Hanwha Aerospace Global CSO on China Sanctions, Rare Earths

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00:00We are now seeing Hanwha companies under the spotlight, given Hanwha Oceans U.S. subsidiary

00:04sanctioned by China. How much do the latest developments really impact Hanwha's thinking

00:10into investments in the U.S.? You know, we have and we're aware of the sanctions announced

00:17by China on Hanwha's U.S.A. subsidiaries, and we're reviewing what that impact will be going

00:24forward. But I think the story here is whether it's from the Chinese perspective, whether it's

00:28from the Korean perspective, whether it's from the U.S. perspective, this really highlights

00:33the significant role that Hanwha plays in shipbuilding and the role that we can play in the growing

00:39cooperation between Korea and the United States as allies on shipbuilding. We have technological

00:46capabilities, advanced manufacturing capabilities, sheer industrial scale, or we really can, as

00:52the two leaders, President Lee and President Trump have said, make American shipbuilding

00:57great again. And we'll see when President Lee and President Trump meet here in Gyeongju whether

01:02there's more shape brought to that Mozga deal. And we stand ready to provide support to that

01:09and ready to implement that cooperation.

01:14But Hanwha has been so ambitious when it comes to the U.S. Navy shipbuilding potential. Does this

01:20sort of restrict or give you pause for thought?

01:24Well, I think there's going to be a lot of opportunity in the United States on shipbuilding,

01:29whether that's naval ships, whether that's on maintenance and repair of naval ships. We've done

01:34one of those in our Akpo yard in South Korea. But we're also looking at expanding and modernizing

01:41the Philadelphia shipyard, the most historic shipyard in the United States, which we acquired last year,

01:47as we build out capacity there, you know, with a goal of moving in from two ships a year capacity

01:52to 20 ships a year, if we reach our objective, that provides a lot of opportunity, whether for

01:58naval ship repair, maintenance, even construction, or commercial ocean going shipbuilding.

02:07How is Hanwha affected by China's restrictions on rare earths, which, of course, are widely used in the

02:13defense industry?

02:18Right. Well, I think every company in every country in the world is looking at the possible implications of those

02:26restrictions. As you say, they are an upstream input into a number of industries, not just defense, but it's

02:33something, you know, as a defense company that we'll look at, as will every other defense company in the world. But as you

02:40know, Sherry, that's going to be a topic of conversation here between President Trump and President Xi when they meet here in

02:46Gyeongju. And we'll see what the outcome is of that.

02:50Where does Hanwha source rare earths from? And is it impacting the way that you think about supply chains?

02:56Well, we think about supply chains from a security perspective as well. What can we do to source, whether it's rare earths, whether it's our

03:08steel, whether it's our other technological and commodity inputs, in a way that makes us resilient, and therefore we can deliver for our

03:18customers? You know, I'll give you an example. You know, we are the number one maker of artillery systems, the number one howitzer in the

03:25world, sold to many countries. And nearly half of those inputs are actually US sourced, and then sourced from Korea and other

03:34nations. So we're looking to diversify the inputs into all of our products, again, for security reasons.

03:44But China takes up most of the sourcing when it comes to rare earths. Are you diversifying?

03:55Well, I think every country and every company in the world is looking at that. But you're right. China has a very dominant and very

04:03strong position in the refining of rare earths. And if you look, whether it's at the United States, whether it's Europe, whether it's

04:10APEC economies, how do we all look at that, that supply chain, strengthen it, and strengthen the resilience of countries and

04:20companies around the world? Again, from a national security perspective, but just for the health of the world economy.

04:28I spoke to President Lee Jae-myung, who talked about that defense spending being raised to three and a half percent of GDP. We have Japan

04:36also doing the same. What sort of opportunities does this present as we're seeing more spending across the defense industries?

04:43You know, for Hanwha, I think this presents a real opportunity. You know, we are the top defense

04:52contractor here in Korea. So any kind of increase in top line defense, we would look to provide those

04:58services to the government and to the military of Korea. But I want to note that Korea's move here and

05:04Japan's move and Taiwan's move is a part of a global trend. You know, I note that in the NATO countries earlier this

05:11year, collectively jointly agreed to move to five percent of GDP and defense spending. That is also an

05:18opportunity for Hanwha. We're looking to help rearm Europe. We're looking to help provide them with

05:23the munitions, the artillery, the hardware and the technology that the next generation technology they

05:29need to rearm and reestablish deterrence there in Europe. What are the latest conversations that you're

05:37having with tech companies in order to up your game here?

05:44Right. You know, those conversations are happening here at APEC. You know, it's very interesting. APEC,

05:48as you know, Sherry, has traditionally been an economics focused multilateral event, not a security

05:55focused one. But in this world today, traditionally economic matters, whether that's trade, whether that's

06:01supply chains, whether that's technological innovation, are inextricably linked now to security.

06:07And the most clear example of that is in defense, where AI and autonomy are changing the nature of

06:14warfare. And Hanwha is a very uniquely positioned company in that respect. We are an ICT company,

06:20a defense ICT company, providing communications and digital systems on the battlefield. But we pair

06:27that with unmatched sheer industrial scale, because you can have the technology and you need the

06:33technology in modern warfare to make decisions faster, to outpace your adversary in the battlefield.

06:39But it needs to be married up to hardware. You still need steel in the water. You still need steel

06:44on the ground. You still still need a critical mass in fear of physical mass paired with that new

06:51technology.

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