Overview

As of September 2025, South Korea is the tenth largest global defense exporter and spends a defense budget that is 11th largest in the world. South Korea, which has traditionally been heavily reliant upon the United States in supplying defense equipment to support its military forces, has become a major defense manufacturer over the past decades. Being able to develop and grow its domestic defense industry, South Korea has further transformed itself into a global exporter of defense articles. Nevertheless, South Korea continues to be one of the United States’ primary locations for arms exports, thus a substantial market for American defense contractors. Between 2020 and 2024, 86% of South Korea’s arms imports came from the United States. During the same period, South Korea accounted for 5.3% of total U.S. arms exports.

Table 1: Military Expenditure by Country for 2024

Source: Stockholm International Peace Research Institute (SIPRI Fact Sheet, April 2025)

To complement its national defense strategy, South Korea has been pursuing force modernization programs for some years. The most updated program is known as Defense Innovation 4.0. which was announced in March 2023.

One of the goals of this modernization program is to build an effective and capable force that is able to meet emerging security threats while limiting reliance on foreign defense technology. It also encourages the development of homegrown technology, as well as the local production of weapons systems both in the form of parts or components, and complete systems. South Korea thus prioritizes the acquisition of locally developed and manufactured defense articles.

Under Defense Innovation 4.0, the government is aiming to keep the military ready to “fight and win” by coupling the power of advanced science and technology. This initiative seeks to modernize and strengthen ROK’s defense and military response capabilities to a combat system based on AI, manned and unmanned systems to overcome challenging security environments of the future. Such focus on unmanned systems also reflects South Korea’s low birth rate and a shrinking population which would likely impact and reduce the number of armed forces in the near future.

Table 2: South Korea’s Defense Budget Trends 2020-2025

Unit: USD Million, $1 USD = 1,180 KRW, Source: Ministry of National Defense Data.

South Korea’s Defense Budget

For 2025, South Korea allocated $52 billion (61.2 trillion won) or 8.7 percent of its total government expenditure to its defense budget. This was a 3.06 percent increase compared to the previous year. The 2025 defense budget contained $36.8 billion (43.5 trillion won) for force operations which includes expenditure for military logistics, facilities, and education and training of military forces. Another $15.3 billion (18 trillion won) was dedicated to defense capability improvement, an expenditure used for securing advanced weapon systems to enhance and maintain defense capabilities in preparation of all kinds of possible security threats. Compared to the previous year, the budget for force operations and defense capability improvement represents a 4.2 percent increase and a 2.4 percent increase, respectively.

In particular, the 2025 budget for defense capability improvement continues to focus on reinforcing the core defense capabilities for the Korean 3 axis system. Primarily, it seeks to respond to North Korea’s nuclear and missile threats and secure defense capabilities to counter North Korea’s asymmetric threats. This also includes establishing an AI-based manned-unmanned teaming (MUM-T) system, enhancing operational capability for space, cyber, electronic warfare, and expanding defense exports.

South Korea’s Acquisition of Weapons Systems

South Korea’s acquisition of weapons systems from overseas is administered through foreign procurement programs either in the form of Foreign Military Sales (FMS) or Direct Commercial Sales (DCS). In particular, South Korea’s foreign purchase of defense equipment has sharply increased in 2023 with the government pursuing large-scale programs such as the F-35A next-generation fighter jets, and large transporter helicopter programs.

According to the latest data from the Defense Acquisition Program Administration (DAPA) published in July 2025, the total volume of weapons South Korea acquired through foreign purchases from 2020 to 2024 was about $16.1 billion (20 trillion won) and more than half of it was acquired through FMS programs valued at $9.6 billion. Meanwhile, the total volume of weapon systems South Korea acquired through foreign DCS programs during the same period was about $6.6 billion in value and 43 percent ($2.8 billion) of it was purchased from the United States.

Table 3: South Korea’s Arms Purchases from Overseas

Source: DAPA, Unit: USD Million. $1 USD = 1,300 KRW

Figures are based on contract amount. FMS figures are based on the ROK government’s acceptance of new offers each year.

It is common for most advanced weapons systems with a U.S. origin to be acquired through FMS programs due to strict U.S. government regulations. Nevertheless, the number of procurement cases for weapons systems administered through DCS programs has been steadily increasing in recent years. In particular, the South Korean government has shown a tendency to procure some weapons systems through DCS programs in lieu of FMS programs which would oftentimes entail a rather complex and lengthy process for purchasing and approval.

Market Access and End Users

With a mission to improve the Republic of Korea’s (ROK) defense capabilities and foster its defense industry, the Defense Acquisition Program Administration (DAPA) was established in 2006 as the central administrative body for defense acquisition. Consolidating the defense acquisition function previously administered by each military service, DAPA plans, executes, and oversees the procurement of arms, military equipment and supplies on behalf of the Ministry of National Defense (MND) across all domains. Furthermore, DAPA negotiates the requirements of the defense products and services, authorizes offset credits, dictates terms and conditions, and makes changes to delivery schedules or required deliverables. DAPA controls all formal negotiations on the price, technology transfers, local work share, and offset packages.

The principal points of contact for major defense programs are the respective military service which includes the ROK Air Force, ROK Army, ROK Navy. The military services, however, procure most of the military equipment and systems through DAPA. To participate in government programs that require local co-production or co-development, foreign defense contractors would oftentimes form a consortium with leading Korean defense firms such as the Korea Aerospace Industries (KAI), Korean Air, Hanwha, LIG NEX1, Hyundai Rotem and others.

Most foreign defense contractors seeking to participate in local defense bids and government programs work with their in-country partners which may include distributors, sales agents, or commission-based sales representatives. Working with local partners is considered essential for foreign defense contractors in order to overcome language barriers, secure networks with key decision-makers, gain local market intelligence, and navigate the administrative and logistical challenges related to the procurement processes.

Market Challenges

Offset Trade Policy

Offset programs were first introduced in South Korea in 1982 with the objective to develop the ROK’s domestic aerospace industry. However, it gradually became an important means to acquire core defense technologies to develop the local defense industry. DAPA, the central defense procurement agency, administers the offset policy, while technology quality assurance assessments are led by the Defense Agency for Technology and Quality (DTaQ), an organization under DAPA.

An offset obligation may arise for a foreign contractor should the value of the defense contract exceed $10 million. According to the latest guidelines, a minimum of 50 percent or more of the estimated value of the main contract would be allocated for an offset for contracts with competing suppliers. For sole source contracts, a minimum of 30 percent or more of the estimated value of the main contract would be applied to an offset.

According to the latest DAPA data published in 2025, foreign defense contractors from a total of 9 countries had partaken in a total of 43 offset programs between 2020 and 2024. The total value secured through those offset programs during the same period was recorded at $1,026 million. Furthermore, out of the 43 offset programs, U.S. defense contractors participated in a total of 15, which provided the largest offset value (35 percent) at $314 million.

Between 2020 and 2024, 71 percent of the offset programs valued at $733 million were administered in the form of exporting Korean-made parts and components of weapons systems, while other types of offset programs included acquisition of logistical support equipment, and technology transfers for weapon systems development.

With aims to expand the exports of the defense sector, South Korea has been encouraging foreign defense contractors to pursue co-development and co-production with local defense manufacturers to fulfill the offset requirements. However, foreign companies are oftentimes finding it challenging to commit to offset program requirements due to the number of extensive liability terms and conditions stipulated by the Korean government under its policy guidelines.

Table 3: Offset Program Participants by Country from 2020 to 2024

Unit: number of programs, USD million

Government-driven Development of Homegrown Technology and Defense Exports

South Korea was the 10th largest arms exporter during years from 2020 to 2024 accounting for 2.2 percent of the world’s defense exports. During those years, South Korea’s defense exports to the world were recorded at $3.1 billion in value according to the SIPRI data released in 2025. In general, South Korea’s major defense exports have been centered on its platform systems which includes aircrafts, artillery, and ships. Major recipients of South Korean arms during the period included Poland, Philippines, India and others.

Traditionally reliant upon the United States in supplying defense equipment and systems to its military forces, South Korea’s strong government-led initiative to develop the local defense industry has enabled South Korea to grow into a manufacturer and an exporter of defense articles. The government continues to pursue policies that prioritize local technology and products over foreign defense technology. Some recent key defense exports of South Korea include items listed as below.

• 6 patrol corvettes to Malaysia ($1.2 billion)
• 12 FA-50 light combat aircrafts to Philippines ($420 million)
• 16 T-50 advanced trainers to Indonesia ($4 billion), 12 T-50 advanced trainers to Thailand ($110 million)
• Military vehicles to the Philippines ($345 million)
• K-9 Thunder self-propelled howitzers to India (100 units), Turkey (280 units), Finland (48 units), Norway (24 units), and Poland (648 units), Egypt (200 units, $1.7 billion), Australia (30 units, $730 million)
• Cheongung II (Mid-range surface-to-air-missiles) to UAE ($3.5 billion) 
• 980 K2 battle tanks to Poland
• 288 K239 Cheonmoo Rocket Artillery Systems to Poland
• 48 FA-50 Light Combat Aircrafts to Poland, 18 FA-50 Light Combat Aircrafts to Malaysia

South Korea’s indigenization rate of defense technology has been steadily increasing over the past five years. According to DAPA’s data released in 2025, which utilize the Korea Defense Industry Association’s (KDIA) data for 2023, South Korea’s overall indigenization rate of weapon systems has grown from 75.3 percent in 2019 to 89.6 percent in 2023. Compared to the previous year, those weapons systems with a strong domestic technology base that use maneuver systems, warships, communication electronics demonstrated a relatively higher indigenization rate compared to those in the guided munitions, aerospace, ammunition domain.

In August 2021, DAPA revealed a new industrial policy, known as Korea Defense Capability, which prioritizes the sourcing of Korean-made defense articles over foreign-produced defense products linked to defense procurement contracts. This new policy requires all defense procurement to adopt an 80 percent to 20 percent quota between local and foreign products, respectively.   

The United States and the ROK Defense Industry

The United States maintains a total of 28,500 troops on Korean soil in support of its commitment under the U.S.-ROK alliance to help secure peace and stability on the Korean peninsula. The alliance serves as a powerful deterrent against the rising and evolving threat of North Korea, as well as the rapidly changing security dynamics in the Asia-Pacific region. Thanks to the 72 years old alliance which serves as a cornerstone for U.S.-ROK security relations, most Korean defense systems and equipment have a U.S. origin and are thus based on American standards. This remains to be a key factor that affects South Korea’s defense procurement decisions.

While the U.S. continues to be a primary supplier of defense articles and weapons systems to South Korea, stringent requirements under U.S. export control regimes, and competitive price points offered by other European and Israeli competitors pose market challenges for American firms seeking entry into the Korean market.

Best Prospects and Opportunities

• Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR)
• Aircraft upgrades
• Avionics, high-tech sensors, radars, and missile system
• Unmanned Aerial Systems (UAS) and counter-UAS
• Unmanned systems for maritime and ground domain
• Defense AI technology and products
• Support for combat equipment
• Anti-terrorism products

Resources

Trade Shows

• Seoul International Aerospace and Defense Exhibition (ADEX), Oct 2027
• Korea Army International Defense Industry Exhibition (KADEX), Oct 6-10, 2026

Key Contacts

• Defense Acquisition Program Administration (DAPA)
• Ministry of National Defense (MND)

Local Contact

U.S. Commercial Service Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 03141 Korea
Tel: 82-2-397-4186
www.trade.gov/south-korea