K-defense order backlogs slip as new export deals dry up

The order backlogs of South Korea's defense industry, which had carved out a strong presence in global markets, are now trending downward. Weapons deliveries under past export contracts continue, but new overseas orders have been shrinking. The combined backlog of the four major defense firms stands at nearly 100 trillion won ($70.4 billion), and opportunity factors — including uncertainty in the Middle East — remain. Still, some analysts argue that Korean defense companies must sharpen their unmanned weapons capabilities to keep winning export contracts.

As of the end of June, the defense order backlogs of Korea Aerospace Industries (KAI), LIG D&A and Hyundai Rotem's defense division (AD&RH) had all declined from their end-of-2025 levels, according to industry data released Monday.

KAI's backlog stood at 25.75 trillion won at the end of June, down 5.8 percent from 27.34 trillion won at the end of last year. LIG D&A and Hyundai Rotem's defense division posted backlogs of 24.57 trillion won and 9.89 trillion won, respectively, falling 6.3 percent and 6.6 percent over the same period. Hanwha Aerospace was the only company to record an increase, with its backlog rising from 37.22 trillion won to 38.3 trillion won.

South Korean defense firms had previously secured a string of trillion-won contracts in Poland and the Middle East, riding a wave of heightened geopolitical risk. KAI signed a $3 billion deal in 2022 to supply 48 FA-50 light combat aircraft to Poland. LIG D&A concluded a series of export contracts for its Cheongung II guided-missile system with three Middle Eastern countries — the United Arab Emirates, Saudi Arabia and Iraq — between 2022 and 2024. Hyundai Rotem signed a second export contract last year to supply K2 tanks to Poland, worth around 9 trillion won.

The recent slowdown follows a drop-off in large-scale export deals. KAI, LIG D&A and Hyundai Rotem have all failed to land any notable overseas contracts this year. KAI had teamed up with Lockheed Martin to bid for a US Navy advanced jet trainer program but withdrew from the competition, citing cost concerns. Hanwha Aerospace at least secured a Chunmoo multiple-rocket-launcher export contract with Norway worth 1.3 trillion won earlier this year.

Industry insiders broadly agree, however, that it is too early to sound the alarm. The four firms' combined backlog remains close to 100 trillion won, and security uncertainty is rising across key regions, including the Middle East. The strong reputation Korean defense products have built on cost-effectiveness also underpins the case for a recovery.

The companies are pursuing major export contracts to rebuild their backlogs. Hanwha Aerospace is in negotiations with Saudi Arabia over ground-based weapons systems, while KAI is in talks with Indonesia over exports of the KF-21 fighter jet. LIG D&A opened a Latin America representative office in Peru last month to strengthen its push into that defense market. Hyundai Rotem is pursuing K2 tank sales to Romania and Peru, among other markets.

Meanwhile, analysts are calling on South Korean defense companies to boost their unmanned strategic assets if they want to sustain overseas orders. "The importance of drones and other unmanned weapons on the modern battlefield is growing by the day," one industry official said. "Because domestic defense exports have been concentrated in conventional weapons such as howitzers and tanks, companies need to accelerate their portfolio shift as quickly as possible."

Domestic defense firms are already stepping up efforts to strengthen their technological edge. Hanwha Aerospace conducted an integrated performance demonstration of a manned-unmanned teaming combat system in Romania in June, with the company's multipurpose unmanned ground vehicle taking part. It was the first time a domestically developed military unmanned ground vehicle had demonstrated its capabilities on European soil.

KAI is pushing ahead with the development of an AI-based manned-unmanned teaming system, while LIG D&A is accelerating the commercialization of unmanned surface vessels. Hyundai Rotem is developing unmanned robot technology based on physical AI.