South Korea's Hanwha and Krafton plan joint venture on physical AI for defense

Hanwha Aerospace and Krafton, the developer of PUBG: Battlegrounds, announced on the 13th that they will pursue joint development of physical AI and establish a joint venture to commercialize the work. The collaboration centers on turning AI that can operate in real-world environments into workable defense and industrial technologies.

The two companies said they will conduct core research and development on physical AI, evaluate demonstration and application scenarios, and build the technology and operations framework needed to advance the concept. A joint venture is planned to connect development results to commercialization and to establish a long-term collaborative framework.

Hanwha Aerospace will leverage its experience in operating weapon systems to push physical AI toward effective performance in real environments and will conduct phased demonstrations to validate field applicability. Krafton, meanwhile, will contribute its data management capabilities and its virtual-environment simulation technology, which are expected to play a critical role in training and validating physical AI.

Hanwha Asset Management is set to participate as an investor in a fund established to back the project. The fund focuses on AI, robotics, and defense-related opportunities and aims to raise up to USD 1 billion. Its objective is to invest in promising technologies and companies to expand the physical AI ecosystem and strengthen overall competitiveness, then identify partners along the value chain and link them to joint development and commercialization.

Krafton CEO Kim Chang-han said the partnership would fuse Krafton’s AI and software operations with Hanwha’s on-site capabilities to accelerate the development of technologies that work in real environments. He added that establishing a joint venture could eventually commercialize results and scale the operation toward becoming a global defense technology company, drawing a parallel with Anduril.

Hanwha Aerospace CEO Son Jae-il emphasized that AI is expanding beyond civilian industries into defense as physical AI, and that the Krafton collaboration could introduce a new technology paradigm for future defense applications.

Why this matters to U.S. readers: the deal highlights growing cross-industry collaboration in Korea that couples game industry data expertise, AI and simulation technology with defense applications. For the United States, it signals potential new sources of advanced AI, digital-twin and VR-based training technologies, and future defense supply-chain links that could intersect with U.S. defense contractors and standards. The involvement of an investment fund focused on AI, robotics and defense also points to potential cross-border investment flows and technology transfer considerations that U.S. policymakers and industry players will watch closely, including export controls and dual-use implications. The collaboration could influence regional competitiveness in AI-driven defense tech and contribute to evolving global markets for advanced simulation, testing, and deployment.