Hanwha Aerospace, a major player in South Korea’s defense sector, has announced plans to spin off its semiconductor equipment and video surveillance businesses. With this, the company plans to separate units that contributed approximately 16% to the company’s revenue, allowing Hanwha Aerospace to sharpen its focus on its flagship defense division.
Hanwha Aerospace will spin off Hanwha Precision Machinery, its chip equipment making business and Hanwha Vision, surveillance camera manufacturing business. The company plans for the two entities to merge into a single industrial solutions company.Â
The decision to spin off these non-military businesses is part of Hanwha Aerospace’s strategic realignment efforts. By segregating these segments into a newly established corporation, the company will streamline its operations and concentrate on strengthening its defense business operations.
Estimates suggest that the newly formed corporation would be valued at approximately 2 trillion won ($1.48 billion), while the defense business is estimated to be worth 10 trillion won. Hanwha Group, the parent company, will retain a 33.95 percent stake in Hanwha Aerospace and the newly formed corporation.
By streamlining its flagship defense business, Hanwha Aerospace aims to become a comprehensive defense solutions provider in global markets, covering sectors such as land, ocean, and aerospace fields. After the spin-off, Hanwha Aerospace will retain affiliates such as Hanwha Systems and Hanwha Ocean. At the same time, Hanwha Precision and Hanwha Vision will become wholly owned by the newly established company, Hanwha Industrial Solutions.
Hanwha Aerospace emphasized that the spin-off would help overcome valuation challenges associated with combining its defense business with subsidiaries such as Hanwha Vision and Hanwha Precision Machinery.Â
It expects Hanwha Precision’s semiconductor chip equipment business to experience growth, particularly in developing equipment for high-bandwidth memory (HBM) chips used in artificial intelligence (AI) chipsets, supported by solid cash flow from Hanwha Vision.
Hanwha Aerospace, whose origins trace back to aircraft parts manufacturing, plans to consolidate its defense operations and drive growth in the defense sector, building on past successes such as the landmark deal with Poland in 2022.
Analysts are optimistic about the spin-off of Hanwha Aerospace’s non-military businesses, seeing it as a catalyst for the pursuit of growth strategies in the defense sector. With this new move, the company is aiming to expand its defense business, with Hanwha Ocean actively seeking to acquire Australian shipbuilder Austal, renowned for its shipbuilding expertise for the U.S. Navy.
Moreover, the spin-off is expected to streamline the conglomerate’s governance structure, simplifying succession planning for the current chairman’s heirs. With this restructuring, Hanwha Aerospace will focus on its core areas of space, aviation, and military operations while divesting other businesses to optimize management efficiency.Â
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