Development of South Korea's signal intelligence plane is in question after Korea Aerospace Industries pulled out of the bidding over funding and equipment concerns.

South Korea was aiming for 2014 to deploy two new Baekdu reconnaissance aircraft, named after the Korean Peninsula's highest mountain.

The South Korean air force has four Raytheon Hawker 800XP aircraft for SIGINT operations, bought in 2000. The planes, based at Seongnam Air Base, take pictures of installations up to 50 miles deep into North Korean territory as they fly along the Korean Demilitarized Zone that has divided the two Koreas -- still technically at war -- since 1953.

The acquisition process for the upgraded Baekdu planes was proposed in 2009 after North Korea conducted its second underground nuclear test. The planes' main mission would be to detect further North Korean tests.

The strategy is to have at least one of the two planes flying at all times.

Deployment of the new planes was to have been a year before South Korea takes over wartime operational control, OPCON, of its troops from the United States. Last July, Defense Acquisition Program Administration released a request for proposals to local and foreign bidders, with winners to be announced by the end of the year.

But KAI has said it is concerned over the project's budget, set at $80 million, as well as technical issues over modifying a ship-based SIGINT system for air operations.

Precision electronics companies LIG Nex1 and Samsung Thales are bidding to supply communication, electronic and foreign instrumentation signals intelligence systems.

U.S. company Gulfstream Aerospace and Canada's Bombardier are competing for the airframe contract.

Korea Aerospace Industries, South Korea's only aircraft maker, and the national flag-carrier Korean Air are looking to win the systems integration work.

But KAI's continued involvement is in doubt, a report in The Korea Times newspaper said.

"For example, the military has demanded that the new be equipped with domestically built SIGINT equipment," an unidentified source is quoted in the article.

"But local precision electronics makers Samsung Thales and LIG Nex1 have developed SIGINT equipment only for ships. They have to make the naval equipment suitable for aircraft."

It's rare to install a ship-based SIGINT device on a surveillance aircraft, the source said.

A procurement official said there could be delays in getting the planes operational by 2015. "I believe those timeframes have apparently affected the latest readjustment of the timeline for the OPCON transition," he said.

South Korea had sought to buy four Northrop Grumman RQ-4 Global Hawk unmanned aerial vehicles by 2011 to increase surveillance capability for its takeover of OPCON. The jet-powered Global Hawk can fly as high as 65,000 feet and remain airborne for 35-40 hours monitoring around 40,000 square miles.

But purchase of the Hawks has been postponed, due to South Korean defense budget cuts, and 2015 is likely the date for operational readiness if they get approval from U.S. authorities to buy the planes.