South Korea's Krafton and Hanwha Form Joint Venture for Physical AI

Krafton, better known for its video games, and Hanwha Aerospace signed a memorandum of understanding on March 13, 2026, in Seoul to form a “physical AI” alliance. The agreement aims to jointly develop and commercialize technologies in the defense and manufacturing sectors and to establish a joint venture to bring those outcomes to real-world use.

Under the MOU, the two companies plan to combine Krafton’s artificial intelligence research and software development capabilities with Hanwha’s defense industry and manufacturing infrastructure. Krafton will leverage its data operations and virtual environment-based simulation capabilities to advance the training and validation of physical AI systems.

The collaboration will pursue several tasks, including joint research and development of core physical AI technologies, evaluation of pilots and application scenarios, and the construction of technical and operational frameworks. In addition, the companies intend to form a joint venture to apply the developed technologies on the ground and connect them to business opportunities.

Krafton will also invest in a fund established by Hanwha Asset Management that targets AI, robotics, and defense sectors, with a stated goal of roughly $1 billion. The fund will focus on investments in those areas, aligning with the broader collaboration between Krafton and Hanwha.

This move fits Krafton’s broader push into new business domains beyond its core gaming business. The company established Ludo Robotics as a robotics research entity in the United States last year, and then set up a corresponding operation in Korea in February of this year, signaling a shift toward hardware-enabled AI and robotics.

Physical AI, as defined in the announcement, refers to artificial intelligence that can perceive and understand real-world physical environments and directly perform actions through robots or autonomous systems. This differentiates it from more traditional, non-embodied AI and highlights potential applications in robotics, autonomous vehicles, and related technologies.

For U.S. readers, the deal signals growing cross-border collaboration in advanced AI and defense technologies, with Korea-based firms pairing gaming-grade AI know-how and simulation expertise with defense manufacturing capabilities. The involvement of a U.S.-based robotics research subsidiary underscores potential ties to American tech ecosystems and supply chains, and it may influence future investment, collaboration, and regulatory discussions around AI, robotics, and defense tech.