Hanwha Group, a major defense company in South Korea, announced on July 29 that it is revamping its business model to maximize synergy among defense units to emulate Lockheed Martin’s success.
The company said a series of mergers would boost exports while generating synergies across land, sea, air, and space technologies. By completing this deal, Hanwha Aerospace hopes to rank among the top 10 defense manufacturers by 2030.
“We plan to create a ‘Korean Lockheed Martin’ by increasing the company’s size and diversifying its products,” the press release stated. In terms of scale, Hanwha Aerospace cited recent consolidated trends in the US defense market, like Raytheon’s 2020 merger with United Technologies and Northrop Grumman’s 2018 acquisition of Orbital ATK.
As per the plan, Hanwha Aerospace, the group’s largest defense division that primarily manufactures aircraft engines, will acquire the defense division of Hanwha Corp, a de facto holding company of the group, and absorb its wholly owned subsidiary Hanwha Defense.
Hanwha Corp, whose primary business focuses are batteries and solar power, will simultaneously acquire semiconductor machinery and the maker of innovative factory solutions, Hanwha Precision Machinery, a division of Hanwha Aerospace, to achieve synergy.
Hanwha Impact, a chemicals-to-energy business, will acquire the energy equipment company Hanwha Power System from Hanwha Aerospace, providing a stronger position in the hydrogen industry value chain.
Hanwha bought Samsung Techwin, Samsung Thales, and two other chemical units from the Samsung Group in 2014 as part of a 2 trillion won megadeal. In 2018, Hanwha Techwin changed its name to Hanwha Aerospace.
Hanwha Aerospace expects to increase in size and broaden its international sales network due to the merger. Hanwha Aerospace currently focuses on the North American and European markets, while Hanwha Defense’s key customers are in Turkey, India, Egypt, Indonesia, Malaysia, Vietnam, and the United Arab Emirates.
Hanwha Aerospace announced that in addition to its technological capabilities and Hanwha Defense’s operation of armored vehicles like the infantry fighting Redback and K21, the company would also set up a defense R&D center to develop technologies constantly.
“To actively respond to the evolving defense trend that adopts AI, drones, and robots, we will make a preemptive R&D investment and secure next-generation technologies such as autonomous driving and energy storage technology,” said Hanwha Aerospace CEO Shin Hyun-woo.
Success Of Hanwha Defense
The company ranks among South Korea’s top defense suppliers and has emerged as a major global arms supplier in recent years. The company is also trying to position itself as a significant NATO arm supplier as European countries are spending more on defense in the wake of the Ukraine war.
Hanwha Defense grew considerably after the group bought Samsung’s defense firm, Samsung Techwin, in 2015.
Since the Russian attack on Ukraine in February, EU nations have announced a considerable increase in defense budgets. The European Defense Agency has identified replacing outdated Soviet-era equipment and restocking stockpiles exhausted by assistance for Ukraine as a crucial short-term necessity, particularly in eastern member states.
Yoon Suk-yeol, the conservative president of Korea, joined the recent NATO summit in Madrid. According to diplomats in Seoul, one of his priorities while there was “sales diplomacy.”
Son Jae-il, the chief executive of Hanwha Defense, stated in an interview with the Financial Times, “We’ve been able to emerge as a very reliable partner, even though we’re located at a distance (from Europe).”
“By building our global footprint, especially in Europe, our ultimate goal is to emerge as a reliable partner for Nato itself by establishing many partnerships with local businesses in Europe,” said Son.
He specifically mentioned India as an example of a nation where Hanwha was winning contracts despite the nation’s protracted ties to Russia. The company has signed several deals in recent months.
In a joint venture with Hanwha Defense, Larsen & Toubro delivered 100 K-9 Thunders to the Indian Army. New Delhi could also place an order for 200 more K-9 Vajra (Thunder) self-propelled howitzers, according to reports.
Indian Army is also exploring lightweight tanks, and Hanwha Defense could emerge as a key vendor.
Hanwha Defense agreed to sell K9 howitzers to the Egyptian military as part of a $1.66 billion contract that South Korea and Egypt signed in February.
That came after a $3.5 billion agreement in January between South Korea and the United Arab Emirates for exporting midrange surface-to-air missiles to the Gulf nation by Korean defense companies, including Hanwha.
Hanwha and Australia agreed to a $717 million contract in December to supply 30 self-propelled howitzers and 15 armored ammunition resupply vehicles. Recently, Poland decided to purchase 648 self-propelled K9 armored howitzers.
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