Hyundai Rotem with the highest defense factory utilization rate, Also 'No. 1' in exports

[Korea Financial Times, Shin Haeju] Hyundai Rotem (CEO Lee Yong-bae), which has the highest production line utilization rate among the five major defense companies in Korea, also has the largest share of exports.

According to the company's semi-annual report on the 27th, the factory utilization rate of its defense solutions division was 107.5 percent in the first half of this year. It was the highest utilization rate among the five companies and the only one to exceed 100%. It was followed by ▲ Hanwha Aerospace at 89.96%, ▲ Hanwha Systems at 84.76%, ▲ LIG NexOne at 74.8%, and ▲ Korea Aerospace Industries (KAI) at 73.26%.

A utilization rate of more than 100% means that the factory cannot meet demand with the amount of production during regular working hours, so it runs on holidays and at night. In short, demand exceeds production capacity (CAPA). CAPA represents how much product can be produced in a month.
Hyundai Rotem set the operating hours of its defense plants at 438,952MH (man-hours, the amount of work that can be done per hour) in the first half of this year, but it actually operated 470,2003MH, resulting in an average 107.5 percent utilization rate. The figure represents a 5.5 percentage point increase year-on-year.

Hyundai Rotem currently produces defense products such as K2 tanks and wheeled armored vehicles at its defense plant in Changwon, Gyeongnam. While the specific production capacity of the Changwon plant is unknown, it is estimated to be similar or higher than KAI's, which makes aircraft weapons, with an average capacity of 2 to 2.5. Aircraft weapons typically take two years to build, with one year for parts and the remaining year for production. Ground weapons are known to take three to six months.


The high utilization rate of Hyundai Rotem's defense line is due to a contract signed two years ago. In August 2022, Hyundai Rotem signed an executory contract with the Polish Armaments Agency to export 180 K2 tanks. The company delivered the first 10 units in 2022 and 18 units last year to Gdynia, Poland. This year, a total of 56 units are to be delivered, 18 of which were delivered in March.

Hyundai Rotem is also the most dependent on exports. Hyundai Rotem accounted for the highest proportion of overseas sales in the defense sector in the first half of this year. It earned 62.23% of its total sales of 882.5billion won from exports. This was followed by ▲ KAI at 39.90%, ▲ Hanwha Aerospace at 34.42%, ▲ LIG NexOne at 29.81%, and ▲ Hanwha Systems at 5.49%.
“The utilization rate is calculated by taking into account breaks, leakage time due to leave or annual leave depending on the specific case, waiting and production process time such as timely delivery of parts, and development design change time, assuming an eight-hour workday,” an industry insider explained.

Shin Haeju (hjs0509@fntimes.com)