Hanwha (000880) will pour more than 400 billion won into its local units to expand its presence in the United States, the world's largest defense market. The move follows Hanwha Aerospace's (012450) recent deal to export its K9 self-propelled howitzer to the U.S. — the first fully domestic Korean weapons system to be sold there — and reflects an accelerated push to build up land and naval defense production bases and supply chains in the country.
Hanwha has decided to take part in rights offerings by Hanwha Defense USA, its U.S. defense subsidiary, and Hanwha FutureProof, a company set up to invest in U.S. strategic assets, according to industry sources on the 23rd. The total investment comes to $299 million, or about 415 billion won.
Hanwha Aerospace will first contribute $149 million to Hanwha Defense USA's rights offering. Hanwha Defense USA, which is wholly owned by Hanwha Aerospace, leads the group's defense business in the United States. The new contribution far exceeds the 159.7 billion won that Hanwha Aerospace has cumulatively put into Hanwha Defense USA to date. Hanwha Aerospace also invested about 92.1 billion won in April this year.
The remaining $150 million will go to Hanwha FutureProof. The company was established by Hanwha to invest in U.S. strategic assets and is held by Hanwha Aerospace (50%), Hanwha Ocean (042660, 18.75%), Hanwha Systems (272210, 18.75%) and Hanwha Solutions (009830, 12.5%). For the FutureProof rights offering, Hanwha Aerospace is likely to shoulder half, or $75 million, in line with its stake, while Hanwha Ocean, Hanwha Systems and Hanwha Solutions divide the other $75 million, sources said.
The funds will support Hanwha's strategy to localize its land and naval defense operations in the United States and add momentum to recent business gains. This month, Hanwha Defense USA was selected as the sole prototype developer in the U.S. Army's next-generation self-propelled howitzer program, which aims to replace the aging M777 towed howitzer, beating out competitors from Britain, Germany and Italy. The initial contract to supply six K9 wheeled self-propelled howitzers (K9MH) is worth about 141.7 billion won, and if production begins, the program is estimated to reach about 500 units and more than 10 trillion won.
Choi Kwang-sik, an analyst at Daol Investment & Securities, said, "The significance of earning the trust of a 'self-propelled howitzer' operated by the world's strongest military power is very great," adding, "A K9 variant will also compete to replace the aging M109 Paladin self-propelled howitzer, and Hanwha has secured a favorable position."
Hanwha is speeding up the establishment of a U.S. production base to prove it can consistently supply land weapons systems. At a plant in Opelika, Alabama, leased for three years starting this April, Hanwha plans to produce the K9MH locally after testing and evaluation.
Hanwha is also considering building a plant in the United States to produce modular charge systems (MCS) for 155mm artillery shells. Propellant charges are a key component that pushes the projectile out of the barrel, and they are exported as a package with the K9. In addition, Hanwha Aerospace's multipurpose unmanned ground vehicle, the Arion-SMET, has passed the U.S. Defense Department's Foreign Comparative Testing (FCT) program, qualifying it to bid for U.S. defense procurement projects.
In naval defense, Hanwha Philly Shipyard, acquired at the end of 2024, is leading MASGA (Make American Shipbuilding Great Again), a Korea-U.S. shipbuilding cooperation project. After announcing last year a plan to invest an additional $5 billion (about 7 trillion won) in the Philly Shipyard, Hanwha has been expanding capital spending to build up production capacity. Hanwha, the first Korean shipbuilder to secure a shipyard in the United States, is positioning itself to gain an early lead in the U.S. Navy warship construction market.
Hanwha's recently confirmed acquisition of Austal USA, the U.S. arm of Australian shipbuilder and defense firm Austal, is understood to be part of a plan to link local shipbuilding infrastructure to the supply chain for nuclear-powered submarines. Hanwha Defense USA recently offered to acquire 100% of Austal USA for up to $1.2 billion and is conducting due diligence. Austal USA produces U.S. Navy vessels and modules for nuclear-powered submarines.
