Krafton, Hanwha Aerospace to Form Defense AI Venture

Krafton, the Korean game developer behind PUBG, and Hanwha Aerospace have signed a memorandum of understanding to jointly develop what they call “physical AI” and to establish a joint venture to commercialize the results. Hanwha Asset Management will also participate, investing in a fund focused on AI, robotics and defense with a target size around $1 billion.

Under the agreement, the two companies will conduct joint research and development on core physical AI technologies, review real-world demonstration scenarios, and build the organizational and operational framework needed for a future JV. The plan is to connect research outcomes to commercial applications through the joint venture and to establish a long-term collaboration.

Krafton will contribute its AI research capabilities and software development expertise, including experience managing data and operating simulations in virtual environments, which are central to its gaming business. Hanwha Aerospace will bring its defense manufacturing capacity and unmanned-systems know-how to help translate AI advances into field-ready capabilities.

Hanwha Aerospace has signaled a broader ambition to extend collaboration beyond weapons systems, aiming to expand into space and aerospace applications in the long run. The partnership with Krafton is framed as the first step in a longer strategic effort to fuse Korea’s defense know-how with cutting-edge AI and software development.

Krafton chief executive Kim Chang-han said the company envisions turning the joint venture into a global defense-technology firm, in part by following a path similar to that of Anduril, a U.S.-based defense tech company. Hanwha Aerospace chief executive Son Jae-il stressed that the collaboration aims to advance physical AI and present a new technology paradigm in future defense technologies.

For U.S. readers, the deal matters because it signals a rare cross-industry collaboration—gaming AI expertise paired with defense manufacturing—to push forward autonomous and AI-enabled weapons and systems. The arrangement could influence defense tech supply chains, private funding dynamics, and potential partnerships or competition with American defense firms and U.S.-based markets.

Context helps frame the story: Anduril Industries is a prominent U.S. defense tech company known for AI-driven autonomous systems; Krafton is a major game developer with extensive data-management and simulation capabilities; Hanwha Aerospace is a leading Korean defense contractor with manufacturing and unmanned-system experience. The initiative’s focus on “physical AI” refers to AI integrated into real-world hardware such as weapons, unmanned systems, and robotics.