From tanks to drones: South Korea’s defense firms face a new battlefield test

South Korea’s leading defence companies have lost much of their stock-market value as investors question whether their traditional strengths in tanks and artillery match a battlefield increasingly shaped by drones, counter-drone systems and air defence. The shift in military priorities is one concern, alongside weaker earnings, a stronger won, delayed export orders and competition for investment from the semiconductor sector.

The combined value of Hanwha Aerospace, LIG D&A, Hyundai Rotem and Korea Aerospace fell to about 62 trillion won at the end of October, from a 52-week peak of 170 trillion won. Hanwha’s third-quarter operating profit dropped more than 46% year on year and Hyundai Rotem’s fell 11.1%, while Korea Aerospace reported higher sales and profit. Analysts say conventional weapons remain important, pointing to recent Korean deals including a 546 million-euro Spanish K9 order and a $922 million Norwegian rocket-system order; they also expect drone and unmanned-system exports to grow, though building a proven track record may take time.