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Contact: Stuart Slade, Defense Analyst

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E-mail: stu.slade@forecast1.com
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FOR IMMEDIATE RELEASE

Cheonan Sinking Stirs New Interest in Coastal Submarines

NEWTOWN, Conn. [January 24, 2011] — According to Forecast International’s “The Market for Submarines”
analysis, the torpedoing and sinking of the South Korean corvette Cheonan in March 2010 by a North Korean
coastal submarine will prompt a surge of interest in small, low-cost submarines. The corvette was specifically
designed for operations in littoral waters and built with full knowledge of the threat spectrum she would face. Yet,
she was blown in half by a torpedo she never saw coming. The force multiplier effect was clearly evident here.

“The Cheonan was designed to provide an economical asset for patrolling coastal waters, but the submarine used to
sink her cost an order of magnitude less – and that submarine got away with her attack cold,” said warships analyst
Stuart Slade, author of the report. “It is quite clear which was the most cost-effective asset in this particular
scenario.”

It is likely that the sinking of the Cheonan will cause a surge in the market for small, coastal submarines. These
low-cost, quick-to-build and economical-to-operate submarines offer small navies with the means to threaten those
who intrude upon their territorial waters. Until recently, the capabilities of such submarines were neglected as
attention focused on their ocean-going sisters. With the destruction of the Cheonan, this is likely to change. The
question is whether the shipbuilding companies will be able to exploit this altered perception.

Western submarine builders have attempted to produce small coastal submarines but, with few exceptions, these
have never enjoyed any significant success. Russian offerings of small derivatives of their Project 877 and 677 class
diesel-electric boats have also met with scant success. The reason is that these boats have tried to package the
capability of the larger submarines into a small hull. This is a technological challenge of daunting dimensions and,
in solving it, the defining characteristic of the small coastal – its low cost – is lost.

“If the changed perception of the coastal submarine is to be exploited, the requirement is to build a low-cost
submarine that makes no pretext of challenging its larger cousins in quality terms but instead requires a minimum
investment in resources and personnel to operate,” said Slade. He added that such submarines would exploit a gap
in the market but require existing Western submarine teams to break decades of acquired design habits. If they do
not do so, Slade said, the coastal submarine market will go to Chinese and possibly Russian producers.

Forecast International, Inc. (www.forecastinternational.com) is a leading provider of Market Intelligence and

Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn.,
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