Korea-based game developer Krafton and Hanwha Aerospace, a leading K-defense stock, recently announced they would set up a joint venture to focus on physical artificial intelligence (AI) research and commercialization, laying out a blueprint to grow it into a global defense technology company like Anduril. Anduril is a fast-growing U.S. defense company over the past decade that has emerged as a key partner to the U.S. Department of Defense by touting AI-based autonomous defense systems and military drones.
Anduril is boosting its valuation with the full-throated support of the Donald Trump administration, which is pushing the "modernization of the U.S. military" by actively using AI in war planning and weapons development. After recent U.S. airstrikes on Iran, it signed a contract with the U.S. Army worth up to $20 billion (about 29 trillion won), and is expected to raise up to $8 billion (about 11.9 trillion won) in an ongoing investment round targeting a valuation of about $60 billion (about 89 trillion won).
◇ Defense startup touting AI and speed
Anduril was founded in 2017 by Palmer Luckey, 33, the founder of Oculus VR, the virtual reality (VR) device subsidiary that Facebook's parent company Meta acquired in 2014. Luckey, who served as head of Facebook's VR division at the time, was fired after it was revealed ahead of the 2016 U.S. presidential election that he donated to a pro-Trump group, and the following year he co-founded Anduril with four others including Brian Schimpf, formerly of Palantir. Founders Fund, the venture capital firm led by Peter Thiel, a Palantir co-founder and Silicon Valley billionaire investor, joined as an early backer of Anduril, drawing industry attention.
From its early days, Anduril criticized the inefficiency of traditional defense corporations, saying weapons development was slow and trapped in bureaucracy, and declared it would lead a "defense innovation" drive by putting forward AI technology and Silicon Valley-style speed. Trae Stephens, Anduril's board chair and co-founder, said "cutting-edge technology and private capital are the driving forces of the future defense industry," signaling a break from the model in which the government leads weapons development by pouring in taxpayer money. The name Anduril is taken from the name of Aragorn's sword in the British fantasy novel The Lord of the Rings and means "Flame of the West."
AI-based autonomous weapons systems and the defense software that integrates and commands them are Anduril's core technologies. Lattice, Anduril's AI-based battlespace operating system (OS), is an "AI staff officer" that connects drones, submarines, surveillance sensors and more into a single network for real-time integrated control. AI automatically identifies threats and proposes operations, helping to analyze the battlespace faster and devise responses.
The company also has a lineup of hardware such as the Anvil, a kamikaze interceptor drone; Ghost, a reconnaissance drone capable of vertical takeoff and landing; Roadrunner, a VTOL interceptor; and Bolt M, a small precision-strike drone that soldiers can carry in a backpack. Recently, it acquired missile-defense modeling company ExoAnalytic Solutions to expand into space and missile defense. With President Trump pushing to build the Golden Dome missile defense system using satellite data and more, the acquisition is seen as a bid to win that project.
Beyond the United States, Anduril agreed to co-develop an unmanned surface vessel with HD Hyundai in Korea and to build the Ghost Shark, an extra-large autonomous undersea vehicle to be adopted by the Royal Australian Navy, among other deals totaling more than $6 billion (about 8.9 trillion won) worldwide, fueling rapid growth. Since its founding, it has raised close to $7 billion, and as of last year its valuation was pegged at about $31 billion (about 46.5 trillion won). Industry watchers say that as AI's role in modern warfare grows—seen in Russia's invasion of Ukraine and the recent U.S. airstrikes on Iran—emerging U.S. defense players like Anduril are becoming the biggest beneficiaries.
Still, because Anduril focuses on speed, some point out that, compared with traditional defense corporations, it does not run as rigorous safety and verification regimes, leading to frequent technical flaws. Last year, about 10 of 30 U.S. Navy unmanned combat ships equipped with the Lattice software malfunctioned, and an Anduril drone crashed during a test flight at a U.S. Air Force base.
◇ Will Battlegrounds technology move to the battlespace? Krafton and Hanwha join hands for "AI defense"
Krafton and Hanwha Aerospace are expected to embark on developing AI-based battlespace operating software like Anduril's Lattice through this "physical AI alliance." On the 13th, the two companies said they would sign a memorandum of understanding (MOU) to jointly develop physical AI technology and establish a JV.
Krafton has technology to build a virtual battlespace similar to the real world, and the idea is to graft such AI and simulation technology onto Hanwha Aerospace's physical, defense-industry infrastructure. Hanwha appears to have focused on the combat-related big data and real-time data processing capabilities Krafton accumulated by operating large-scale concurrent-user games such as its flagship Battlegrounds.
On this basis, they can build a virtual battlespace environment to train fighter pilots or to pre-verify tactics and weapons performance. Some say it could serve as the foundation for developing unmanned weapons systems that Hanwha Aerospace is targeting.
In fact, Lockheed Martin, the largest U.S. defense contractor, has used Unreal Engine, the game development platform from game engine developer Epic Games, Inc., for pilot training and for experiments and demonstrations of autonomous weapons systems.
The move is also seen as part of Krafton's push to diversify its business. Thanks to the growth of its flagship Battlegrounds, Krafton's revenue topped 3 trillion won for the first time last year, but it has faced criticism that its dependence on a single intellectual property (IP) is high and that it needs a new growth engine. As part of its mid- to long-term growth strategy, Krafton said it would discover new game IPs and foster physical AI and Robotics businesses, and the partnership with Hanwha Aerospace is seen as an extension of that strategy.
Krafton CEO Kim Chang-han said, "We will accelerate the development of technology that works in real-world environments by combining Krafton's AI technology and software operations capabilities with Hanwha's field-based strengths."