This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 9/6/2018


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 2017, 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 order to face the antagonistic actions of North Korea. Korea continues to be a major defense and security ally of the U.S. in the Pacific region.
Due to the recent change in the political environment surrounding the Korean Peninsula after the U.S. and the North Korea summit in June of 2018, it is expected that Korean government will announce revised defense strategy that focuses more on self-reliance defense but as of July 2018, no official announcement has been made yet.  Up until 2017, Korea’s Ministry of National Defense (MND) continued to concentrate on the Kill Chain and Korea Air and Missile Defense programs.
Market Demand                                                                                             (Unit: million USD)
                                                20152016 2017 (Estimated)2018
Total Market Size14,2177,2377,8338,470 
Total Local Production12,4568,9919,89010,879 
Total Exports3,5412,5482,9303,370 
Total Imports5,302794873961 
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 2018, a total of 39.23 billion USD has been announced for Korea’s defense budget which includes 12.29 billion USD for the force improvement plan (FIP). The total budget and FIP budget have increased by 7.0 percent and 10.8 percent compared to the previous year, respectively. For 2018, Korea’s defense budget is around 2.38 percent of its GDP and constitutes about 14.3 percent of total national budget. The government proposed a defense budget of 46.7 trillion won ($42 billion) for 2019, up 8.2 percent from 2018 and the largest in 10 years, amid growing security uncertainty here and abroad. The rate is double the average growth rate of 4.4 percent between 2010 and 2017. The cost for troop management topped the list in a specific breakdown of the 2019 budget plan. Korea is estimated to have the 10th largest defense budget in the world. 
Korea’s Defense Budget:     
Breakdown20172018% increase
Total Defense Budget36,66839,234+7%
Force Improvement Plan (FIP)11,08812,291+10.8%
Operation & Management (O&M)25,58026,943+5.3%
 Unit: USD million
Top defense budget spending countries:
RankCountryDefense Budget ($ Billion)% of GDP
1United States604.53.26
3Saudi Arabia56.98.4
4United Kingdom52.51.98
10South Korea33.82.41
Source: The Military Balance 2017 (IISS, 2017.2)
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:
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.
  • 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.
  • 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 & Retaliation (KMPR) is the system that allows to destroy the control tower of the enemy when attack occurs.
  • 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,
  • Aircrafts: F-35, Maritime Operation Helicopters (LMCO vs. Leonardo), Maritime Patrol Aircraft (Boeing’s P8)
  • Vessels: Jangbogo-II/III, Gwangaeto-III batch-II
Market Access & 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 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.
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 in an effort to reduce purchase price, and work with faster and more simple process.
Foreign procurement contract amount (figures are based on contract amount)
Source: DAPA’s Statistics                                                                             Unit: Million USD
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 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, and etc. DAPA is the leading entity that governs the offset policy and oversees the executions.Technology evaluations are done by DTaQ (Defense Agency for Technology and Quality), an organization under DAPA.
According to the data announced by DAPA in 2016, offset programs executed from 2011 to 2015 were valued at total of 8 billion USD. There was a sharp increase in the value in 2014 and 2015 due to major programs such as F-X (F-35), HUAV (Global Hawk), and Patriot missile programs.Of the total executed offset program values, 45 percent was accounted for technology transfer, 29 percent for acquisition of equipment, and 26 percent for exports. The U.S. took up the largest share in both the number of offset programs offered (48 percent) and the value of offset programs offered (83 percent).  A large portion of Korea’s export of defense products is a result of DAPA’s defense offset program.
DAPA is recently announced reforms on their offset policy.  The new guideline is expected to be announced in early 2019 and be fully implemented sometime during the latter half of 2019.
Indigenous technology and the drive for defense exports  
In 2015, Korea’s total export of defense products was about 3.5 billion USD, more than triple the export value in 2010. The figure has decreased to 2.5 billion USD in 2016 but 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 89 countries in 2016 with 176 exporting companies.  Exporting items have also been diversified over the years.  In the past Korea mainly exported ammunition and fire extinguishers; currently Korea is exporting warships, submarines, propeller training aircrafts and, most recently, light supersonic combat aircraft.
US 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 61 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 80% of Korea’s total defense imports. (This figure is the sum of U.S. share in the foreign defense procurement from 2012 to 2016.  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
  • Anti-terrorism products


Trade Shows
Defense Expo Korea (DX Korea) 2018
September 11-16, 2018
Seoul International Aerospace & Defense Exhibition 2019 (Seoul Air Show 2019)
15 - 20, 2019 -
  1. 2019 (International Maritime Defense Industry Exhibition)
October, 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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South Korea Aerospace and Defense Trade Development and Promotion