Hanwha's KAI bid bodes well for another defense leap forward
Korea’s first domestically developed KF-21 Boramae fighter jet takes off from Sacheon Air Base in South Gyeongsang Province, Sept. 22. Courtesy of the Air Force.
Ownership change to private firm still requires careful scrutiny
Hanwha Group’s potential acquisition of Korea Aerospace Industries (KAI) could give the country’s aerospace and defense industry a much-needed boost in the global market, as privately owned defense firms have significantly outpaced their state-backed rival in sales growth.
Yet transferring control of a strategically important company to a private conglomerate would also raise questions over national security, market concentration and the public investment underpinning its technological achievements.
KAI has remained under state ownership since its establishment in 1999, with the state-run Export-Import Bank of Korea as its largest shareholder, holding a 26.41 percent stake. Hanwha is the second-largest shareholder, with a 15.89 percent stake.
KAI’s relatively modest growth compared with private-sector defense counterparts highlights the potential benefits of a change in ownership.
Lagging behind other private defense firms, KAI’s annual sales reached 3.69 trillion won ($2.79 billion) in 2025, inching down from 3.81 trillion won in 2023.
Over the same period, LIG Defense & Aerospace’s (D&A) sales rose 86 percent to 4.3 trillion won. Hyundai Rotem also reported solid growth, with sales increasing 63 percent over the two years.
The contrast underscores the importance of management autonomy, investment capacity and long-term strategic planning. While KAI has developed major platforms, including the FA-50 light combat aircraft and the KF-21 fighter jet, its state ownership has repeatedly exposed leadership appointments to political changes.
KAI’s top management has also been reshuffled frequently amid political changes, reflecting its state-controlled ownership structure. Only one of the company’s nine chief executives has risen through its own ranks.
A liquefied natural gas carrier built by Hanwha Ocean sails at sea. Courtesy of Hanwha Ocean
Leadership vacancies have also disrupted continuity, including one period in which the top position remained unfilled for eight months.
The instability is particularly costly in aerospace, where developing aircraft, engines and satellite systems requires sustained investment and long development cycles.
Hanwha’s experience with Hanwha Ocean offers a potential precedent. After acquiring the shipbuilder, formerly known as Daewoo Shipbuilding & Marine Engineering, in 2023, Hanwha moved to integrate it into its broader defense and marine business.
The shipbuilder’s subsequent earnings recovery and expanding business opportunities suggest how private ownership could help KAI strengthen investment and pursue synergies across aircraft, weapons systems, satellites and space technologies.
“The rapid normalization of management and subsequent sales growth at Hanwha Ocean after its acquisition offer a useful reference,” an industry official said.
Union members of Korea Aerospace Industries (KAI) hold a rally near the presidential office in central Seoul, Tuesday, protesting Hanwha Group's potential acquisition of KAI. Yonhap
However, a potential takeover would come with significant challenges.
KAI has benefited from decades of public investment and technological development, with the KF-21 representing a major milestone in Korea’s ambition to build an independent advanced fighter aircraft.
Critics question whether transferring control of such a strategically important company to a private conglomerate would adequately protect the public interest.
Concerns over market concentration also remain.
Hanwha already commands a diverse portfolio spanning land-based weapons, aerospace systems and naval defense. Bringing KAI under its control could strengthen integrated capabilities, but it could also reduce competition and complicate government procurement.
“Any ownership change to a private firm would therefore require careful scrutiny of its strategic benefits, competition implications and safeguards for critical technologies,” another official from the defense industry said.