Korean arms makers confront NATO market barriers

Korea's booming defense industry is fighting for a foothold in the European and U.S. markets as a growing wave of economic nationalism makes it increasingly difficult to enter those markets.

Over the past two decades, defense exports have soared from $250 million in 2006 to more than $15.4 billion last year. Yet Korea faces an industrial landscape largely dominated by traditional powerhouses in Europe and the United States.

Washington is implementing the "America First" directive, while Europe is strengthening its defense industry through localization strategies with priorities seemingly given to regional partners.

Two decades ago, Korea mainly exported ammunition and aircraft components.

Today, it sells a broader range of weapons, including the K2 main battle tank, the K9 self-propelled howitzer, the K239 Chunmoo multiple rocket launcher and the Cheongung-II medium-range surface-to-air missile system, also known as M-SAM II.

Among North Atlantic Treaty Organization (NATO) members, Romania is weighing the purchase of K2 tanks, while Poland is preparing to sign a third implementation contract for the K2 tank purchases.

Only a handful of countries independently design, manufacture and produce major land weapons systems such as the K2, K9 and Chunmoo. Outside the United States, several European nations, Russia and China, Korea is one of the few with those capabilities.

Under this backdrop, winning a submarine export deal would give Korea's defense industry a “quantum leap” in global stature, industry watchers say.

That helps explain Seoul's diplomatic push for the Canadian Patrol Submarine Project (CPSP), a 60 trillion won ($39.1 billion) procurement program expected to reach a decision around Monday in Canadian time.

In that bidding, Hanwha Ocean competes against Germany's TKMS.

But since the  global arms market is still largely controlled by U.S. and European defense contractors, procuring the deal will depend on whether or not Hanwha can overcome the "NATO barrier." 

Seoul has viewed the Canadian submarine race as an uneven playing field from the start, given Canada's close defense ties to fellow NATO members. Even so, Korean state officials and industry executives spent months making repeated trips to Canada to strengthen Korea's bid.

"There is nothing more we could have done," one Korean government official said.

"Now we have done our best, and the rest is out of our hands,” some others say.

Germany, meanwhile, has shown little hesitation in expressing confidence that Canada, one of NATO's founding members, will ultimately choose a fellow ally.

“The entire federal government is campaigning to ensure that cooperation with Canada goes ahead,” German Vice Chancellor and Finance Minister Lars Klingbeil said during his visit to a TKMS shipyard on Friday. "The arguments […] are very much in our favor," Klingbeil said according to a German outlet DPA.

“[The contract would be] the largest ever awarded in the world of conventional submarines to a NATO partner,” TKMS chief executive Oliver Burkhard said.

The contest has effectively become a showdown between Germany's effort to preserve the dominance of NATO's traditional defense suppliers and Korea's bid to establish itself as an emerging, reliable alternative.

If Seoul wins the Canadian contract, it would mark one of the biggest breakthroughs in the history of exports.

In November last year, Poland selected Sweden's Saab AB over Korea in its ORKA submarine program. The bloc’s “Buy European” preference was part of the equation, but Poland’s decision also reflected a desire to work more closely with regional partners against Russian underwater threats.

The outcome highlighted how defense deals have evolved. Winning contracts now requires more than competitive technology or economic cooperation — it increasingly hinges on military alliances or similarly close strategic partnerships.

In response, Korean defense companies are moving beyond a strategy focused on exporting finished products. Instead, they are increasingly localizing production and forming partnerships with NATO-based companies to gain access to the European market.

"Without committing at least part of the production process or investment locally, export has become virtually impossible because NATO's barriers to entry have grown so high," an industry insider said.

Some Korean companies are establishing joint ventures with European companies to expand presence into the region.

Korean weapon maker LIG Defense & Aerospace announced plans to establish a joint venture with Rheinmetall Air Defence AG, a subsidiary of Germany's Rheinmetall, to develop a new short-range air defense missile system during defense exhibition Eurosatory 2026 held in Paris last month.

Hanwha Aerospace, which is carrying out large-scale contracts to supply K9 self-propelled howitzers and Chunmoo rocket systems to Poland, established a joint venture with Polish defense company WB Electronics in October last year. Two months later, it signed a 5.6 trillion won contract to supply CGR-080 guided missiles, with a range of 80 kilometers (49 miles), for the Chunmoo system.

Hyundai Rotem, which exports K2 tanks to Poland, is localizing production. The company plans to assemble 61 K2PL tanks at an armored vehicle facility in Poland's Silesian Voivodeship.

BY LEE YU-JUNG [[email protected]]