Korea's Defense Exports Hit $15.4 Billion in 2025, Set to Grow Further

South Korea's defense exports reached $15.4 billion in 2025, the Defense Acquisition Program Administration (DAPA) announced. This marks the agency's first official tally of export figures. After hitting a record $17.3 billion in 2022, exports declined for two consecutive years — to $13.5 billion in 2023 and $9.5 billion in 2024 — before rebounding last year.

According to DAPA and defense industry sources on the 25th, defense exports last year surged 60.4% year-on-year to $15.4 billion (23.2 trillion won). The increase was largely driven by a third execution contract worth 5.6 trillion won ($4.1 billion) signed with Poland on December 30 for the supply of Chunmoo guided missiles (CGR-080).

The figure fell short of the government's original target of $20 billion, but the recovery is significant given the two-year decline in 2023 and 2024. Analysts note that a qualitative shift in the export structure is also underway.

Poland remains the largest buyer, accounting for more than 40% of total exports. Neighboring Romania signed a contract worth approximately 1.3 trillion won for 54 K9 self-propelled howitzers and 36 K10 ammunition resupply vehicles. K9 howitzers are already deployed across Northern and Eastern Europe, including Finland (48 units), Estonia (24 units), Norway, and Romania (54 units). Expansion into K2 tanks and Redback infantry fighting vehicles is considered highly likely.

In the Middle East, exports of the Cheongung-II missile defense system and maintenance, repair, and operations (MRO) contracts centered on Saudi Arabia and the UAE have created a high-value market worth approximately 5 trillion won. Beyond these, K-defense exports are rapidly expanding to Estonia (Chunmoo), Iraq (Cheongung-II), and Vietnam and the Philippines (naval vessels and FA-50 follow-on support).

Going a step further, Peru is establishing itself as a bridgehead in Latin America. HD Hyundai Heavy Industries (329180.KS) won a Peruvian naval vessel project worth 640 billion won — the largest Korean naval export deal in Latin American history. Additionally, Hyundai Rotem (064350.KS) plans to supply 54 K2 tanks and 141 K808 armored vehicles through an implementation contract worth more than 2 trillion won.

These developments have led to assessments that K-defense has moved beyond a short-term boom into a phase of structural growth. According to the "2026 Economic and Industry Outlook" report published by the Export-Import Bank of Korea's Overseas Economic Research Institute, Korea's defense exports could exceed $27 billion this year.

In response, defense firms are evolving their overseas strategies. They are moving beyond the first-generation export model of manufacturing domestically and shipping abroad. Instead, they are establishing local production bases overseas. This shift transforms the business from finished-product exports to "ecosystem exports" encompassing technology, production, and maintenance — transplanting supply chains locally to build sustainable business foundations.

Most notably, the expansion of K-defense exports is accelerating the industry's transition to record-high earnings and a high-profitability structure.

The combined revenue of Korea's "Big Four" defense firms — Hanwha Aerospace (012450.KS), Hyundai Rotem, LIG Nex1 (079550.KS), and Korea Aerospace Industries (KAI) (047810.KS) — reached 40.45 trillion won in 2025, with operating profit totaling 4.63 trillion won. Both figures represent all-time highs.

Profitability metrics are even more striking. Hanwha Aerospace's operating profit margin more than doubled from 5% in 2021 to 11.4% last year. Hyundai Rotem posted an operating margin of 17.22%, a 3.7-fold increase from 4.66% in 2022, when exports began in earnest.

Over the same period, KAI's operating margin rose sharply from 2.27% to 7.28%. LIG Nex1 maintained a high-profit trajectory with margins in the 7–8% range. The improvement in profitability stems from the surge in defense exports, primarily to Europe and the Middle East.

Defense exports jumped from $7.25 billion in 2021 to $17.3 billion in 2022, declined for two consecutive years, and then rebounded to $15.4 billion last year. The number of export destination countries expanded significantly, from seven in 2022 to 16 last year.

As a result, Hanwha Aerospace saw overseas exports exceed 50% of its defense segment revenue for the first time in 2025, with operating profit surpassing 3 trillion won. Hyundai Rotem also entered the 1-trillion-won operating profit era for the first time last year as overseas exports continued to grow.

A key point is that domestic contracts negotiated with the government guarantee profit margins of only around 2–5%. In contrast, overseas deals allow companies to negotiate prices freely with foreign militaries and governments. This is creating a virtuous cycle in which expanding export volumes drive higher margins and economies of scale.