Korea's Defense Industry Secures Major Order: Confirming the Export of K2 Tanks Worth $6.7 Billion to Poland... Also Collecting Technology Patent Fees

The South Korean Agency for Defense Development and the Polish government announced on the 2nd that "the negotiations for the second batch of K2 tank exports to Poland by Hyundai Rotem have been completed." Although the specific contract size was not disclosed, it is reported that a total of 180 K2 tanks will be exported, worth $6.7 billion (about 9 trillion won). This contract is expected to become the largest in the history of Korea's defense industry, based on a single contract.

Poland, which borders Ukraine, chose to cooperate with Korea's defense industry in response to Russia's invasion of Ukraine in February 2022, thereby enhancing its national defense capabilities in the short term. In July of the same year, Poland introduced 180 K2 tanks, and three years later decided to introduce the same number again. Particularly, although the export volume in this contract is the same, the contract amount has nearly doubled, and there are evaluations that this is another "evolution" of the Korean defense industry.

The biggest difference from the first contract is that the export items include not only finished products but also technology transfer. Of the 180 exported units, 117 will be manufactured by Hyundai Rotem in South Korea and directly supplied, while 63 will be produced locally by the Polish state-owned military equipment group PGZ. The contract supports the establishment of local production bases for Hyundai Rotem and other companies in Poland and provides production experience. The export contract also includes content for subsequent MRO (maintenance, repair, and overhaul) support.

It is evaluated that the export of the "defense industry ecosystem" is the result of the performance and productivity of Korea's defense industry being recognized globally. Another significance is that Korea previously acquired various defense industry technologies from its ally, the United States, to build the current framework of the Korean defense industry, and now it has reached a stage where it can transfer defense industry technologies overseas.

Thanks to the capabilities of the domestic defense industry ecosystem

The K2 tank is a tank independently developed by South Korea in 2008 in collaboration with the Agency for Defense Development and Hyundai Rotem. In the late 1980s, the South Korean military produced the K1 tank designed by the United States for the first time domestically. The experience at that time led to the development of the first K2 tank in 2008, which was developed with South Korean self-researched technology. During this process, the localization rate of the K2 tank was increased to over 90%. Thanks to this, South Korea built its own parts supply chain, which is one of the secrets of the success of the second export. Domestic companies involved in the production had more than 120 partner companies during the first contract. Because of this experience, it was possible to achieve this export.

Establishing a production base in Poland, after the first and second batches of 360 tanks, there is also hope for follow-up contracts for the third and fourth batches. That is to say, through local production facilities, additional production can be carried out, and patent fees or parts supply can continue. A senior executive of a defense company said, "The Polish army is building tank tactics centered around the functions of the K2 tank. The K2 tank will be used for at least 10 to 20 years. This also means that the business relationship with Poland will last longer."

The Korean defense industry ecosystem is heading overseas

Korean defense companies are trying to rapidly shift from exporting mainly finished products to exporting ecosystems. Because the "defense protectionism" trend is spreading worldwide. For example, Hanwha Aerospace completed the production facility for the "Redback Spider" armored vehicle in Australia in August of last year. This is replacing the American-made armored vehicles introduced by the Australian military in the 1960s with the Redback Spider armored vehicles developed by Hanwha Aerospace, and producing them locally in Australia. Hanwha Aerospace is also advancing the construction of a production plant for the K9 self-propelled howitzer in Romania. Korea Aerospace Industries (KAI) also signed an agreement in July of last year to produce parts for the light attack aircraft FA-50 in Peru.

With Russia's invasion of Ukraine and the election of U.S. President Trump, countries around the world are racing to "protect their defense industries." Under the pressure of Trump's declaration that "the United States will no longer provide protection," the EU announced the "Re-arm Europe" policy to significantly strengthen military power by 2030. Its main content is to invest more than 800 billion euros (about 1,282 trillion won) within five years to increase weapons reserves among EU member states. Poland is also looking toward this and hopes to establish production facilities in its own country.

A person in the defense industry said, "If we can continuously export finished products, that would be ideal, but in reality, countries are also beginning to establish trade barriers in the defense sector. From a long-term perspective, the fields of earning patent fees through technology transfer, supplying parts, and providing MRO are the most reasonable choices."

Sources: Chosun Ilbo

Original article: https://www.toutiao.com/article/1836591723684164/

Statement: This article represents the views of the author.