[Corporate Exploration] Hanwha Systems Soars with Synergies in Air Mobility and Satellite Communications New Businesses

The Yoon Suk-yeol administration is fostering future mobility (transportation means) such as electric and hydrogen vehicles, autonomous vehicles, and urban air mobility (UAM). It has set a plan to commercialize UAM by 2025. The Presidential Transition Committee announced, "Mobility will be developed as a core future growth engine as a key axis to realize the digital platform government." The global mobility market is expected to grow to a scale of 900 trillion won by 2030. As the government decided to actively support to secure technological and industrial leadership, attention is focused on companies engaged in related businesses. Hanwha Systems has entered the UAM market through active equity investments backed by financial strength. Kencoa Aerospace is expanding its business area into the UAM field based on its technological capabilities accumulated in the aerospace sector.

[Asia Economy Reporter Park Hyung-su] Hanwha Systems was established by merging Hanwha Thales (formerly Samsung Thales) and Hanwha Group's ICT division. It has a defense sector that develops, produces, and sells products based on core technologies in defense electronics, and an ICT sector that sells services such as building corporate computer systems (SI) and maintenance (ITO). As new businesses, it is promoting air mobility, satellite communication business, and digital platforms based on blockchain technology.

The defense sector's main businesses include ▲ surveillance and reconnaissance composed of radar and others ▲ command, control, and communication providing integrated solutions for future network-centric warfare (NCW) ▲ avionics integrating electronic equipment and various sensors mounted on aircraft ▲ maritime systems with unique domestic capabilities for independent development of combat systems for surface ships and submarines ▲ satellite business capable of real-time monitoring of the Korean Peninsula region and neighboring countries. Last year, the defense sector recorded sales of 1.5135 trillion won, operating profit of 92.6 billion won, and net profit of 83 billion won. The main client is the Defense Acquisition Program Administration, accounting for about 47% of the defense sector's sales. Most end users of defense sector products are government agencies, and as of the end of last year, the defense sector's order backlog was 5.5262 trillion won.

The ICT sector is responsible for SI business that builds corporate information systems and IT outsourcing that operates and manages customers' computer systems. At the end of last year, the ICT sector recorded sales of 576 billion won, operating profit of 43.1 billion won, and net profit of 48.3 billion won. The main client is Hanwha Life Insurance, for which it is building an insurance core system. The ICT sector's order backlog is 296.8 billion won.

One of the new businesses Hanwha Systems is promoting, air mobility, is a next-generation transportation system that can transport people or cargo in urban airspace. It has invested in the US company Overair and is jointly developing the air taxi "Butterfly." Under the "UAM Team Korea" system, it is cooperating with domestic related companies.

In February last year, Hanwha Systems also participated in the "Carbon Material Convergence Industry Alliance" to localize carbon materials used in aircraft manufacturing. Carbon materials can overcome the limitations of existing materials based on excellent properties such as ultra-lightweight, high strength, and high conductivity. Applying carbon materials to UAM can increase the capacity for passengers and cargo and reduce energy consumption. It is expected to have the effect of extending flight distance. The alliance includes 28 carbon material-related companies such as Hanwha Systems, Hanwha Solutions, Korean Air, Hyosung Advanced Materials, and Toray Advanced Materials.

Yoo Hyun-jae, a researcher at DB Financial Investment, said, "Hanwha Systems is proceeding with the vision of being a 'UAM service provider' by dividing into aircraft, infrastructure, and services," and introduced, "After obtaining FAA certification in 2025, it plans to start pilot services in five major domestic cities." He added, "By 2030, it will provide commercial services in major cities worldwide," and "Of the 1.16 trillion won raised through a paid-in capital increase in June last year, 700 billion won will be used as funds for mergers and acquisitions (M&A) related to new businesses such as air mobility and satellite communication."

Hanwha Systems is also promoting satellite communication business, which can create synergy effects with the air mobility business. It plans satellite communication antennas and satellite communication services centered on low Earth orbit satellites. Its overseas subsidiary Hanwha Phazer is developing ultra-thin high-performance satellite communication antennas based on proprietary integrated circuit semiconductor technology and flat panel antenna technology. It invested in and formed a strategic partnership with the US venture company Kymeta, which succeeded in commercializing metamaterial-based electronic satellite communication antenna products. It also invested in the multinational low Earth orbit satellite communication company OneWeb. It is promoting domestic and international satellite communication businesses using low Earth orbit satellites.

Lee Dong-heon, a researcher at Daishin Securities, said, "Hanwha Systems is steadily expanding its business areas based on core technologies such as communication systems, radar systems, fire control systems, and ICT," and expected, "Thanks to securing investment funds through capital increases, the expansion of areas will continue incessantly."

Although Hanwha Systems continues its investments, its debt ratio as of March was 68%, down 6 percentage points compared to the end of last year. It holds 848.9 billion won in cash.