The South Korea aerospace and defense market is expected to exhibit a growth rate of more than 14% during the forecast period.
- South Korea is a leading military power with one of the largest defense budget in the world. South Korean companies such as Doosan Corporation, Hanwha Defense, Hyundai Heavy Industries, Korea Aerospace Industries, etc. are significantly allocating their budget on research and development, innovations, etc. and this factor is significantly propelling the growth of national defense and aerospace industries.
- South Korea is significantly spending on its space programs which include the development of the country’s first completely indigenous satellite launch vehicle, the world’s first geostationary satellite, etc. These aforementioned developments are anticipated to propel space exploration growth in the country.
- The aviation industry in South Korea is also booming owing to the investments in aviation infrastructure development, aircraft procurement, etc. The commercial aviation market is primarily driven by the growth of LCCs and the airlines are expected to expand their fleet size during the forecast period.
Key Market Trends
Increase in Defense Spending is Expected to Propel the Industry Growth
South Korea is focusing on the development of its sea, air, and land-based defense capabilities owing to the ongoing tensions in North Korea and the South China Sea. According to SIPRI, South Korea’s defense budget for 2019 stood at USD 43.9 billion which is more than 12% of national GDP, one of the highest shares in the Asia-Pacific region. The defense export of South Korea has also increased substantially from USD 250 million in 2006 to nearly USD 3.5 billion in 2019. However, the Foreign Direct Investment in South Korea fell by nearly 13% in 2019 due to trade disputes with Japan, taxation of foreign investments, etc. and this factor is expected to hinder the defense industry growth. In 2020, South Korea is planning to invest USD 23.2 million (rise of 94% from 2019 budget) to extend its drone capabilities. In 2019, South Korea initiated its second phase of stealth fighter procurement program which includes 20 F-35 aircraft. In 2019, South Korea started the development of an amphibious assault ship called Landing Platform Helicopter II which will support the short take-off and vertical landing operations. The aforementioned developments are expected to propel the market growth for the defense industry in the country.
South Korea Increasing its Investment on Space Technology
The increasing focus of South Korea in developing C4ISR capabilities of its armed forces is propelling the growth of development programs in the country. In 2018, South Korea placed 2 satellites in the orbit using a satellite launch vehicle powered by indigenously developed rocket engine. This launch has been considered as a major breakthrough for the development of indegeniously produced Korea Space Launch Vehicle - 2 (KSLV-2) which is scheduled for launch in 2021. In April 2020, science ministry of South Korea announced the investment of USD 170 million for research and development that will boost the production of satellite and launch vehicle parts in the country. Korea Aerospace Research Institute’s (KARI) Korea Pathfinder Lunar Orbiter (KPLO) is scheduled for launch in 2020. KPLO will be South Korea’s debut moon spacecraft program that will initiate the development of several other deep space exploration missions necessary for space capability development of South Korea. Perigee Aerospace Inc. raised USD 50 million in investments from Samsung, LB Investments and other venture investors to develop Blue Whale 1 which is a small launcher rocket scheduled for launch in July 2020. The aforementioned developments are expected to propel the aerospace industry in South Korea.
The South Korea aerospace and defense market is marked by the presence of major players such as Doosan Corporation, Samsung Group, Hanwha Defense, Korea Aerospace Research Institute, Hyundai Heavy Industries, etc. that are significantly investing in the development of technologically advanced systems to cater to the national and foreign needs. The industries are expected to enjoy a healthy growth owing to the large scale domestic and foreign investments, collaborations and partnerships, from countries such as China and the US.
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