The South Korean Defense Sector - Market Opportunities And Entry Strategies, Analyses And Forecasts

Summary

Summary

This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs

(original equipment manufacturers) to gain a market share in the South Korean defense industry. In

particular, it offers in-depth analysis of the following:

Market opportunity and attractiveness: detailed analysis of the current industry size and

growth expectations during 20102015, including highlights of the key growth stimulators. It also

benchmarks the industry against key global markets and provides detailed understanding of

emerging opportunities in specific areas.

Procurement dynamics: trend analysis of imports and exports, together with its implications and impact on the South Korean defense industry.

Industry structure: five forces analysis to identify various power centers in the industry and how these are likely to develop in the future.

Market entry strategy: analysis of possible ways to enter the market, together with detailed descriptions of how existing players have entered the market, including key contracts, alliances, and strategic initiatives.

Competitive landscape and strategic insights: analysis of competitive landscape of the defense industry in South Korea. It provides an overview of key defense companies (both domestic and foreign), together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and

availability, labor force, demographics, and political and social risk.

Scope

analysis of Defense industry market size from 2004 through 2009 and forecasts till 2015

analysis of defense budget allocation

Benchmarking with key global markets

Market opportunities

Defense procurement dynamics

Industry dynamics

Market entry strategy

Competitive landscape and strategic insights

Business environment and country risk

Reasons To Buy

Gain insight into South Korean defense industry with current, historic and forecast market values

Get insight on market opportunity and attractiveness

Get insight on industry procurement dynamics

Gain insight on industry structure

Gain insight into the regulations governing the South Korean defense industry and the potential market entry strategies with an expert analysis of the competitive structure

Identify top companies of the South Korean defense industry along with profiles of all those companies

Key Highlights

The South Korean defense industry is expected to grow at a CAGR of 7.39% over the forecast period, from an estimated US$22.4 billion in 2009 to an expected US$32.5 billion in 2015. The perceived threat of nuclear attacks from neighbor North Korea will drive growth in defense expenditure, despite South Koreas military superiority. The South Korean defense industry is also set to benefit from economic growth, a military modernization plan, and a planned reduction in defense personnel. During the review period, the country maintained a defense expenditure of 2.5% of its gross domestic product (GDP), which is expected to continue during the forecast period. During the review period, 69% of the defense budget was allocated for revenue expenditure, while the remaining 31% was assigned to capital expenditure. However, as the government plans to reduce the size of its forces, capital expenditure is expected to receive an increased allocation during the forecast period.

The key opportunities in the industry are expected in areas such as armored vehicles, joint direct attack munitions (JDAMs), fighter planes and VIP aircrafts, multi-mission helicopters, anti-mine equipment, warships, tanks, rocket launchers, and military trucks. Furthermore, although the country has not yet experienced any terror activity from external terrorist organizations (excluding those from North Korea), the globalization of terrorism and increased threat from organizations such as Al-Qaeda and several indigenous terrorist groups will support the expansion of the homeland security market. The three main areas of growth are expected to be in aviation security, cyber security and the aerial surveillance market

Keywords

Defense, South Korea, Korea Aerospace Industries, Samsung Techwin, Hanwha Corporation, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Huneed Technologies, STX Engine, S&T Dynamics, Poongsan Corporation, Samsung Thales, LIG NEX1, Doosan DST, , , , , , , , , , , , , , , ,

Table of Contents :

1 Introduction

1.1 About this Report

1.2 Definitions

1.3 Methodology

1.3.1 Secondary research

1.3.2 Primary research

1.3.3 Conventions

1.4 ICD Research Terrorism Index

1.5 About ICD Research Defense Intelligence Center

2 Executive Summary

3 Market Attractiveness and Emerging Opportunities

3.1 Defense Market Size and Forecast

3.1.1 South Korean annual defense expenditure to reach US$32.5 billion by 2015

3.1.2 Nuclear threat from North Korea, reduction in personnel, acquisition of new technology, economic growth, and reduction in reliance on imports set to drive growth of defense expenditure

3.1.3 Defense expenditure as a percentage of GDP expected to remain at current levels in the forecast period

3.2 Analysis of Defense Budget Allocation

3.2.1 Capital expenditure allocation to increase during the forecast period

3.2.2 Funding for research and development set to increase

3.2.3 Air force expenditure is likely to continue to dominate capital expenditure budget

3.2.4 Capital expenditure allocation for army to grow at a CAGR of 11.04% during the forecast period

3.2.5 Capital expenditure allocation for navy to grow at a CAGR of 10.37% during the forecast period

3.2.6 Capital expenditure allocation for surveillance and communication to grow at the fastest rate

3.3 Homeland Security Market Size and Forecast

3.3.1 Homeland security market expected to grow steadily during the forecast period

3.3.2 The majority of terror threats come from North Korea

3.3.3 South Korea experienced minimal terror activity during the review period

3.4 Benchmarking with Key Global Markets

3.4.1 South Korea has one of the largest defense industries in the world

3.4.2 The US and China dominate the global defense industry

3.4.3 South Korea allocates significant percentage of GDP towards defense

3.4.4 South Korea ranked third among top arms importing countries during the review period

3.4.5 South Korea ranked seventeenth among top arms exporting countries during the review period

3.5 Market Opportunities: Key Trends and Growth Stimulators

3.5.1 Demand for armored vehicles expected to grow

3.5.2 JDAMs expected to provide attractive market opportunities

3.5.3 Plans to procure fighter and VIP aircraft expected to boost interest among suppliers

3.5.4 Demand for multi-mission helicopters and anti-mine equipment expected to increase

3.5.5 Naval modernization plan expected to create demand for war ships

3.5.6 Procurement plan will drive demand for ground force equipment such as tanks, rocket launchers and trucks

4 Defense Procurement Market Dynamics

4.1 Import Market Dynamics

4.1.1 Defense imports expected to grow considerably in the next five years

4.1.2 US share of arms sales witnesses decline

4.1.3 Aircraft constitute majority of South Korean arms imports

4.2 Export Market Dynamics

4.2.1 Defense exports grew considerably during the review period

4.2.2 Indonesia and Turkey are the largest importers of South Korean arms

4.2.3 Ships and artillery account for majority of exports

5 Industry Dynamics

5.1 Five Forces Analysis

5.1.1 Bargaining power of supplier: low

5.1.2 Bargaining power of buyer: high

5.1.3 Barrier to entry: medium

5.1.4 Intensity of rivalry: medium

5.1.5 Threat of substitution: high

6 Market Entry Strategy

6.1 Market Regulation

6.1.1 Offset policy aids development of domestic defense industry

6.1.2 Foreign direct investment in defense sector to become less complicated

6.2 Market Entry Route

6.2.1 Technology transfer provides good market entry opportunities

6.2.2 Research and development collaborations offer market access

6.2.3 Joint ventures and licensing agreements open new market entry strategy choices

6.3 Key Challenges

6.3.1 Intense emphasis on technology transfer

6.3.2 Industrial disputes and rigidity of labor market deter investment

7 Competitive Landscape and Strategic Insights

7.1 Competitive Landscape Overview

7.2 Key Public Sector Companies

7.2.1 Korea Aerospace Industries: overview

7.2.2 Korea Aerospace Industries: products and services

7.2.3 Korea Aerospace Industries: recent announcements and strategic initiatives

7.2.4 Korea Aerospace Industries: alliances

7.2.5 Korea Aerospace Industries: recent contract wins

7.2.6 Korea Aerospace Industries: financial analysis

7.2.7 Samsung Techwin: overview

7.2.8 Samsung Techwin: products and services

7.2.9 Samsung Techwin: recent announcements and strategic initiatives

7.2.10 Samsung Techwin: alliances

7.2.11 Samsung Techwin: recent contract wins

7.2.12 Samsung Techwin: financial analysis

7.2.13 Hanwha Corporation: overview

7.2.14 Hanwha Corporation: products and services

7.2.15 Hanwha Corporation: recent announcements and strategic initiatives

7.2.16 Hanwha Corporation: alliances

7.2.17 Hanwha Corporation: recent contract wins

7.2.18 Hanwha Corporation: financial analysis

7.2.19 Hyundai Heavy Industries: overview

7.2.20 Hyundai Heavy Industries: products and services

7.2.21 Hyundai Heavy Industries: recent announcements and strategic initiatives

7.2.22 Hyundai Heavy Industries: alliances

7.2.23 Hyundai Heavy Industries: recent contract wins

7.2.24 Hyundai Heavy Industries: financial analysis

7.2.25 Daewoo Shipbuilding & Marine Engineering: overview

7.2.26 Daewoo Shipbuilding & Marine Engineering: products and services

7.2.27 Daewoo Shipbuilding & Marine Engineering: recent announcements and strategic initiatives

7.2.28 Daewoo Shipbuilding & Marine Engineering: alliances

7.2.29 Daewoo Shipbuilding & Marine Engineering: recent contract wins

7.2.30 Daewoo Shipbuilding & Marine Engineering: financial analysis

7.2.31 Huneed Technologies: overview

7.2.32 Huneed Technologies: products and services

7.2.33 Huneed Technologies: recent announcements and strategic initiatives

7.2.34 Huneed Technologies: alliances

7.2.35 Huneed Technologies: recent contract wins

7.2.36 Huneed Technologies: financial analysis

7.2.37 STX Engine: overview

7.2.38 STX Engine: products and services

7.2.39 STX Engine: recent announcements and strategic initiatives

7.2.40 STX Engine: alliances

7.2.41 STX Engine: recent contract wins

7.2.42 STX Engine: financial analysis

7.2.43 S&T Dynamics: overview

7.2.44 S&T Dynamics: products and services

7.2.45 S&T Dynamics: recent announcements and strategic initiatives

7.2.46 S&T Dynamics: alliances

7.2.47 S&T Dynamics: recent contract wins

7.2.48 S&T Dynamics: financial analysis

7.2.49 Poongsan Corporation: overview

7.2.50 Poongsan Corporation: products and services

7.2.51 Poongsan Corporation: recent announcements and strategic initiatives

7.2.52 Poongsan Corporation: alliances

7.2.53 Poongsan Corporation: recent contract wins

7.2.54 Poongsan Corporation: financial analysis

7.3 Key Private Sector Companies

7.3.1 Samsung Thales: overview

7.3.2 Samsung Thales: products and services

7.3.3 Samsung Thales: recent announcements and strategic initiatives

7.3.4 Samsung Thales: alliances

7.3.5 Samsung Thales: recent contract wins

7.3.6 Samsung Thales: financial analysis

7.3.7 LIG NEX1: overview

7.3.8 LIG NEX1: products and services

7.3.9 LIG NEX1: recent announcements and strategic initiatives

7.3.10 LIG NEX1: alliances

7.3.11 LIG NEX1: recent contract wins

7.3.12 LIG NEX1: financial analysis

7.3.13 Doosan DST: Overview

7.3.14 Doosan DST: products and services

7.3.15 Doosan DST: recent announcements and strategic initiatives

7.3.16 Doosan DST: alliances

7.3.17 Doosan DST: recent contract wins

7.3.18 Doosan DST: financial analysis

8 Business Environment and Country Risk

8.1 Business Confidence

8.1.1 Business Confidence Index

8.1.2 Market Capitalization Trend KRX Korea Exchange, South Korea

8.2 FDI Inflows by Sector

8.3 Economic Performance

8.3.1 GDP at Constant Prices

8.3.2 GDP per Capita at Constant Prices

8.3.3 GDP at Current Prices

8.3.4 GDP Per Capita at Current Prices

8.3.5 GDP Split by Key Segments

8.3.6 Agriculture Agriculture Net Output Value at Current Prices (Local Currency)

8.3.7 Agriculture Agriculture Net Output Value at Current Prices (US Dollar)

8.3.8 Agriculture Agriculture Net Output at Current Prices as Percentage of GDP

8.3.9 Manufacturing Manufacturing Net Output at Current Prices (Local Currency)

8.3.10 Manufacturing Manufacturing Net Output at Current Prices (US Dollar)

8.3.11 Manufacturing Manufacturing Net Output-Current Prices as Percentage of GDP

8.3.12 Manufacturing Mining, Manufacturing, and Utilities at Current Prices (Local Currency)

8.3.13 Manufacturing Mining, Manufacturing, Utilities at Current Prices (US Dollars)

8.3.14 Manufacturing Mining, Manufacturing, Utilities at Current Prices, as Percentage of GDP

8.3.15 Construction Construction Net Output at Current Prices, (Local Currency)

8.3.16 Construction Construction Net Output-Current Prices

8.3.17 Construction Construction Net Output-Current Prices as a % of GDP

8.3.18 Industry - Crude Steel Production

8.3.19 Industry - Crude Oil Consumption

8.3.20 Inflation Rate

8.3.21 Fiscal Deficit as a Percentage of GDP

8.3.22 Trade Balance as a Percentage of GDP

8.3.23 Exports as a Percentage of GDP

8.3.24 Imports as a Percentage of GDP

8.3.25 Exports Growth

8.3.26 Imports Growth

8.3.27 External Debt as Percentage of GDP

8.3.28 Exchange Rate US$-KRW (Annual Average)

8.3.29 Exchange Rate US$-KRW (End of Fiscal)

8.3.30 Debt Service Ratio

8.4 Infrastructure Quality and Availability

8.4.1 Transport Total Airports and Ports

8.4.2 Transport - Passenger Vehicle Production Volume

8.4.3 Transport - Commercial Vehicle Production Volume

8.4.4 Transport - Automotive Components Export Trend

8.4.5 Transport - Automotive Products Import Trend

8.4.6 Transport - Passenger Car Penetration

8.4.7 Utilities - Total Installed Capacity for Electricity Generation

8.4.8 Utilities - Installed Capacity for Conventional Thermal Electricity Generation

8.4.9 Utilities - Electricity Production

8.4.10 Utilities - Installed Capacity for Hydro-electricity Generation

8.4.11 Utilities - Installed Capacity for Renewable Electricity Generation

8.4.12 Utilities - Electric Power Consumption

8.4.13 Healthcare - Healthcare Expenditure

8.4.14 Healthcare - Healthcare Expenditure as % GDP

8.4.15 Healthcare - Healthcare Expenditure Per Capita

8.4.16 Communication - Total Internet Subscribers

8.4.17 Communication - Broadband Internet Subscribers

8.4.18 Communication - Personal Computer penetration

8.4.19 Communication Mobile Phone Penetration Rate

8.5 Labor Force

8.5.1 Labor Force

8.5.2 Unemployment Rate

8.6 Demographics

8.6.1 Annual Disposable Income

8.6.2 Annual Per Capita Disposable Income

8.6.3 Annual Consumer Expenditure on Food

8.6.4 Annual Per Capita Consumer Expenditure on Food

8.6.5 Urban and Rural Population

8.6.6 Female as Percentage of Population

8.6.7 Male as Percentage of Population

8.6.8 Mean Age of Population

8.6.9 Median Age of Population

8.6.10 Population Density

8.6.11 Age Distribution Total Population

8.6.12 Age Distribution-Male Population

8.6.13 Age Distribution-Female Population

8.6.14 Number of Households

8.7 Political and Social Risk

8.7.1 Political Stability

8.7.2 Terrorism Index

8.7.3 Transparency Index

List of Tables

Table 1: ICD Research Terrorism Index

Table 2: Top Twenty Global Arms Importers*, 200509

Table 3: Top Twenty Global Arms Exporters*, 200509

Table 4: South Korean Air Force Procurement as part of the Defense Reform 2020 Plan

Table 5: Naval Procurement as part of the Defense Reform 2020 Plan

Table 6: Ground Force Procurement as part of the Defense Reform 2020 Plan

Table 7: Offset Regulations in South Korea

Table 8: Korea Aerospace Industries - Alliances

Table 9: Korea Aerospace Industries Recent Contract Wins

Table 10: Samsung Techwin - Alliances

Table 11: Samsung Techwin Recent Contract Wins

Table 12: Hanwha Corporation - Alliances

Table 13: Hanwha Corporation Recent Contract Wins

Table 14: Hyundai Heavy Industries - Alliances

Table 15: Hyundai Heavy Industries Recent Contract Wins

Table 16: Daewoo Shipbuilding & Marine Engineering - Alliances

Table 17: Daewoo Shipbuilding & Marine Engineering Recent Contract Wins

Table 18: Huneed Technologies - Alliances

Table 19: Huneed Technologies Recent Contract Wins

Table 20: STX Engine - Alliances

Table 21: STX Engine Recent Contract Wins

Table 22: S&T Dynamics: Recent Contract Wins

Table 23: Poongsan Corporation - Alliances

Table 24: Poongsan Corporation Recent Contract Wins

Table 25: Samsung Thales - Alliances

Table 26: Samsung Thales - Contracts

Table 27: LIG NEX1 - Alliances

Table 28: LIG NEX1 - Recent Contract Wins

Table 29: Doosan DST Recent Contract Wins

List of Figures

Figure 1: South Korean Defense Market Size and Forecast (US$ Billion), 200515F

Figure 2: South Korean Defense Expenditure as a Percentage of GDP (%), 200515F

Figure 3: South Korean Defense Expenditure Allocation for Revenue and Capital Expenditure (%), 200415F

Figure 4: South Korean Defense Capital Expenditure Breakdown (%), 200915F

Figure 5: South Korean Capital Expenditure Allocation for Air Force (US$ Billion), 200915F

Figure 6: South Korean Capital Expenditure Budget Allocation for Army (US$ Billion), 200915F

Figure 7: South Korean Capital Expenditure Budget Allocation for Navy (US$ billion), 200915F

Figure 8: South Korean Capital Expenditure Budget Allocation for Surveillance and Communication (US$ billion), 200915F

Figure 9: ICD Research Terrorism Heat Map, 2009

Figure 10: ICD Research Terrorism Index, 2009

Figure 11: Benchmarking with Key Global Markets Historical vs. Expected Defense Budget Growth

Figure 12: Defense Expenditure of the Largest Military Spenders in the World (US$ billion), 2009 and 2015F

Figure 13: Defense Expenditure as a percentage of GDP of Largest Military Spenders (%), 2009

Figure 14: South Korean Defense Imports (US$ billion), 200509

Figure 15: South Korean Defense Imports by Country (US$ billion), 200509

Figure 16: South Korean Defense Imports by Country (%), 200509 and 2009

Figure 17: South Korean Defense Imports by Category, 200509 and 2009

Figure 18: South Korean Defense Exports (US$ Million), 200509

Figure 19: South Korean Defense Exports by Country (%), 200509 and 2009

Figure 20: South Korean Defense Exports by Category (%), 200509 and 2009

Figure 21: Industry Dynamics - Porters Five Forces Analysis

Figure 22: Korea Aerospa

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