Hanwha Aerospace Expands Overseas Defense Production

On Oct. 14, the K21 infantry fighting vehicle, Chunmoo multiple rocket launcher, Cheongung-II medium-range surface-to-air missile, and Tigon wheeled armored vehicle (in order from the right), along with three types of unmanned ground vehicles (UGV) including the Arion-SMET multi-purpose unmanned vehicle (left), are maneuvering at the performance test site of Hanwha Aerospace’s Changwon Plant 2. (Photo courtesy of Hanwha Aerospace) Hanwha Aerospace is expanding its defense production bases in the United States, Europe, and Australia, localizing its export strategy. The strategy aims to establish a firm foothold in major markets and secure follow-up orders through local production and supply chain establishment. According to the defense industry on Oct. 20, Hanwha Aerospace is exploring cooperation opportunities such as the establishment of production facilities, research and development (R&D), and strategic partnerships with the local government and industry, prompted by Representative Lee Boo-hwan’s visit to Germany on Oct. 19 to 20 (local time). As Germany is a major defense country in Europe, if the acquisition of a local production base materializes, it could serve as an opportunity to further expand the production network within Europe, following existing bases in Australia, Poland, and Romania. The company is reportedly in the process of selecting a factory site in Germany recently. Australia is the first place where Hanwha Aerospace established an overseas production base, completing H-ACE, a self-propelled howitzer and armored vehicle production facility, in Geelong, Victoria in August 2024. This is the first overseas production base for a domestic defense company. The production of AS9 self-propelled howitzers and AS10 ammunition resupply vehicles is underway here, and the second phase of expansion for the production of Redback infantry fighting vehicles was also completed in March this year. By adding a facility of approximately 32,000 square meters, it has established a system capable of simultaneously producing self-propelled howitzers and armored vehicles. In Poland, the company is broadening the scope of localization to include guided missile production through a joint venture with a local company. Hanwha Aerospace has established a joint venture with WB Group, Poland’s largest private defense company, and is proceeding with the local production of the CGR-080, an 80-kilometer range guided missile mounted on the Chunmoo multiple rocket launcher. The joint venture aims to begin full-scale production before the end of 2028 after establishing production facilities, transferring technology, and training local personnel. While prioritizing supply to the Polish military, it is also exploring plans to export to other European countries in the future. The expansion of the European production network is also underway in Romania. In February, Hanwha Aerospace began construction of H-ACE Europe, which will produce K9 self-propelled howitzers and K10 ammunition resupply armored vehicles. The company plans to establish assembly lines, performance verification facilities, and driving test tracks at the local factory, and prepare a support system encompassing not only assembly, integration, and testing, but also maintenance, repair, and overhaul (MRO). The goal is to expand the foundation for cooperation with more than 30 local Romanian companies and increase the localization rate up to 80%. In the United States, the company is expanding its local business with self-propelled howitzer and ammunition production as its two main pillars. In August, Hanwha Aerospace signed a contract to supply 6 units of K9 wheeled self-propelled howitzer (K9MH) prototypes for the US Army’s Mobile Tactical Cannon (MTC) program. It is preparing a facility for prototype assembly, integration, and testing in Opelika, Alabama. Following this, last month, it announced that it would invest $2.2 billion in the Pine Bluff Arsenal site in Arkansas, United States, to establish a production facility for 155mm artillery shell components and propelling charges. The plan is to create about 400 jobs over the next 7 years and establish an ammunition manufacturing system extending from raw materials to finished products. Such a localization strategy is to respond to the trend of major export countries demanding domestic production, technology transfer, and participation in local supply chains. By establishing a local production system, it can meet the procurement requirements of each country while securing a foundation to expand its business into long-term logistics support, maintenance, and follow-up orders. Incorporating local partners into the supply chain can also be expected to have the effect of supporting the overseas expansion of domestic partners. However, the expansion of production bases does not immediately lead to improved performance. Considerable costs are incurred in constructing overseas factories and investing in facilities, and there are remaining challenges to be resolved, such as country-specific licensing, local regulations, the scope of technology transfer, and securing skilled personnel. Even if a local factory is secured, the investment burden could pressure profitability if the order volume is insufficient or the operation rate is low. Ultimately, the key to Hanwha Aerospace’s localization strategy is expected to be connecting it to actual follow-up orders and profitability improvement, moving beyond the stage of establishing production facilities. An industry official said, “With the defense bloc formation in the European Union (EU) and the intensification of competition in the global defense market, a localization strategy is essential to overcome this,” adding, “For the sustainable global management performance of K-defense, major domestic defense companies are proceeding with the construction of local production factories and the employment of local personnel. This is done with both expected upcoming demand and preemptive investment for future market share expansion in mind.”