Samsung Techwin clinches $1.7 bil. aircraft engine deal

Samsung Techwin PresidentKim Cheol-kyo, center, poses with Bennett Croswell, right, president of Pratt & Whitney’s military engines business, andJim Maser, vice president of Pratt & Whitney’s marketing division, after they signed a risk and revenue sharing partnership (RRSP) agreement for the development of aero-engine parts, during the Paris Air Show, Tuesday. / Yonhap

By Park Jin-hai

Samsung Techwin, Samsung’s defense unit, which is soon to be merged with Hanwha Group, inked a $1.7 billion deal to supply aircraft engine parts to U.S. engine maker Pratt & Whitney during the Paris Air Show.

Under a risk and revenue sharing partnership (RRSP) deal with one of the world’s top-three aero-engine makers, the Korean firm will provide engine parts until 2062.

The RRSP is a specific contract form that distributes all the risk and revenue throughout the aero-engine development, manufacturing and after-sales, in proportion to the stakes partners hold in the project.

Samsung Techwin will develop and manufacture the middle turbine frame that is part of Pratt & Whitney's geared turbofan engine.

The geared turbofan engine is a highly efficient engine that has less fuel consumption and noise but with a better performance, which is projected to be the mainstream engine for regional jets carrying less than 130 passengers.

It is the company’s latest export contract, following its $900 million deal with Pratt & Whitney in 2013 and a $430 million deal with GE in January this year. The company has bagged supply contracts worth $3 billion in total over the past six months.

The RRSP has a high threshold, and only a small number of high-tech companies can sign one. Clinching the RRSP deal, Samsung Techwin doesn’t have to renew the contract on a three-to-five year basis that it would have in the past, but can expect to have a more stable business structure as Pratt & Whitney’s partner.

“Through the deal, Samsung's status has emerged as a parts supplier to a co-developing partner,” the company said. “It is the outcome of mutual trust in our quality that we have built in the industry over the past 30 years.”