South Korea's Hanwha, Krafton plan Physical AI JV with $1B fund
Hanwha Aerospace and Krafton, the South Korean maker of PUBG, have signed a memorandum of understanding to jointly develop what they call “Physical AI.” The agreement outlines a phased plan for AI research and development, field testing, and the potential creation of a joint venture to commercialize the results and broaden long-term collaboration.
The collaboration aims to combine Hanwha’s defense and manufacturing infrastructure and unmanned-systems capabilities with Krafton’s AI research and software development strengths. The partners plan to advance core Physical AI technologies, validate them through demonstrations, and build an integrated operating framework that can be taken from lab to real-world environments.
Krafton’s experience with data management from the gaming industry and its virtual-simulation technology are expected to play a key role in training and validating Physical AI systems. By leveraging large-scale data operations and simulated environments, the partners intend to accelerate learning and verification ahead of field deployment. The long-term vision includes expanding cooperation into space and aerospace domains.
In addition to the joint development efforts, both companies will participate as investors in a fund managed by Hanwha Asset Management. The fund targets investment in AI, robotics, and defense technologies, with an intended size of about $1 billion. The aim is to foster the Physical AI ecosystem and strengthen the technological and commercial competitiveness of the participants.
The fund intends to identify high-potential partners across the value chain and connect them to joint development and commercialization opportunities, using the joint venture as a vehicle to scale successful results. This approach seeks to create a pipeline of capability that could feed into future programs and markets.
Kim Chang-han, Krafton’s chief executive, said the collaboration would accelerate the development of real-world AI technology by combining Krafton’s AI and software-operational capabilities with Hanwha’s on-the-ground expertise. He added that the eventual joint venture would commercialize the joint results and could become a global defense-technology company comparable to Anduril.
Hanwha Aerospace chief executive Son Jae-il emphasized that AI is rapidly expanding into defense as Physical AI, and that the Krafton collaboration could establish a new technology paradigm for future defense applications. He highlighted the potential to translate game-based AI insights into real-world unmanned and autonomous systems.
The partnership reflects Korea’s broader push to blend advanced digital technologies with traditional defense capabilities. For U.S. readers, the arrangement signals potential cross-border collaboration in next-generation defense tech, with implications for supply chains, joint research, and potential technology transfers between Korea, the United States, and other allied markets. It also aligns with ongoing global interest in AI-enabled defense platforms and the growing role of private-sector partnerships in accelerating military-technology innovation.