South Korea's Krafton, Hanwha form Physical AI alliance; defense JV and $1B fund

Krafton, the South Korean game developer, and Hanwha Aerospace have formed a strategic alliance in the field of Physical AI, signing a memorandum of understanding on the 13th to pursue joint research and development and to establish a joint venture aimed at commercialization across defense and other sectors.

The collaboration combines Krafton’s artificial intelligence research and software capabilities with Hanwha Group’s industrial infrastructure in defense and manufacturing. Krafton’s data management experience and virtual-environment simulation technology are expected to play a central role in training and validating Physical AI systems.

Under the agreement, the two companies will proceed in phases with core Physical AI technology development, verification of deployment scenarios, and the building of technical and operational systems. They also plan to establish a joint venture to translate research成果 into field deployments and commercial products, reinforcing long-term collaboration.

Krafton will also invest in a fund established by Hanwha Asset Management. The fund targets investments in AI, robotics and defense-related sectors, with a planned size of up to $1 billion, aiming to expand the Physical AI ecosystem and strengthen technological competitiveness. The fund is expected to help identify partners across the value chain for joint development and commercialization.

Krafton CEO Kim Chang-han said the company would accelerate the development of technologies that operate in real environments by integrating Krafton’s AI and software operations with Hanwha’s on-the-ground capabilities, and that a future joint venture would commercialize成果 and grow into a global defense-tech firm similar to Anduril Industries.

Hanwha Aerospace CEO Son Jaeil stated that AI technology is rapidly expanding beyond traditional industry use into defense, and that the Krafton collaboration would help establish a new technological paradigm in Physical AI and the future defense sector.

Krafton has already been building toward long-term growth in Physical AI, including the establishment of Ludo Robotics in the United States for robotics research, and the creation of a Korean subsidiary this year. The company says the new JV and fund-backed initiatives will leverage Ludo Robotics’ research strengths alongside Hanwha’s defense and manufacturing capabilities to drive demonstrations and commercialization.