This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 9/8/2020


The ROK’s defense industry has grown far faster than the regional average in recent years as ROKG defense budget outlays have grown in response to the increasing threat and security challenges posed by North Korea. Korea continues to be a major defense and security ally and partner of the U.S. in the Pacific region.
For 2020, a total of 40.69 billion USD has been announced for Korea’s defense budget which includes 13.62 billion USD for the force improvement plan (FIP). The total budget and FIP budget have increased by 7.4 percent and 8.5 percent compared to the previous year, respectively. For 2020, Korea’s defense budget is around 2.69 percent of its GDP and constitutes about 14.1 percent of total national budget. Korea is estimated to have the 10th largest defense budget in the world. 
Korea’s Defense Budget:           
Breakdown20192020% increase
Total Defense Budget38,13340,961+7.4%
Force Improvement Plan (FIP)12,55013,623+8.5%
Operation & Management (O&M)25,58327,338+5.7%
 Unit: USD million
Top defense budget spending countries (for 2018):
RankCountryDefense Budget ($ Billion)% of GDP
1United States643.33.14
3Saudi Arabia82.910.77
6United Kingdom56.12.00
10South Korea38.22.28
Source: The Military Balance 2019 (IISS, 2019)
According to the mid-term defense plan from 2020 to 2024 announced by the Ministry of National Defense, a total of 84.6 billion USD had been allocated for the Force Improvement Plan for next five years. Following are the detailed plans for Force Improvement:
  • Allocated 27 billion USD to cope with nuclear/weapons of mass destruction threat
  • Improve surveillance capability: Establish Korea’s independent surveillance capability with military satellite, mid/high altitude surveillance UAV, and etc.
  • Improve ballistic missile capability with Hyunmoo (ballistic missile), SSM-700K Haeseong (anti-ship missile), TAURUS missile and etc.
  • Expand coverage and missile capability for Korea Air and Missile Defense (KAMD): Acquire additional early-warning radar and Aegis combat system radar, upgrade Patriot and Cheolmae II missiles, and upgrade Korea Theater Missile Operation Cell
  • Allocated 46 billion USD to cope with defense force restructuring
  • Conventional weapons will be replaced with the high-tech weapon systems to cope with defense force reduction: Artillery detection radar-II, 230mm rocket artillery system, Korean tactical surface-to-surface missile system, indigenously developed tanks, small tactical vehicles, and armed helicopters, warrior platform based on 4th industrial revolution, ‘drone-bot system’, and indigenously developed unmanned attack, surveillance, and operation vehicles
  • Improve warship and submarine capabilities and acquire maritime patrol capability: Acquire additional Great-class destroyer with Aegis combat system, 3,000-ton submarine, multi-purpose large carrier, latest maritime patrol aircraft and maritime operation helicopters
  • Replace old fighter platforms to latest fighter jets and develop space operation capabilities: Phase out F-4 and F-5s and replace them with F-35A and continue invest in KFX project, acquire additional large military transport aircrafts, develop capabilities for satellite surveillance and monitoring
  • Allocated 2 billion USD to utilize advanced 4th industrial revolution technologies for military operation
  • Smart Defense Innovation: Apply big data, AI, IOT into defense field
  • Foster Advanced Concept Technology Demonstration (ACTD)
  • Improve maritime surveillance and monitoring capabilities
  • Deploy maritime surveillance radar and newest TOD-III
  • Develop and deploy fixed long-range radar
Market Access & Obstacles
The ROK’s defense procurement agency, Defense Acquisition Program Administration (DAPA), is the sole government agency conducting and executing the procurement of defense equipment. Established in 2006, DAPA is the primary government agency conducting ROK’s defense procurement and is the only agency that is authorized to negotiate on behalf of the Ministry of National Defense (MND) for defense products and services, as well as being the only agency that can authorize offset credits, dictate terms and conditions, and make changes to delivery schedules or required deliverables. DAPA controls all formal negotiations on price, technology transfer, local work share, and offset packages.
FMS (Foreign Military Sales) in the defense industry account for 69 percent of DAPA procurement from 2014 to 2018 due to major U.S. strategic asset purchases such as F-35, Global Hawk, and etc. Recently the ROK government has shown a preference for DCS (Direct Commercial Sales) over FMS on some programs in an effort to reduce purchase prices, and work with a faster and simpler process.
Foreign procurement contract amounts (figures are based on contract amount)
Source: DAPA’s Statistics                                                                                                  Unit: Million USD
(Currency rates: 2014: USD 1 = KRW 1,053, 2015: USD 1 = KRW 1,131, 2016: USD 1 = KRW 1,160, 2017: USD 1 = KRW 1,131, 2018: USD 1 = KRW 1,110)
Defense Offset Policy
The offset program was first introduced in Korea in 1982 as a way to facilitate development of Korea’s aerospace industry, but it gradually became an important means to acquire core technologies to develop the defense industry.  An offset obligation is imposed upon foreign suppliers/contractors when the main defense contact amount of a unit acquisition program exceeds 10 million USD. Exceptions do exist where an offset obligation is imposed on a contract of less than 10 million USD value. For programs with competing suppliers, usually 50 percent of the estimated main contract amount should be allocated to an offset program. For sole source programs, 10 percent or more of the estimated main contract amount is expected. The following programs are considered for the offset: co-production, licensed production, overseas investment, technology transfer, counter purchase, buy-backs, etc. DAPA is the leading entity that governs the offset policy and oversees the execution. Technology evaluations are done by DTaQ (Defense Agency for Technology and Quality), an organization under DAPA.
According to data announced by DAPA in 2019, offset programs executed from 2014 to 2018 were valued at a total of 5.7 billion USD. Fifty-eight programs were executed as offset programs, 29 of those programs were from U.S. suppliers, accounting for 50% of the programs in quantity and 80.5% of program value.
Following is the list of major suppliers who had offsets in 2014 to 2018:
CompanyNo. of programsTech. transferKorea’s exportEquipment acquisitionTotalShare of value
Lockheed Martin22,191.4338.21,447.73,977.370.0%
Northrop Grumman146.720.3104.4171.33.0%
(Unit: cases, million USD)
DAPA announced reforms to its offset policy in 2019, renaming it as “Industrial Cooperation.” With the new policy, offsets are no longer required in FMS cases and emphasis has been placed on cooperation with local defense manufacturers. Based on new office policy, some of foreign companies are struggling to commit to offset programs due to unlimited liability terms and conditions.
Indigenous technology and the drive for defense exports  
In 2017, Korea’s total defense products exports were about 3.1 billion USD, more than triple the export value in 2010. Korea is becoming an active player and one of the top countries in the Asia in defense exports. Korea not only increased its exports regionally, but also managed to export at a global level, expanding to Europe and South America. Korea exported to 83 countries in 2017 with 132 exporting companies. 
Following is the list of major defense exports of Korea from 2013 - 2018:
  • 6 patrol corvettes to Malaysia (1.2 billion USD)
  • 12 FA-50 (Light combat aircraft) to Philippines (420 million USD); FA-50 is co-developed with Lockheed Martin
  • 16 T-50s (advanced trainer) to Indonesia (4 billion USD); T-50 is co-developed with Lockheed Martin
  • 12 T-50s to Thailand (110 million USD)
  • Military vehicles to Philippines (345 million USD)
  • K-9 Thunder (self-propelled howitzer) to India (100), Turkey (280), Finland (48), Norway (24), and Poland (120)
US Position in Korea’s Defense Industry
The U.S. remains Korea’s most significant military ally, due largely to 62 years of close alliance and the presence of 28,500 U.S. troops in Korea as a deterrent to any aggression from North Korea.  U.S. standards are generally accepted in Korea and most Korean defense systems are based on American standards. This has affected defense procurement decisions. The U.S. constitutes about 84 percent of Korea’s total defense imports. (This figure is the sum of U.S. share in the foreign defense procurement from 2014 to 2018. There was a sharp increase in FMS in 2014)
Although the U.S. continues to be a primary defense supplier in Korea, strict U.S. export control policy and aggressive marketing of other suppliers from Europe and Israel have cut into U.S. firms’ advantages.

Best Prospects and Opportunities 

· C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance)
· Aircraft upgrades
· Avionics, high-tech sensors, radars, and missile system
· Support for combat equipment
· Anti-terrorism products


Trade Shows
Seoul International Aerospace & Defense Exhibition 2021 (Seoul Air Show 2021)
October 15 - 20, 2021 -  

MADEX 2021 (International Maritime Defense Industry Exhibition)
Date TBD

Key Contacts
Defense Acquisition Procurement Agency (DAPA) –
Ministry of National Defense (MND) –  

Local Contact
Ms. Sunny Park
Commercial Specialist
US Commercial Service Korea
US Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 03141 Korea
Tel: 82-2-397-4164

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More Information

South Korea Aerospace and Defense Trade Development and Promotion