Defense & Rearmament

Defense and rearmament is the investment cycle that began when governments started raising military budgets and rebuilding stockpiles after Russia’s 2022 invasion of Ukraine. This pillar starts with South Korea, the exporter that has gained the most share, on the strength of fast delivery, local production, and the offset deals that win foreign orders.

Key takeaways
  • The defense and rearmament theme follows the global re-armament cycle that accelerated after Russia's 2022 invasion of Ukraine, as governments rebuild stockpiles and expand arsenals.
  • South Korea is the standout exporter: its arms-export volumes more than doubled from 2010-14 to 2020-24, lifting it to the world's 10th-largest exporter with a 2.2% share, on the strength of fast delivery, local production, and offset deals.
  • Demand shows up in revenue: the four Korean firms in SIPRI's Top 100 grew combined arms revenue 31% to $14.1 billion in 2024, with Hanwha up 42%.
  • This pillar starts with the Korea defense industry (Hanwha Aerospace, Hyundai Rotem, KAI, LIG Nex1) and the offset agreements that win export orders.

What is driving the rearmament cycle?

A war in Europe ended the long peace dividend. Governments that had run down their militaries for thirty years began rebuilding them, and that is a multi-year process, not a single budget. The orders land first with whoever can deliver, which is why a handful of national champions have captured outsized demand.

South Korea is the clearest case. SIPRI’s data shows its arms-export volumes more than doubled from 2010-14 to 2020-24, lifting it to the world’s 10th-largest exporter with a 2.2% share (SIPRI). The revenue followed: the four Korean firms in SIPRI’s Top 100 grew combined arms revenue 31% to $14.1 billion in 2024 (SIPRI).

South Korea’s largest arms company, Hanwha Group, recorded a 42 per cent increase in its arms revenues in 2024, with more than half coming from arms exports.

— Nan Tian, Director, SIPRI Military Expenditure and Arms Production Programme (SIPRI)

Why South Korea, and what is an offset?

Buyers under pressure want kit fast and they want jobs at home. Korean firms offer both: large production capacity that delivers in months, and offset packages that move technology and assembly into the customer’s country. Poland’s purchases are the template, a 2022 framework worth roughly $15 billion with a 2025 follow-on $6.5 billion order for K2 tanks (Defense News). Korea exported $15.4 billion of defense goods in 2025 and aims to be the world’s No. 4 exporter (Seoul Economic Daily).

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Concepts

Companies

Key terms

How can you invest in it?

The Korea Defense Industry concept covers the listed Korean leaders, from Hanwha Aerospace and Hyundai Rotem to KAI and LIG Nex1. The Korea Defense Industry Index is tracked by the U.S.-listed PLUS Korea Defense Industry Index ETF (KDEF).

What are the risks?

Defense is policy-driven, and policy can turn. A ceasefire, a budget fight, or a change of government can slow orders, and export deals carry approval and financing risk that can delay revenue for years. Many of these names have already re-rated sharply, so the easy gains may be behind them. The backlog is real, but it is not guaranteed.

Frequently asked questions

What is the defense and rearmament theme?

It is investing in the companies that make weapons, platforms, and military systems as governments raise defense budgets and rebuild stockpiles. The cycle accelerated after 2022, and the most visible export winner has been South Korea, whose Top 100 arms makers grew combined revenue 31% to $14.1 billion in 2024 (SIPRI).

Why are defense stocks in a multi-year up-cycle?

Russia's 2022 invasion of Ukraine pushed European and Asian governments to raise defense spending and refill depleted stockpiles, a process that plays out over years of contracts. South Korean export volumes more than doubled from 2010-14 to 2020-24 (SIPRI).

Why is South Korea winning defense export orders?

Korean firms combine fast delivery, large-scale local production, and generous offset packages that transfer technology and build factories in the buyer's country. Poland's 2022 framework worth roughly $15 billion, with a 2025 follow-on $6.5 billion tank order, is the flagship example (Defense News).

How can you invest in the defense theme?

The Korea Defense Industry concept covers the listed Korean leaders. The Korea Defense Industry Index is tracked by the U.S.-listed PLUS Korea Defense Industry Index ETF (KDEF). As always, check fees, holdings, and risk before investing.

Sources & references

  1. SIPRI Top 100 arms producers see combined revenues surge · SIPRI, 2025-12-01
  2. Can the growth trend in South Korea's arms industry last? · SIPRI, 2025-03-01
  3. Poland doubles down on South Korean tanks with $6.5 billion deal · Defense News, 2025-08-01
  4. Korea's Defense Exports Hit $15.4 Billion in 2025 · Seoul Economic Daily, 2026-03-24