Krafton, Hanwha Aerospace Launch $1B Physical AI Venture for Defense and Manufacturing
Krafton, the South Korean game maker behind PUBG, announced on the 13th that it has signed a memorandum of understanding with Hanwha Aerospace to jointly develop Physical AI and to establish a venture aimed at taking the work from research into commercialization. The agreement signals a strategic shift from entertainment tech to real-world industrial and defense applications, with a long-term plan to fielddeploy AI-enabled systems.
Physical AI refers to artificial intelligence that operates in the real world, embedded in robots, unmanned platforms, and automated manufacturing equipment, rather than software that only runs inside a computer. Krafton says the collaboration will explore applications across manufacturing and defense sectors and will build a long-term framework to pilot and commercialize the technology.
Krafton argues that its experience handling massive user data, designing real-time interactions, and building large-scale virtual environments can be translated into robust learning and validation processes for physical AI. By applying these capabilities to real-world systems, Krafton envisions higher reliability and faster deployment of AI in physical settings.
Hanwha Aerospace brings defense and manufacturing infrastructure to the partnership, enabling the research to move beyond theory toward real-world use. The companies plan to move from joint research to demonstration projects and, ultimately, to deployment in the field through the new joint venture. This alignment suggests a pathway to near-term proof-of-concept tests followed by broader adoption.
A central pillar of the collaboration is a planned investment through Hanwha Group’s asset-management arm, in a global AI, robotics, and defense fund. The two partners aim to raise about $1 billion, with Krafton also participating as an investor via the fund. The structure reflects an intent to accelerate commercialization by tying research directly to capital and implementation.
Krafton has already begun building a U.S. foothold in AI robotics, having established Ludor Robotics in San Francisco, with Krafton CEO Changhan Kim at the helm. Krafton’s chief AI officer, Lee Kang-wook, also serves as Ludor Robotics’ CTO and as head of Krafton’s Korean subsidiary, underscoring a cross-border leadership approach to scale the technology.
The company is also involved in Korea’s government-led independent AI foundation model project, which SK Telecom leads as part of a national strategy to develop a domestically led AI ecosystem. Krafton’s role includes contributing to foundation-model development that contemplates integrating physical AI capabilities, signaling a broader push to align national AI research with industrial applications.
Industry observers note that Krafton’s pivot mirrors a broader trend in Korea of converging digital entertainment tech with defense and manufacturing capabilities. If the initiative succeeds, it could influence global supply chains and competition in the defense-tech sector, particularly in the United States, where a company like Anduril is cited as a model for software-led, hardware-enabled defense technology. The collaboration could open paths for U.S.–Korea tech partnerships and potential supplier relationships in next-generation autonomous systems and automated manufacturing.