Cutting-edge Weapon Systems
The authors are analysts of Shinhan Investment Corp. They can be reached at idh@shinhan.com and jiunmyoung@shinhan.com, respectively. -- Ed.
Takeaways from DX Korea 2022
Defense Expo Korea (DX Korea) is a platform for land forces equipment exhibition. This year marks the fifth biennial event since its first iteration in 2014. Most domestic defense companies are participating in the defense show, which began its five-day run on September 21 in the second and outdoor exhibition areas of the Korea International Exhibition Center (KINTEX). The first three days are for business only (September 21-23) and the following two days will be open to the general public.
The DX Korea 2022 show is the largest scale to date, with 1,350 booths of 350 companies from 50 countries spread across the 88,160 square meter exhibition venue. It sets the stage for domestic defense companies to strengthen their overseas competitiveness, increase export opportunities, and promote technological exchanges and cooperation with both local and global companies.
Cutting-edge weapon systems
The defense show offers a rare opportunity to personally check out the weapon systems and learn about the flagship products and their functions offered by each company.
The cutting-edge weapon systems of domestic defense companies on display are as follows:
Korea Aerospace Industries: Light armed helicopter, KUH-1Surion
Hanwha Corp., Hanwha Defense, Hanwha Systems: Chunmoo multiple rocket launcher, K9 self-propelled howitzer, K-30 SAM
LIG Nex1: KP-SAM, long-range artillery intercept system, guided missile systems (model)
Hyundai Rotem: K2 tank, wheeled armored combat vehicle
Other products that are also on display include Kia’s rescue hydrogen generator vehicle, STX Engine’s flagship engine system, Korean Air Lines’ unmanned aerial vehicle, Apache and Black Hawk helicopters, and Ghost Robotics’ military robot dogs.
Poland-bound exports to pave the way for additional arms deals
DX Korea 2022 has attracted more overseas military participants than in previous years. According to media reports, a delegation from Slovakia arrived on a chartered flight, and high-ranking officials from Saudi Arabia and the UAE made their visit to the event. Military generals from Romania, Jordan, Uzbekistan, Brazil, Ecuador, Estonia, and Mongolia will also take part.
The recent arms deals with Poland amount to KRW11.9tr, including Hyundai Rotem’s K2 tanks, Hanwha Aerospace’s K9 self-propelled howitzers, and Korea Aerospace Industries’ FA-50 fighter jets (first phase). Negotiations are underway for exports of Redback armored vehicles and Chunmoo multiple rocket launchers. The economies of scale from wider adoption enables faster upgrades to the weapon systems. Poland-bound exports have brought global attention to domestic weapons.
Korean defense companies are shifting away from domestic operations to focus on exports. It takes a long time to develop weapon systems and build up production capacity. We believe the boom in the domestic defense industry will be stronger and last longer than other sectors that have seen a re-rating with export growth. Share price gains have come with higher volatility, but we find domestic defense stocks still attractive at current levels.