[비즈한국] Hanwha Momentum, an affiliate of Hanwha000880 Group, has recently been criminally charged for subcontracting construction work to a firm that is not registered as a construction business. The Gyeonggi Provincial Government received notification of the violation from the regional land management office, which oversees construction sites, and subsequently filed a criminal complaint and imposed a penalty surcharge. The violation occurred less than a year after Hanwha Momentum was newly established through a physical split from Hanwha Corporation. Amidst a prolonged construction industry recession and rising costs for construction materials, cases of subcontracting to unregistered firms at construction sites are on the rise.
According to Bizhankook’s reporting, the Gyeonggi Provincial Government filed a criminal complaint with the police last month against Hanwha Momentum for subcontracting construction work to an unregistered company and imposed a penalty surcharge of 19.34 million KRW. Hanwha Momentum was caught by the local land management office for subcontracting pipe system installation and trial operation tasks to an unregistered firm during the installation of calciner and heat treatment furnace equipment for a Gwangyang cathode material project, which was contracted privately in 2024. It is reported that the Gyeonggi Provincial Government took this action after being notified of the violation.
In principle, only companies registered as construction businesses can perform construction work. Under the Framework Act on the Construction Industry, those intending to operate a construction business must register with their local government after meeting specific requirements for capital, technical personnel, and facilities/equipment by sector. Construction companies that win contracts are also only permitted to subcontract work to construction companies that possess the necessary qualifications. Those who subcontract to unregistered firms face a prison sentence of up to 3 years or a fine of up to 30 million KRW, along with a business suspension of up to 1 year or a penalty surcharge of up to 30% of the subcontracting cost.
An official from the Gyeonggi Provincial Government’s Construction Policy Division stated, "We took administrative action and filed criminal charges against the company for subcontracting construction work to an unregistered entity in accordance with the Framework Act on the Construction Industry. The level of administrative action, including the surcharge, was determined after gathering the company's input." The official added, "Unlike common violations such as failing to issue a payment guarantee for subcontracting costs, subcontracting to an unregistered firm is a serious violation that the Framework Act specifies as subject to both administrative and criminal penalties."
Hanwha Momentum is a Hanwha Group affiliate that supplies industrial machinery. It was established in July 2024 after being physically split from Hanwha Corporation, which acts as the group's holding company. It currently provides core equipment and engineering solutions for major industries such as secondary batteries, displays, and factory automation. Last year's consolidated revenue was 397.3 billion KRW, an increase from the 307.9 billion KRW recorded in the previous period (July to December 2024), but operating profit swung from 17.4 billion KRW in profit to a 13.3 billion KRW loss. Currently, 100% of Hanwha Momentum's shares are held by Hanwha Corporation.
This illegal subcontracting charge occurred essentially in the company's first year of operation. Since its establishment in July 2024, Hanwha Momentum completed its construction business registration in August of that year. In December, it also added relevant industries to its business objectives in the articles of incorporation. The construction industries it currently operates include building construction, industrial/environmental facility construction, and mechanical/gas facility construction. In effect, a violation subject to criminal punishment emerged in its first year of operation as a company that had just obtained a construction license following its split.
A representative from Hanwha Momentum stated, "The company is taking this matter very seriously and is preparing and implementing strong measures, including the establishment of a standard management system and a full overhaul of our IT systems, to ensure that similar cases do not recur in the future."
Cases of subcontracting to unregistered firms are on an upward trend. According to an analysis of Ministry of Land, Infrastructure and Transport data by Bizhankook, 244 construction firms received administrative penalties (including changes, corrections, or cancellations) last year for subcontracting to unregistered firms, an increase of 37 from the previous year. Related administrative penalties have surged from 28 in 2022 to 125 in 2023, 207 in 2024, and 244 in 2025. Last year, while specialized construction firms accounted for 91 cases, a decrease of 20 (18%), cases involving larger general construction firms rose to 153, an increase of 57 (59%).
The rise in subcontracting to unregistered firms is rooted in the increase in construction costs. The Construction Cost Index, which indicates price fluctuations at construction sites, reached 133.69 this February, hitting an all-time high for six consecutive months since August of last year. The Construction Business Survey Index (CBSI), which indicates the sentiment of construction firms, also recorded 62.5 in the same month, the lowest since the index's revision in May 2024. Analysts suggest that as industry stagnation and cost burdens intensify, there is a greater incentive for some sites to utilize lower-cost, unqualified firms.