Krafton, Hanwha Aerospace Forge Physical AI Defense Alliance

Krafton, the Korean video game maker behind the popular PUBG series, and Hanwha Aerospace announced on the 13th that they will form a strategic alliance focused on physical AI, aiming to develop and commercialize technologies across defense and other sectors. Krafton’s stock rose more than 9 percent in early trading after the news. The collaboration centers on combining Krafton’s AI research and software capabilities with Hanwha’s defense and manufacturing infrastructure.

The term “physical AI” refers to AI systems designed to operate in real-world environments, including robotics, automation, and defense applications, with emphasis on learning from and interacting with actual settings. The partners plan to accelerate the training, validation, and deployment of such technologies through data operations and simulation-based workflows.

Under the agreement, the companies will pursue joint research and development of core physical AI technologies, evaluate proof-of-concept demonstrations, and build the systems and operating frameworks needed for real-world use. They also intend to establish a joint venture to streamline the transition from development to commercialization and to deepen long-term collaboration.

In addition to the R&D plan, Krafton will participate as an investor in a fund created by Hanwha Asset Management. The fund focuses on AI, robotics, and defense sectors and targets a total size of up to $1 billion. The aim is to nurture high-potential technologies and partners that can feed into the physical AI ecosystem and accelerate joint development and commercialization.

Krafton’s founder and CEO Kim Chang-han said the collaboration would leverage Krafton’s AI and software operations with Hanwha’s on-the-ground capabilities to accelerate practical, in-environment technology development. He added that a future joint venture could grow into a global defense tech company akin to Anduril, a leading U.S. defense technology firm.

Hanwha Aerospace President Son Jae-il noted that AI-enabled, “physical AI” applications are rapidly expanding beyond civilian industries into the defense realm. He described the alliance as a pathway to set new technology standards in physical AI and the broader future of defense technology.

Krafton has been building an enterprise around AI beyond its gaming roots. The company established Ludo Robotics in the United States in 2023 for robotics research and, earlier this year, opened a Korean subsidiary led by its Chief AI Officer, I. Kang-wook. Krafton intends to use Ludo Robotics as one pillar of a broader strategy that ties robotics research to the new joint venture and its commercialization efforts.

For U.S. readers, the partnership signals growing cross-border collaboration in advanced AI and defense technologies, with implications for supply chains, joint development of autonomous or semi-autonomous systems, and the evolution of trans-Pacific defense technology ecosystems. The deal also highlights how large non-defense tech firms in Korea are pivoting toward defense-adjacent capabilities, potentially influencing competition, regulatory considerations, and collaboration opportunities with American firms and policymakers.