2023 DAPA-CSIS Executive Summary

ROK-U.S. Defense Industrial Cooperation for a Resilient Global Supply Chain

With the backdrop of the ongoing war in Ukraine and intensifying competition in the Indo-Pacific, the Center for Strategic and International Studies (CSIS) and the Defense Acquisition Program Administration (DAPA) convened a conference on March 16, 2023, to discuss avenues to deepen bilateral defense cooperation between the United States and the Republic of Korea (ROK). The 2023 DAPA-CSIS conference builds off conversations established in its 2019 and 2021 iterations to continue developing what CSIS president Dr. John Hamre has termed the “third generation of defense cooperation” for the two countries. This “third generation” is based on the ROK’s expanding defense industrial capacity and seeks to integrate the ROK’s defense industrial base into U.S. defense critical supply chains. With this strategic context as a backdrop, the 2023 conference’s discussions centered around three core pillars: investigating the prospects of a bilateral Security of Supply Arrangement (SOSA) between the United States and the ROK, strengthening of semiconductor supply chains, and deepening cooperation on “off-peninsula” issues.

Both keynote speakers reaffirmed the importance of industrial cooperation as part of the partnership, building on U.S.-ROK leaders’ joint statement on May 21, 2022. In his keynote remarks, Defense Acquisition Program Administration (DAPA) minister Eom Donghwan noted that the joint declarations of the two nations should “recognize that the potential for cooperation in defense industry is increasing and that a safe, sustainable, and resilient global supply chain is based on such effort.”[1] The minister offered that defense cooperation can serve as a pillar of a larger evolving technology alliance that also includes emerging technologies and cybersecurity. Similarly, Deputy Assistant Secretary Michael J. Vaccaro observed that the U.S. Congress has also noted the importance of the global defense industrial base and government-to-government cooperation, which has led to the creation of an assistant secretary of defense for industrial base policy.

The U.S.-ROK Alliance Then and Now

The U.S.-ROK alliance is celebrating its 70th anniversary in 2023. Since the Korean War, the United States has understood the importance of maintaining peace on the Korean Peninsula, and the ROK has developed into a flourishing industrial economy amidst a complex security environment. In light of this harrowing security challenge and with a foundation of shared sacrifices, Washington and Seoul have developed a deep bilateral security partnership. This has transformed over time as the ROK economy and industrial capability have grown, as captured in Figure 1; each stage of the relationship is discussed in further detail below.

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The figure tracks U.S.-ROK defense cooperation over the stages of the partnership. The first generation was largely defined by equipment transfers from the United States to the ROK through military assistance, evolving into arms sales through the Foreign Military Sales (FMS) process that includes training and logistics support. The United States transferred a variety of systems to the ROK during this phase, ranging from armored vehicles to fighter jets to developing the ROK’s military into a combat-credible force able to resist the threat of invasion.

The second generation of defense cooperation featured a larger role for technology transfer and elevated the ROK from solely a receiver of U.S. equipment and technological know-how to a contributor to capability development. Korean firms have partnered with U.S. primes to develop platforms in conjunction with larger Department of Defense’s (DoD) programs. This expanded relationship includes licensed production of U.S. origin systems in the ROK and an ROK policy to encourage industrial development and technology transfers to offset some of the expenses of importing weapons. An example of second-generation cooperation was offered during the conference by Han Seung Jae, the director of the Korea Research Institute for Defense Technology Planning and Advancement’s Global Defense Business Division, who referenced the ROK’s development of the T-50 trainer jet as a part of the U.S.-led F-16 program.

Seoul’s burgeoning defense industrial capabilities have also allowed South Korean systems to find success on the export market. From 2021 to 2022, ROK defense exports increased dramatically by 140 percent as Seoul positioned itself as providing cost-effective alternatives to systems offered by traditional players in the international arms export arena.

The third generation continues to involve U.S.-ROK government-to-government cooperation through the bilateral Defense Technological and Industrial Cooperation Committee (DTICC). Under this arrangement, the Technology Cooperation Subcommittee (TCSC) has a special role for fostering cooperation on mutual emerging technology and research and development priorities. Similarly, ROK industry may validate products and potentially sell directly to the U.S. government through the foreign comparative test (FCT) program that compares arms produced by allies and partner nations to U.S. specifications. As highlighted in Figure 1, a venue for third-generation business-to-business integration is the U.S.-ROK Defense Consultative Committee (DICC), which brings together members of the U.S.-based National Defense Industrial Association and the Korean Defense Industry Association.

Speakers at the 2023 DAPA-CSIS conference highlighted active areas of cooperation, indicating that the third-generation partnership is not merely a theoretical construct but is in active development. Mr. Vaccaro pointed to five ongoing foreign comparative test programs involving South Korean industry. Deputy Assistant Secretary of the Army for Defense Exports & Cooperation Pat Mason mentioned that the U.S. Army has seven ongoing cooperative science and technology efforts with the ROK and another two in development. Medical technology and artificial intelligence are specific areas where collaboration is seen as particularly promising. He added that the goal is “not that we simply collaborate on science and technology and then we go in separate directions. Rather it’s how does that lead to co-development of systems or subcomponents, elements that can go into systems that, again, ensure that interoperability? And then how that leads into production opportunities throughout our allies and partners, where that is shared.”[2] Minister Eom called for building the relationship further based on these efforts: “Now it is time for us to move forward to third generation, where we jointly do the overall process of joint development, joint production, and joint marketing of the weapon systems.”

Security of Supply Arrangements

A necessary feature of the third generation of U.S.-ROK defense cooperation will be the strengthening of bilateral supply chains to enable more effective integration of both nations’ industrial bases. Security of Supply Arrangements (SOSAs) offer a pathway to achieving this goal. SOSAs are bilateral arrangements that allow each participant to request priority delivery for acquisition from the partner nation’s industry, including both direct purchases of final products and also acquisitions of critical parts from lower tiers of the supply chain.

According to the DoD, SOSAs and other reciprocal industry priority policies “encourage partner nations to acquire defense goods from each other” and “promote interoperability” between U.S. allies. Mr. Vaccaro noted that a key initiative in the DoD’s 2022 presidentially mandated supply chain assessment was “to conclude more security of supply arrangements with key allies and partners.” In addition to the benefits mentioned above, the increased mutual visibility granted by SOSAs can add resilience to supply chains by helping identify alternative sources when a key supplier has reached its production capacity. While the current efforts at a U.S.-ROK SOSA began in November of 2022, Mr. Vaccaro indicated that he had been advocating for a SOSA with South Korea for “about 15 years” and that this agreement would promote industry-to-industry cooperation in addition to the existing government-to-government relationship.

Several Korean panelists discussed the ROK’s eligibility to enter a SOSA with the DoD. According to Mr. Yoon Changmoon, DAPA’s director general of the International Cooperation Bureau, said that the ROK is reviewing whether to enter a SOSA and offered that the agreement would reinforce the existing U.S.-ROK defense partnership by aligning both states’ defense supply chains. Mr. Yoon noted that participation would be voluntary for industry and “the companies that participate in this arrangement will be recognized as trustworthy suppliers. So it will be a good opportunity for them to also participate in the global supply chain.”

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As shown in Figure 2, the majority of the DoD’s existing SOSAs are with North Atlantic Treaty Organization’s (NATO) allies with Denmark, Japan and Israel added in 2023. The data show that completing a SOSA does not guarantee that U.S. exports will occur at a higher rate than before the agreement, although in the case of Latvia, Norway, and the Netherlands, there are clear upward trends. That said, for the ROK, a SOSA does not fully simplify its ability to engage with the United States’ defense industrial base. SOSAs typically come after a Reciprocal Defense Procurement Agreement (RDP). The ROK is in an unusual situation in that it does not have an RDP with the United States. In the absence of an RDP, the ROK will not count as a qualifying country for which the Buy American Act is waived. National comparisons are thus difficult, but seven countries with SOSAs have listed companies participating in the code of conduct.[3] Identifying and learning from the experience of vendors that are peers to those in South Korea may thus offer useful insights as the ROK moves forward with a SOSA. Though SOSAs have limitations, the establishment of a U.S.-ROK SOSA would still likely deepen defense industrial cooperation within the supply chains of U.S. prime contractors.

Cybersecurity and the Supply Chain

Another critical issue relating to supply chain integration and resilience is cooperation on cybersecurity between the United States and the ROK. This element of cooperation is a high-trust exercise given the increasingly networked nature of U.S. defense systems. The DoD developed a cybersecurity maturity model certification (CMMC) approach to standards and classifications for contractors handling sensitive information. These regulations are challenging even for U.S. domestic industry, as required measures to protect against cyber threats can be expensive and complex and are especially burdensome for small businesses. Systems are being constantly tested by skilled adversaries, so protection of every link in these supply chains is critical in spite of the challenges it may create. As National Space Foundation Chair Colonel (ret.) Karlton Johnson warned, “Small business and large business, again, it’s not a matter of if, it’s a matter of when you’re going to get cyberattacked.”

U.S. policymakers have been responding to a range of concerns expressed by the defense industry, and under the leadership of the chief information officer (CIO), the DoD is now developing a CMMC 2.0 approach. In parallel, the ROK is developing its own version of CMMC and is seeking to have the certifications under its K-CMMC system also meet the standards to be recognized by the DOD system.

Mr. Vaccaro indicated that the expected public comment period when CMMC 2.0 regulations are proposed will offer an opportunity for international government and industry partners to help shape the future of CMMC: “I will encourage industry, both U.S. and international, that when that rule is published, in proposed format, to review it closely. And if there are things that work well, highlight that in the comments. We welcome comments. But if there are areas of concern, I would encourage you to acknowledge those and submit comments on those.” Vaccaro cited his experience with export control reform efforts under the Obama administration as a previous case where the regulated community (the global defense industrial base) provided valuable feedback: “And I will say that in a couple of categories, the comments we receive from industry were so enlightening that we went back and had to publish another proposed rule before we went final.”

Semiconductors

The ROK is particularly well positioned to cooperate on defense critical semiconductors. The ROK is a leading producer of high-end semiconductors, and Yoon Changmoon reports that it is actively investing in improving its chips to further align with military applications. Semiconductors are key components of high-tech civil and military applications, and a shortage of chips can have significant consequences for the global economy. The Covid-19 pandemic was a factor in global semiconductor shortage that reverberated across the world and throughout several economic sectors revealing the fragility in the semiconductor supply chain. Ensuring its stability is a strategic imperative for the United States and the ROK. As a result, the Biden administration has identified semiconductors as an essential good.

At the private session of the 2023 DAPA-CSIS conference, bilateral cooperation on semiconductor supply chains was raised as a potential pillar of third-generation U.S.-ROK defense cooperation. The ROK is analyzing demand in the hopes of contributing to the strength of supply chains going forward. The DoD’s Rapid Assured Microelectronics Prototypes – Commercial (RAMP-C) Program was raised on the South Korean side as a key opportunity for the United States and the ROK to co-research and co-develop new chips. This type of collaboration could result in greater standardization of U.S. and South Korean chips in their design and components.

Mr. Vaccaro confirmed the DoD’s interest in South Korean chips at the public panel. He reported that “Korean semiconductor leading manufacturers have met with our [DoD] senior department leadership in recent months.” Vaccaro said that the DoD accounts for only approximately “2 percent of microelectronics consumption in the United States,” but those microelectronics are critically important for U.S. defense systems. Moreover, the DoD’s needs go beyond cutting-edge semiconductors. DoD requires legacy chips to support a range of long-operated weapons platforms long after these chips are no longer relevant to the commercial market.

A caution here is that Mr. Cho Jun Hyun, the director of DAPA’s Defense Acquisition Initiative Division, said that the profitability of providing semiconductors to the DoD is low relative to other consumers, and an inconsistent demand signal may make the costs of producing military semiconductors too much for firms.

Mr. Cho did offer that joint research and development of military chips and mutually agreed upon standards can decrease costs and enable “cost-effective mass production.” Despite the manufacturing complexities, Mr. Han Seung Jae said that the United States, as a “traditional powerhouse in system semiconductor design,” and the ROK, as a manufacturer of semiconductors for memory chips, should partner in this supply chain so both states have a mutually beneficial outcome. Achieving this will require consistent engagement. The United States must strike a balance between developing a domestic semiconductor industry for Washington’s own resilience and incorporating South Korean firms within the U.S. semiconductor supply chain.

U.S.-ROK Global Cooperation Off Peninsula

Besides the ROK’s role in the Pacific security architecture, Seoul’s industrial capabilities are increasingly empowering it to be a leader beyond the peninsula. In the 2023 DAPA-CSIS conference’s private panel, a senior U.S. official noted the connection between the ROK’s growing defense industrial capabilities and Seoul’s increasingly global role and posited that this had the potential to “lead to even greater [U.S.-ROK] cooperation off the peninsula.” This echoed a point made by Minister Eom:While the national benefits to Korea through defense export is important, we also take universal value and philosophy of humanity importantly and are approaching this at macro level of sharing the international security.” Minister Eom further suggested that deepening mutual understanding of defense policies and cooperation areas would produce benefits for both nations and the international community.

As depicted in Figure 3, the United States and the ROK do at times compete, for example, they both deliver aerospace products to East Asia and the Pacific as well as the Near East. That said, the ROK’s concentration in ships, as well as the different regions of focus for U.S. and ROK land vehicles, suggest that the nations exports can at times be complementary. This complementarity can serve mutual goals; notably, the ROK’s defense industry has long played a role in providing land vehicles, including artillery, to Europe, a role that has accelerated in order to try to meet Europe’s rearmament demand amidst the ongoing war in Ukraine.

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As a result, there are a myriad of opportunities for South Korean firms to expand their business with the United States and its allies. In the private panel, a senior South Korean industry official said “that they have seen acquisition of boutique energetics materials evolve from “literally taken years to process orders”, to “requests that require delivery as soon as possible.” 

Poland—an ally that has transferred hundreds of Cold War-era tanks and self-propelled artillery systems to Ukraine—offers a useful example of how the ROK has grown its European exports. Poland purchased over a thousand K2 tanks and 672 K9A1 self-propelled howitzers from Hanwha Defense in July 2022. By December 6, 2022, these systems began to arrive in Gdynia, Poland, demonstrating the ROK’s ability to meet an urgent need to restock depleted Western militaries.

Policy restricts ROK transfers of lethal aid into war zones, which includes Ukraine, but Mr. Vaccaro noted that on March 15, the chairman of the Joint Staff convened a meeting of the Ukraine Defense Contact Group with participation from 50 countries, including the ROK. Vaccaro thanked the ROK for its participating in that forum and the national armaments director level group: “We’re all working together to share information, and looking, seeing, how we can expand production. And key areas we’ve been focusing on are ammunition, but also sustainment. And, so, we really welcome Korea’s support for that workstream also.”

With NATO allies increasingly fielding South Korean systems, there may be risks to transatlantic interoperability unless the United States and ROK work together. To that end, Mr. Mason affirmed at the public panel that the United States and the ROK will need to deepen their bilateral technical exchanges. However, he argued that U.S.-ROK defense cooperation could usefully expand beyond that into other areas such as logistics: “We are also starting a logistics working group, because we feel very strongly that we have to have a strong logistics component; and look at how we do repair and returnables for both the ROK and for U.S. forces, as well as regionally within the INDOPACOM [U.S. Indo-Pacific Command] region.” 

U.S.-ROK Cooperation Tomorrow

The 2023 DAPA-CSIS conference provided an opportunity for U.S. and ROK participants to offer insights about the partnership and ideas for strengthening it in the future. The summary takeaway from the event is that the goal of third-generation U.S.-ROK defense cooperation should be an integrated global strategy wherein Washington and Seoul exercise their comparative advantages toward shared ambitions.

The conference discussion focused on specific recommendations to enhance the partnership. For both South Korean and U.S. panelists and participants, the idea of developing a SOSA generated the most interest. The bilateral participants also focused on opportunities for semiconductor cooperation. A caution was raised regarding the industrial complexity of supply chains, which will require consistent engagement and enhanced visibility to increase the likelihood of a “win-win” arrangement for ROK and U.S. interests. Finally, the increasingly global nature of Seoul’s defense industry and the U.S. strategic shift toward the Pacific will likely drive Washington’s interest in deepening cooperation with the ROK. Taken together, Mr. Vaccaro noted the real-world importance of efforts to cooperate and strengthen defense supply chains: “I think one of the keys why we—and I mean “we,” the West, and our like-minded democracies in Asia and the Pacific—why we’ve been able to assist Ukraine and have them have the success they’ve had on the battlefield to date is because of our combined technological industrial bases and our network of allies and partners.” This evocation of the importance of the U.S.-ROK alliance was echoed throughout the event, and it offers a reminder of the utility of regular convening as a tool to strengthen mutual understanding in the interest of maintaining the strong friendship between the two nations.

Gregory Sanders is deputy director of the Defense-Industrial Initiatives Group and a fellow with the International Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Nicholas Velazquez is research assistant with the Defense-Industrial Initiatives Group at CSIS.

This executive summary report and the 2023 DAPA-CSIS conference were made possible by support from the ROK Defense Acquisition Program Administration (DAPA). 

Please consult the PDF for references.

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Gregory Sanders
Deputy Director and Fellow, Defense-Industrial Initiatives Group