Hanwha Group’s Strategic Play in South America: A Defense Market Playbook

South Korea’s Hanwha Group is sharpening its focus on South America, positioning Chile as a critical gateway to dominate the region’s defense market. With tailored solutions for land, sea, and space systems, the conglomerate aims to establish itself as a “total defense solution provider” in Latin America—a move that could redefine its global footprint.

The South American Defense Opportunity

The South American defense market is projected to grow at a 3.5% CAGR through 2030, driven by modernization efforts in nations like Chile, Colombia, and Brazil. Chile alone plans to invest over $5 billion in defense modernization by 2027, prioritizing armored vehicles, naval systems, and space-based surveillance. Hanwha’s early engagement with Chile’s military and space programs—such as the Cromo Project for armored vehicles and the SNSAT satellite initiative—positions it to capture a significant share of this market.

Hanwha’s Strategic Playbook

1. Land Systems: Dominating the Cromo Project

Hanwha Aerospace’s Tigon wheeled armored vehicle is a linchpin in its bid to secure Chile’s Cromo Project, which seeks to replace over 1,000 outdated armored vehicles. The Tigon’s modular design (4x4 to 8x4 configurations) offers flexibility for both military and public security roles. Chilean officials have also shown interest in Hanwha’s existing K9 howitzers and Chunmoo MLRS, which could solidify a broader artillery contract pipeline.

2. Naval Power: The KSS-III Submarine Gambit

Hanwha Ocean is aggressively pitching its KSS-III-class submarines, a proven design used by South Korea’s navy and Poland’s $5.6 billion submarine program. Chile’s aging submarine fleet—comprising two 1980s-era German Type 209 boats—creates an urgent need for modernization. The KSS-III’s 3,000-ton displacement, air-independent propulsion (AIP), and vertical launch systems (VLS) for ballistic missiles (SLBM) make it a top contender. Hanwha’s offer to localize maintenance and training in Chile could further sweeten the deal, addressing concerns about long-term operational sustainability.

3. Space & Surveillance: The SAR Satellite Edge

Hanwha Systems is targeting Chile’s SNSAT satellite program, offering small synthetic aperture radar (SAR) satellites to enhance maritime and border surveillance. This aligns with Chile’s geographic priorities—monitoring its 6,435-km coastline and Andean borders—while reducing reliance on U.S. or European satellite systems.

Risks and Challenges

• Geopolitical Hurdles: South America’s defense market is fiercely competitive, with European rivals like France (Naval Group) and Germany (ThyssenKrupp) offering alternative submarine bids.
• Contract Delays: Chile’s procurement processes are often slow, with the Cromo Project’s tender delayed multiple times since 2020.
• Technological Overreach: Hanwha’s ambitious localization strategy—such as building MRO facilities in Chile—requires steady investment, which could strain margins if contracts are delayed.

Investment Implications

Hanwha’s defense subsidiaries, particularly Hanwha Systems and Hanwha Ocean, are central to this strategy. Investors should monitor:

While Hanwha’s defense division contributes only ~10% to its total revenue, a successful Chilean contract could unlock $1–2 billion in regional orders over the next decade. The group’s debt-to-equity ratio of 1.2x (as of Q3 2023) suggests manageable financial leverage, but execution risks remain.

Conclusion: A Calculated Gamble with Long-Term Rewards

Hanwha’s South American pivot is a high-risk, high-reward bet. Chile’s modernization needs and the group’s track record in Poland’s submarine deal highlight its competitive edge. However, success hinges on securing flagship contracts like the KSS-III submarine and Tigon armored vehicles. If Hanwha can establish a foothold in Chile, it could leverage its “total solutions” approach to expand into Colombia, Peru, and beyond—a market worth $25 billion by 2030. For investors, this is a play on structural growth in emerging defense markets, but one that demands patience and a tolerance for geopolitical uncertainty.

In the words of a Hanwha executive: “Chile is our gateway, but Latin America is our destination.” The next few years will test whether this vision translates into sustained growth—or becomes a cautionary tale of overextension.