Hanwha Ends Dual Leadership in Defense Sector, New Leaders Face Challenges

Hanwha is set to conclude its dual leadership structure in its defense subsidiaries after two years. While the focus was previously on creating synergies, the company now aims to enhance expertise and accelerate decision-making in line with the growth of the K-defense sector.

According to industry sources on September 17, Hanwha Aerospace and Hanwha Systems will hold a shareholders' meeting on the 18th to approve the appointment of Lee Boo-hwan and Yang Gi-won as internal directors. Following the meeting, the board is expected to finalize their appointments as CEOs.

In October 2024, Hanwha appointed Son Jae-il as the CEO of Hanwha Systems, initiating the dual leadership system for both companies. This arrangement was intended to leverage Hanwha Aerospace's global export network alongside Hanwha Systems' defense electronics and communication technologies. This marked the first time a single leader oversaw both companies.

However, the decision to revert to a traditional structure after two years is interpreted as a response to the rapid growth of the K-defense sector. As both companies have expanded their business through overseas contracts, the emphasis has shifted from synergy creation to strengthening expertise and improving decision-making speed. Indeed, the defense order backlog for Hanwha Aerospace and Hanwha Systems increased from approximately 39.7 trillion won at the end of 2024 to about 46.8 trillion won by the end of the second quarter this year, a rise of over 7 trillion won.

With the change in management structure, the new leaders face significant challenges. For Lee Boo-hwan, the priority is to establish an internal management system that matches the rapid growth of the company. Hanwha Aerospace reported its first quarterly operating profit exceeding 1 trillion won in the second quarter of this year, with its defense order backlog reaching around 38 trillion won.

However, risks related to internal management are also increasing. A June explosion at the Daejeon facility resulted in seven casualties, and the plant has yet to resume normal operations. Recently, allegations surfaced regarding age and school restrictions in the hiring process for experienced workers, prompting the Ministry of Employment and Labor to initiate an investigation. This highlights the need for a comprehensive overhaul of safety and personnel management, separate from performance growth.

Expanding the aerospace business is another major challenge. Hanwha is considered a strong candidate for acquiring Korea Aerospace Industries (KAI), which is rumored to be privatized. Hanwha currently holds a 15.89% stake in KAI, making it the second-largest shareholder. If an acquisition occurs, integrating KAI's comprehensive aerospace capabilities into the business will be crucial for completing the group's defense value chain across land, sea, air, and space.

For Yang Gi-won, the focus will be on securing new growth drivers and managing profitability. Hanwha Systems has achieved success in existing defense projects, such as the Cheongung-II multifunction radar and K2 tank electronics, but it needs to expand its global orders in future sectors like space, AI-based defense solutions, and electronic warfare. As related investments ramp up, the ability to maintain profitability while managing increased costs will be put to the test.

An industry insider noted, "It is true that overseas orders for K-defense have recently slowed down. It has become essential to establish specialized management systems tailored to each company's characteristics while simultaneously enhancing execution capabilities."