Krafton, Hanwha Aerospace form defense AI alliance and up to $1B fund

Krafton, the South Korean game developer, announced on March 13 that it has formed a strategic alliance with Hanwha Aerospace to advance physical AI technology and to pursue joint development and commercialization across defense and other sectors. The companies signed a memorandum of understanding to guide collaborative research and the possible establishment of a joint venture.

The collaboration aims to combine Krafton’s AI research and software development capabilities with Hanwha’s industrial infrastructure in defense and manufacturing. This blend is intended to accelerate the translation of AI advances into real-world applications.

Krafton’s experience in data management and its virtual-environment simulation technology will support the training and validation of physical AI systems, with the goal of improving real-world performance and enabling phased demonstrations in actual environments.

Under the agreement, the partners will pursue a staged program that includes co-research and development of core physical AI technologies, validation of implementation scenarios, and the creation of technical and operating systems. They also plan to pursue a joint venture to rapidly deploy and commercialize joint development成果 while strengthening long-term cooperation.

In addition, Krafton will invest in a fund managed by Hanwha Asset Management focused on AI, robotics, and defense, with a target size of up to $1 billion. The fund aims to expand the physical AI ecosystem and strengthen the company’s technology leadership by identifying high-potential partners for joint development and commercialization.

Krafton has been expanding its footprint in robotics, establishing Ludo Robotics in the United States last year, and launching a Korea-based entity in February led by Krafton’s Chief AI Officer, Lee Kang-wook. The Korea entity will coordinate its physical AI strategy through the CAIO’s leadership.

Kim Chang-han, Krafton’s CEO, said the collaboration will bring Krafton’s AI and software-operating strengths together with Hanwha’s on-the-ground capabilities to accelerate real-world technology development. He said the joint venture could connect development to commercialization and grow into a global defense-technology company comparable to Anduril.

For U.S. readers, the deal signals continued cross-border integration of AI, robotics, and defense technology in Asia, with potential implications for defense supply chains, dual-use technology controls, and international partnerships. It highlights how Asian tech firms are aligning with defense contractors and asset managers to accelerate innovation and market access in high-growth AI and robotics sectors.

No timetable was announced for the formal creation of the joint venture or for the closing of the fund, but the parties described the agreement as a step toward broader collaboration and ongoing demonstrations and scale-up opportunities.