This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/29/2019


The Republic of Korea (ROK) has the world’s seventh largest military force following China, India, U.S., North Korea, Russia, and Pakistan (based on the number of active military personnel 2019, Military Balance published by International Institute for Strategic Studies). South Korea’s defense industry has grown far faster than the regional average in recent years in response to increased antagonism from North Korea. Korea continues to be a major defense and security ally of the U.S. in the Pacific region.

Market Demand    

                                                                                                                             Unit: $ millions
 20162017 2018 (est.) 2019 (est.) 
Total Market Size3,3734,2823,9274,162 
Total Local Production5,1555,7816,0706,374 
Total Exports2,5583,1223,3093,474 
Total Imports7761,6231,1661,262 
Note:  The statistical data above is based on figures announced by Defense Acquisition Program Administration (DAPA).  Total local production and Import figures are based on the contracted amount and not on actual shipment.  Estimated and projected figures are based on an unofficial estimate from CS Korea based on the budget of Korea’s Force Improvement Plan (FIP), Defense Acquisition Program Administration (DAPA)’s procurement plan, and media reports. 
For 2019, a total of $41.69 billion has been announced for Korea’s defense budget which includes $13.73 billion for the force improvement plan (FIP). The total budget and FIP budget have increased by 8.2 percent and 13.7 percent compared to the previous year, respectively. For 2019, Korea’s defense budget is around 2.41 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
Breakdown20182019% increase
Total Defense Budget38,88141,694+8.2%
Force Improvement Plan (FIP)12,18013,726+13.7%
Operation and Management (OandM)26,70127,968+5.7%
   Unit: $ million
Top Defense Budget Spending Countries
RankCountryDefense Budget ($ billions)% of GDP
1United States602.83.11
3Saudi Arabia76.711.3
5United Kingdom50.71.98
10South Korea35.12.33
     Source: The Military Balance 2018 (IISS, 2018)
In Korea’s defense budget allocation, Force Improvement Plan budget is related to the procurement. Force improvement plan reflects Korea’s core defense strategy and is directly related to the plans and decisions on the weapons and defense platform procurement. In 2018, Korea’s Ministry of National Defense (MND) announced following key strategies for the force improvement plan and key weapon systems procurement:
  1. Kill Chain: Kill Chain is an offense-oriented defense system that detects missiles in real-time. The goal is to detect any potential threats from the North and take a head start in attacking the nuclear weapon within 30 minutes.
  1. Related weapon system: Global Hawk (NGC), military satellites, long-range air to ground missile (TAURUS), Army Tactical Missile System (indigenous development by Hanwha), etc.
  1. KAMD: Korea Air and Missile Defense (KAMD) is a lower ground (approx. 20km above ground) defense system where patriot missiles, AMD cell and early warning radar play indispensable roles.
  1. Related weapon system: TBM early warning radar (foreign purchase), ground to air missile upgrade (indigenous development), Patriot missile upgrade (Raytheon), etc.
  1. KMPR: Korea Massive Punishment and Retaliation (KMPR) is the system that allows to destroy the control tower of the enemy when attack occurs.
  1. Related weapon system: UAV and grenade launcher for special operation (indigenous development), CH-47 upgrade, etc.
  1. Platform Force: The major supporting platforms will be,
  1. Aircrafts: F-35, Maritime Operation Helicopters (LMCO vs. Leonardo), Maritime Patrol Aircraft (Boeing’s P8)
  2. Vessels: Jangbogo-II/III, Gwangaeto-III batch-II

Market Access and Obstacles

The ROK’s defense procurement agency, Defense Acquisition Program Administration (DAPA) is a sole government agency in conducting and executing the procurement of defense equipment.  Established in 2006, DAPA is the primary government agency conducting ROK’s defense procurement and 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.
Commercial sales (DCS: Direct Commercial Sale) in the defense industry account for 46 percent of DAPA procurement (average figure from 2011 to 2015). Recently the ROK government has shown a preference for DCS over Foreign Military Sales (FMS) on some programs to reduce purchase price, and work with faster and more simple process.

Foreign Procurement Contract Amount
      Source: DAPA’s Statistics                                                                                Unit: $ millions
Defense Offset Policy

The offset program was first introduced in Korea in 1982 to fulfill the objective of developing Korea’s aerospace industry but it gradually became an important means to acquire core technologies to develop defense industry.  An offset obligation is imposed upon the foreign supplier/contractor when the main defense contact amount of a unit acquisition program exceeds $10 million.  Exceptions do exist where an offset obligation is imposed on a contract of less than $10 million 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 executions.  Technology evaluations are done by Day (Defense Agency for Technology and Quality), an organization under DAPA.

According to the data announced by DAPA in 2018, offset programs executed from 2013 to 2017 were valued at total of $7.7 billion. Total of 79 programs were executed as offset programs and 44 programs were from U.S. suppliers consisting 56.4% of the program in quantity and 84.6% of program value.

Major Suppliers with Offset Obligations (past 5 years)
Company# of programsTechnology transferKorea’s exportEquipment AcquisitionTotalShare of value
Lockheed Martin32,2433381,5224,10353.0%
BAE Systems11992111745847.5%
Northrop Grumman150201041752.3%
L-3 Com41231271421.8%
Unit: cases, $ millions

DAPA is recently announced reforms on their offset policy.  The new guideline is announced in 2019 and DAPA had renamed the policy as ‘Industrial Cooperation’. With the new policy, offset is no longer required in FMS cases and more emphasis has been placed on cooperation with the local defense manufacturers.

Indigenous technology and the drive for defense exports  

In 2017, Korea’s total export of defense products was about $3.1 billion, 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 by expanding to Europe and South America.  Korea exported to 83 countries in 2017 with 132 exporting companies. 

Following are the list of major defense exports of Korea from 2013 - 2018:
  • 6 patrol corvettes to Malaysia ($1.2 billion)
  • 12 FA-50 (Light combat aircraft) to Philippines ($420 million); FA-50 is co-developed with Lockheed Martin
  • 16 T-50s (advanced trainer) to Indonesia ($4 billion); T-50 is co-developed with Lockheed Martin
  • 12 T-50s to Thailand ($110 million)
  • Military vehicles to Philippines ($345 million)
  • K-9 Thunder (self-propelled howitzer) to India (100), Turkey (280), Finland (48), Norway (24), and Poland (120)

U.S. Position in Korea’s Defense Industry
There are 28,500 U.S. troops stationed in Korea on more than 100 bases stretching from the DMZ south to the port city of Busan.  Plans call for consolidating the troops onto fewer than 50 bases, with the majority stationed in regional hubs in the areas around Pyeongtaek/Osan and Daegu.  Progress on the relocation of the U.S. troops in Yongsan, Seoul to Pyeongtaek, south of Seoul and the construction of housing, schools and medical and recreational facilities on bases south of Seoul has long been considered a key element in the U.S. plan to allow more troops to bring along their families to South Korea, allowing for longer tours and greater stability among the ranks on the peninsula.

The U.S. remains Korea’s most significant military ally, owning largely to the presence of 28,500 U.S. troops in Korea as a deterrent to any aggression from North Korea and with its 62 years of close alliance history, U.S. standards are generally accepted in Korea and most Korean defense systems are based on American standards.  This has affected defense procurement decisions. U.S. constitutes about 82% of Korea’s total defense imports.  (This figure is the sum of U.S. share in the foreign defense procurement from 2013 to 2017.  There was a sharp increase in FMS in 2014)
Although the U.S. continues to be a primary supplier in Korea, the strict U.S. export control policy and aggressive marketing of other suppliers from Europe and Israel come as a challenge for the U.S. firms.

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
  • MRO legacy parts and components for old platforms
  • Anti-terrorism products


Trade Shows
Seoul International Aerospace and Defense Exhibition 2019 (Seoul Air Show 2019)
15 - 20, 2019 -

MADEX 2019 (International Maritime Defense Industry Exhibition)
October 22 - 25, 2019 - 

Key Contacts
Defense Acquisition Procurement Agency (DAPA) –
Ministry of National Defense (MND) –
Local Contact
Ms. Sunny Park
Commercial Specialist
U.S. Commercial Service Korea
U.S. 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