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South Korea started bidding process to pick a contractor to provide 60 advanced
fighter jets for US$7.3B facing a decision to select either the Lockheed
Martin’s F-35 Lightning II stealth jet Boeing F-15 Silent Eagle or the European
Aerospace Defense and Space Company [EADS] Eurofighter Tranche 3 Typhoon, to
replace the Air Force’s aging fleet of F-4 and F-5 jets. Bidding will be
assessed for the three jets before making a final decision in an effort to
produce affordable yet highly capable aircraft, but contractors may propose
prices that exceed budgets and adopt a wait-and-see approach during the
competitive bidding sessions. If prices proposed by the three firms exceed the
approved budget, the acquisition plan may need to be re-examined.

The Japanese F-35A fleet is reported to be more expensive than their American counterparts,
due to the cost of incorporating Japanese-made parts, but the actual figures are
controversial. The U.S. authorized 24 F-35 A engine and radar components to be
produced in Japan, accounting for about 10% of the plane’s value, and that
number is expected to grow with additional approvals. Overall, IHI Corp. will
manufacture 17 engine fan and turbine parts, while Mitsubishi Electric Corp.
will produce 7 radar system components that include signal receivers.

Parts for the rear fuselage, wings, and undercarriage will come from Mitsubishi Heavy
Industries Ltd. and other Japanese contractors. That will help Japan gain important experience for its own stealth fighters, and build on the composites manufacturing expertise gained in its F-16-derived F-2 program. The government has reportedly budgeted about $844.1M in FY 2013 for F-35 related industrial  infrastructure, including new facilities at an MHI factory in Aichi Prefecture.
The problem is that Japanese firms will be manufacturing only for JASDF F-35s, sharply raising per-part costs. The 2 aircraft ordered in 2013 will be the first with Japanese parts, and are now budgeted at about $153.5M each. The cost of the contract has jumped 27% in real terms.



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