SEONGNAM, South KoreaSEONGNAM, South Korea (Reuters) - South Korea has displayed the first full-size mock-up of the KF-X fighter jet it is developing with Indonesia, after officials said the program passed key design reviews in September.

The next-generation aircraft being developed by Korea Aerospace Industries (KAI) is designed to be a cheaper, less-stealthy alternative to the U.S.-built F-35, and the plan is to eventually replace most of South Korea's older fighter jets and produce more for export.

The mock-up was displayed on Monday at the Seoul International Aerospace and Defense Exhibition (ADEX).


South Korea has ordered 40 of the advanced F-35A aircraft from the United States, the first of which arrived this year.

North Korea has condemned South Korea's purchase of the F-35s, as well as the development of other advanced weapons.

KAI is currently manufacturing a KF-X prototype and plans to carry out ground testing and flight tests in 2021 and 2022, respectively, company officials said.

"On the face of it they are making good progress, but there are signs of challenges in the program," said Greg Waldron, Asia managing editor for FlightGlobal, a publication covering the aerospace industry. Among these are Indonesia's push to renegotiate how it will pay its portion of the costs, and breaking into an export market crowded with established alternatives, Waldron said.

"With a program this ambitious you really have to spread the cost among many partners," he said. "They could sell a few here and there, but the problem is they are going to be kind of late to the market and there are already many strong aircraft already out there."

South Korean and Indonesia agreed in 2014 to jointly develop the KF-X in a project worth 7.5 trillion won ($6.33 billion) with Jakarta agreeing to pay 20% of the cost.


Last year, however, Indonesia sought to renegotiate to take pressure off its foreign exchange reserves and has since offered to pay its share of the cost in the form of a barter.

The KF-X program also hit a snag when South Korea was forced to develop several key technologies after the United States refused to provide approval for the use of some systems, like a radar, which is now being developed by Hanwha Systems.

But KAI says the project is progressing, and is helping South Korea build on its earlier aircraft programs.

"We could not have done KF-X if we did not have experience in building T-50 and FA-50," a senior company official said, speaking on condition of anonymity as he was not authorized to speak to the media. "We are advancing step by step."

(Reporting by Josh Smith and Ju-min Park; Editing by Mark Potter)