The Globally Eyed Interceptor Missile, LIG D&A's 'Cheongung'... and Aerial Warfare Powerhouses: KAI and Korean Air

If Hanwha Aerospace skyrocketed due to the Russia-Ukraine war, LIG Defense & Aerospace (formerly LIG Nex1) is a company that grabbed attention due to the U.S.-Iran war. Their main customers differ as well; while Hanwha Aerospace focuses on European countries bordering Russia, LIG D&A targets Middle Eastern countries adjacent to Iran.

The reason is simple. The weapons manufactured by the two companies are entirely different. As mentioned in my previous post, LIG D&A hit the jackpot with 'Cheongung-2' (M-SAM). Iran fired an immense number of missiles at the UAE, and Cheongung-2 intercepted almost all of them. According to UAE Ministry of Defense data, the UAE air defense batteries equipped with Cheongung-2 hit 486 out of 507 Iranian ballistic missiles (95.9%), 24 out of 24 cruise missiles (100%), and 2,101 out of 2,191 drones (95.9%).

Securities analysts even worry about whether LIG D&A's supply of Cheongung-2 can keep up with the demand, as requests from Middle Eastern countries are exploding. On top of this, expectations are high for the development of L-SAM (a long-range surface-to-air guided weapon), which can be considered Cheongung-2's partner, and in the long term, Cheongung-3 and L-SAM 2. The interception altitude of Cheongung-3 is 30 km, which is more than double that of Cheongung-2 (15 km). It also increases the interception speed, targeting even hypersonic cruise missiles. L-SAM boasts an interception altitude reaching 40 to 60 km.

The reason the Middle East is focusing on interception weapons is straightforward. The Iran war is being fought primarily through aerial warfare—meaning fighter jets and missiles. This is different from the Russia-Ukraine war, which centers around tanks and infantry.

Most of the land in the Middle East is desert. Iran is defended by the Zagros Mountains to the west and the Alborz Mountains to the north. Both ranges feature numerous peaks exceeding 10,000 to 13,000 feet. Marching ground forces with tanks and infantry into such terrain? It's an easy way to get slaughtered. Iran faces the same difficulty in conducting infantry-centered warfare. Therefore, Middle Eastern warfare naturally revolves around missile strikes and fighter jet bombings. Consequently, Middle Eastern nations are building multi-layered defense systems to block these bombings, making LIG D&A's specialized weapons highly coveted.

What is fascinating is that more than half (59% / 3,409 employees) of LIG D&A's total workforce (5,776 employees) consists of R&D personnel. It is said that 50% of these researchers hold master's or doctoral degrees. This has become the driving force for LIG D&A to evolve beyond Cheongung-2 into a comprehensive system enterprise. Their business has already expanded into Precision Guided Munitions (PGM), Intelligence, Surveillance, and Reconnaissance (ISR), Command, Control, Communications, Computers, and Intelligence (C4I), Avionics, and Electronic Warfare (EW).

Let's look at last year's revenue. LIG D&A's total revenue last year was 4.3069 trillion KRW. Out of this, PGM accounted for 2.0335 trillion KRW, making up 47.2%. C4I stood at 24.7%, AEW at 13.1%, and ISR at 12.1%. Their portfolio is just as solid as Hanwha Aerospace's.

As of the first quarter of this year, the total revenue stood at 1.1679 trillion KRW, with PGM accounting for 59%, AEW for 16.1%, C4I for 13.4%, and ISR for 9.3%.

There is another company that has grown due to the Iran war. It is Korea Aerospace Industries (KAI), the manufacturer of the KF-21 (Boramae). While LIG D&A specializes in missiles, KAI specializes in fighter jets. The KF-21 is a 4.5-generation fighter jet that achieved its first mass-production rollout in March of this year. In actual combat, 4th to 4.5-generation fighter jets handle continuous combat, large-scale weapon operations, airspace defense, and general-purpose missions. This differs from 5th-generation fighter jets, which play a leading role in penetration, target identification, and network-centric warfare during the very early stages of a war.

Because 5th-generation fighter jets must maintain a stealth shape, their weapon payload capacity is smaller than that of 4th to 4.5-generation jets. Their multi-role mission capabilities, such as airspace defense, interception, air-to-ground strikes, and reconnaissance, are also relatively lower. Experts judge that 4th to 4.5-generation jets are operated as the core aerial strength worldwide and are more practical than 5th-generation jets in terms of cost and versatility.

The price of the KF-21 is estimated at 90 to 100 billion KRW per unit. Major potential export candidates include the UAE (21 trillion KRW) and Saudi Arabia (10 trillion KRW). Egypt is expected to import the FA-50, a supersonic light fighter, for up to 1.4300 trillion KRW. The United States has also launched its next-generation advanced pilot training aircraft replacement project (UJST). KAI's supersonic trainer, the TF-50N, has jumped into this race. If the bid is successful, the expected revenue for the TF-50N is projected to reach up to 2.5000 trillion KRW.

Another fighter jet-related company worth noting is Korean Air. Many people think Korean Air only operates passenger and cargo businesses, but it actually manufactures unmanned aerial vehicles (UAVs/drones) and military aircraft as well. Of course, passenger transport accounted for the vast majority at 9.8450 trillion KRW out of last year's total revenue of 16.5020 trillion KRW. Cargo stood at 4.4090 trillion KRW. The Aerospace Business Division brought in 780 billion KRW, which is a mere 4.72% of the total. However, passenger and cargo sectors face clear growth limits. South Korea's annual number of outbound travelers maxes out at 30 million, and it has already begun to stagnate due to a low birth rate and aging population. Cargo transport demand also structurally cannot increase dramatically. To break through these limitations, they chose the UAV and military aircraft business. Since war has never vanished in human history, the future growth potential remains wide open.

Thanks to continuous investment in UAV development since the 2000s, Korean Air has established various mass-production systems. These include the division reconnaissance UAV (KUS-FT), the medium-altitude UAV (KUS-FS), the low-observable UAV wingman (LOWUS), small-to-medium loitering munitions, and small cooperative UAVs (KUS-FX).

In particular, the demand for UAVs (drones) is surging in modern warfare. You have likely seen footage from the Russia-Ukraine war where small kamikaze drones swarm soldiers. In the Iran war, the U.S. fired interceptor missiles worth 6 billion KRW just to shoot down a single Iranian drone that cost 30 million KRW. Currently, the U.S. has established a '1 Million Drones Plan'. Thailand, the Philippines, and other Southeast Asian regions are also highly interested in attack UAVs. This is highly likely to turn into a major benefit for Korean Air. Furthermore, Korean Air is transforming into a true defense company by handling 'depot maintenance'—which involves inspecting, repairing, reinforcing, and upgrading fighter jet airframe systems.