[Click eStock] "KOTS Technology to Benefit as AI Spreads Across Weapons Systems, Driving Demand for 'Military Computers'"

Analysts say KOTS Technology is poised to benefit from its ability to develop domestically military computers that serve as the “brains” of weapons systems.

On October 26, researcher Kim Doyoon of Research Aleum said, “As AI and digitalization drive rapid growth in defense embedded systems, KOTS Technology stands out as a key domestic company developing these systems locally. It could also enter overseas markets directly in the future.”

Founded in 1999, KOTS Technology specializes in embedded systems for the defense industry. Embedded systems are dedicated computers installed inside weapons that process sensor data and issue firing and maneuvering commands, serving as the “brains” of weapons systems. The company has developed more than 50 products, including single-board computers (SBCs), and built up its own hardware and software technologies.

Its major customers include LIG D&A, Hanwha Systems, and Hyundai Rotem. For the K2 tank, it supplies 19 types of products, including firing and operation control computers, SBCs, and military display units. It also supplies five types of products for the Cheongung-II system.

The market’s growth potential is also drawing attention. Research Aleum forecast that the global defense embedded systems market will grow from $2.2 billion in 2026 to $4.5 billion in 2035, representing average annual growth of 8.6%. The firm said demand for computing devices and AI accelerator modules installed in weapons systems is expected to rise as AI is used across the battlefield, including for target recognition and situational assessment.

KOTS Technology is also developing next-generation SBCs equipped with neural processing units (NPUs) for AI computing. “We expect selling prices to rise as the products become more powerful,” Kim said.

Profitability is also recovering. The operating margin was 12.0% in the second quarter of this year, up from 8.1% in the first quarter. The improvement reflected revenue from export products and the passing on of some raw material cost increases through higher selling prices. Research Aleum forecast revenue of 78.3 billion won and operating profit of 8.7 billion won for the year.

Expansion into naval defense is another new growth driver. Earlier this month, KOTS Technology secured a 14.77 billion won order from HD Hyundai Heavy Industries for equipment related to a performance upgrade project for a Jang Bogo-II submarine. The order is expected to help the company expand beyond its existing focus on the K2 and Cheongung-II into naval weapons.

Further growth in overseas exports of the K2 and Cheongung-II is also expected. Research Aleum said orders placed with KOTS Technology typically follow system integrators’ orders by six months to a year, and forecast that new orders would increase from the second half of 2027.

This content was produced with the assistance of AI translation services.