making external security critical, and it is affected by international defense trade regulations and agreements. Fourth, through the transfer of technology to civilian use, it provides significant spillover effects to related industries such as aerospace, automobiles, electronics, and information and communications.

Global Defense Industry Status

As of 2024, according to the Stockholm International Peace Research Institute (SIPRI), global military expenditure was estimated at approximately 2.4 trillion US dollars, with the United States being the largest spender on defense. U.S. companies such as Lockheed Martin, RTX (Raytheon), Northrop Grumman, and Boeing hold the top positions in the global defense industry, while in Europe, BAE Systems and Airbus stand out. In Asia, China (such as AVIC), India, and Israel (IAI) are prominent, and South Korea (Hanwha Aerospace, KAI, LIG Nex1, HD Hyundai Heavy Industries, etc.) is rapidly emerging.

Development of the South Korean Defense Industry

South Korea's defense industry began in earnest with the Yulgok Project in the 1970s and has grown under the name K-Defense. Supported by the establishment of a defense industrial base in the 1980s and 1990s, South Korea developed and mass-produced land weapons such as the K9 self-propelled howitzer, K2 tank, and 155mm towed howitzer; naval systems such as Chungmugong Yi Sun-sin-class destroyers and Jang Bogo-class submarines; and aviation weapon systems such as the KT-1, FA-50, and KF-21 fighter jet. In particular, in 2022, South Korea signed its largest-ever defense export contract with Poland (K2, K9, FA-50, etc.), taking a leap forward as an export industry. Because the domestic defense market is limited in scale, the government provides policy support to revitalize exports.

Recent Trends

The major trends for 2024–2025 are as follows. First, due to the Russia-Ukraine war and instability in the Middle East, defense spending is increasing worldwide, expanding defense export opportunities, especially in Europe and the Middle East. Second, advanced technologies such as artificial intelligence (AI), drones and manned-unmanned teaming systems, cyber warfare, and space weapons are being actively integrated into defense. South Korea plans to expand its defense exports, which recorded 14 billion US dollars in 2023, to 18 billion US dollars in 2024, and is pursuing multifaceted cooperation with Saudi Arabia, the UAE, Australia, and others. Third, domestically, companies such as Hanwha Aerospace and KAI are carrying out next-generation fighter (FC-25) and manned-unmanned stealth projects, increasing the development of dual-use technologies, and in 2025, various achievements are expected such as additional mass production of the Korean fighter jet and exports of the Redback (to Hungary and Saudi Arabia). Approximately 500 billion won is also being invested in the defense AI sector.