Hanwha Aerospace closes in on L-SAM deal with UAE as K-defense eyes Middle East

A contract to export Hanwha Aerospace's long-range surface-to-air missile system, the L-SAM, to the UAE is coming into view. UAE defense firm EDGE recently completed an inspection of Hanwha Aerospace's factory in Changwon, and working-level talks between the two sides are moving ahead at pace.

With the conflict involving the United States, Israel and Iran earlier this year raising the likelihood that Middle Eastern countries will begin placing weapons orders in earnest next year, South Korea's defense firms are expected to intensify their push into the region to make up for a sluggish order intake this year.

According to industry sources Wednesday, Hanwha Aerospace told securities firms at a recent IR session that "the UAE, as the country that suffered the most in the Middle East conflict, will move to strengthen its air defense network," adding that "EDGE has completed its inspection of the Changwon factory and working-level discussions on weapons exports have advanced considerably."

The company said the L-SAM is expected to be the top priority and that it is considering including ground weapons in the framework over the longer term.

Known as Korea's answer to the THAAD system, the L-SAM is a long-range, high-altitude intercept system that covers the uppermost layer of South Korea's missile defense network, with a maximum intercept altitude of 70 kilometers. LIG Defence & Aerospace (LIG D&A) serves as the system integrator, while Hanwha Aerospace supplies the interceptor missiles and launchers and Hanwha Systems provides the multifunction radar.

Hanwha signed a heads-of-agreement with EDGE in September on a project to build an integrated air defense network in the UAE, with the L-SAM listed among the systems covered. Should an L-SAM export go ahead, Hanwha Aerospace is expected to pursue a localization strategy that includes establishing a production base inside the UAE.

After a string of export wins over the past two to three years, South Korea's defense industry has struggled badly this year as orders from its biggest customer, Poland, dried up. While Hanwha Aerospace and some other firms managed to expand into new markets such as Croatia and Spain, Hyundai Rotem and Korea Aerospace Industries (KAI) failed to secure a single new overseas contract this year.

Against that backdrop, orders from the Middle East represent a fresh opportunity for the Korean defense sector — and the region has already provided proof of concept. Earlier this year, the UAE deployed its Cheongung-II surface-to-air missile system against Iranian ballistic missiles and recorded a 96 percent intercept success rate. The Cheongung-II, developed primarily by LIG D&A, incorporates launchers from Hanwha Aerospace and a multifunction radar from Hanwha Systems.

At the IR session, Hanwha Aerospace said it expects next year to be "the year of the Middle East," drawing a parallel with the Poland contracts that followed Russia's 2022 invasion of Ukraine. "Just as the Poland contracts came in 2023 after the war in Ukraine, orders will concentrate in the Middle East next year," the company said. It added that Middle Eastern buyers prioritize volume and delivery timelines, and that "the likelihood of Korea being chosen is high, given compatibility with US weapons systems and a performance advantage over Chinese alternatives."

The industry broadly expects Korean defense firms to push aggressively into the Middle East and break open an order pipeline that has been quiet for some time. Hanwha is the most active in pursuing contracts, with localization strategies under way in both the UAE and Saudi Arabia. Hanwha Aerospace said business discussions are continuing despite delays caused by local conditions.

LIG D&A established a joint venture with a local company in the UAE last year and made its first appearance at a defense exhibition in Qatar earlier this year. KAI is reported to be in talks to finalize a contract for 100 FA-50 fighter jets with Egypt.