[비즈한국] Hanwha Group is Korea's largest defense conglomerate, spanning land, sea, and air operations. It has built a defense enterprise system centered on three companies: Hanwha Aerospace012450, Hanwha Ocean042660, and Hanwha Systems272210. Hanwha Aerospace handles land and space operations, Hanwha Systems manages satellites and software, and Hanwha Ocean covers maritime defense.
Hanwha Group is aggressively expanding its business, even at the cost of conflicting with other defense competitors. As the defense sector emerges as a key export driver and the market grows, competition among domestic companies is intensifying.
Achieved 358.8 Billion Won in Operating Profit for Q2
Hanwha has identified the defense industry as its future growth engine. Vice Chairman Kim Dong-kwan has established the defense system centered around Hanwha Aerospace, Hanwha Ocean, and Hanwha Systems. The group consolidated its scattered defense businesses into Hanwha Aerospace to maximize synergy. Since becoming the head of the strategy division at Hanwha Aerospace in 2022, Vice Chairman Kim has been directly overseeing key issues.
Last year, the group acquired Daewoo Shipbuilding & Marine Engineering, a leader in special-purpose vessels, and launched Hanwha Ocean, evolving into a company that encompasses all domains of land, sea, and air. In June, Hanwha Ocean became the first domestic company to acquire a shipyard in the U.S., entering the American naval vessel market.
The company is also expanding its reach into the aerospace sector, moving between land and sea through the localization of advanced aircraft engines and the development of next-generation space launch vehicles. In 2021, Hanwha Group launched "Space Hub," the backbone of its aerospace business, by pooling the capabilities of Hanwha Aerospace, Hanwha Systems, and Satrec Initiative, Korea's first satellite-specialized company.
Hanwha's defense subsidiaries have recently seen significant results. In the second quarter of this year, Hanwha Aerospace achieved consolidated revenue of 2.786 trillion won and an operating profit of 358.8 billion won. Since its launch as an integrated defense entity, revenue increased by 46% and operating profit by 357% compared to the second quarter of last year.
Energy, maritime, and materials sectors are being highlighted as future growth engines for Hanwha Group's defense business. Through Hanwha Solutions and Hanwha Ocean, the group plans to address climate change with smart eco-friendly energy solutions and customized materials. Starting with solar power—a business with world-class technology and production capacity—it is diversifying its energy portfolio to include hydrogen, ammonia, wind power, and bridge solutions, which will be central to the energy transition.
Conflict with LIG Nex1 over USVs and Cheongung-II; Legal Battle with HD Hyundai over KDDX
While the company's performance has significantly improved through active project wins, noise with competitors has increased. Recently, Hanwha Systems and LIG Nex1 engaged in a war of nerves over a reconnaissance unmanned surface vehicle (USV) project, for which LIG Nex1 ranked first in the proposal evaluation. LIG Nex1 was selected as the preferred bidder for the Defense Acquisition Program Administration's (DAPA) "Reconnaissance USV System Development Project" on the 11th of last month. However, a professor at the Korea Naval Academy is currently under investigation by the Defense Counterintelligence Command for allegedly leaking USV-related technical data to LIG Nex1. Hanwha Systems, which competed for the contract, is reportedly considering legal action, such as a lawsuit to revoke the preferred bidder status, should the allegations be proven.
Hanwha is also clashing with LIG Nex1 over the 3.7 trillion won Cheongung-II export contract to Iraq. Hanwha claims that LIG Nex1 proceeded with the contract excessively without mutual consultation. Conversely, LIG Nex1 argues that they requested a review from Hanwha before the contract but did not receive a proper response. Consequently, DAPA, the presiding agency, has stepped in to mediate. The two companies have explained their basic positions to DAPA, and they are currently in the stage of adjusting specific details. However, as both sides find it difficult to concede, it appears it will take some time to resolve.
In the maritime sector, Hanwha Ocean is locked in legal and public opinion battles with HD Hyundai Heavy Industries329180 over a 7.8 trillion won project to build six Korea Next-Generation Destroyers (KDDX). Police are investigating allegations that former DAPA Commissioner Wang Jung-hong granted favors to HD Hyundai Heavy Industries during the selection of the primary contractor for the KDDX basic design project in 2020. In March, Hanwha Ocean filed a complaint with the police, claiming that executives were involved in the violation of the Military Secret Protection Act by HD Hyundai Heavy Industries employees between 2012 and 2015. DAPA is delaying the selection of a company for the KDDX detailed design and the construction of the lead ship while waiting for the results of the police investigation. DAPA Commissioner Seok Jong-gun stated during a National Assembly audit on the 15th that the decision regarding which company will be entrusted with the KDDX detailed design and construction will be made after the allegations related to lawsuits and complaints between competitors are resolved.
Analysts suggest that as the defense market has suddenly emerged, competition among companies has intensified, leading to these conflicts. There are also opinions that DAPA should take an active role in mediation. A defense industry official suggested, "The conflict over Cheongung-II stems from exporting weapons that were jointly developed. Since Hanwha is the largest and operates in the most diverse fields, such conflicts will likely continue to arise. The more this happens, the more DAPA should step in to manage traffic and help ensure projects proceed smoothly."