Hanwha Defense Australia has enjoyed considerable success recently and has some innovative ideas for engagement with local industry. To learn more, ADM Editor Nigel Pittaway spoke with HDA’s Managing Director Richard Cho on the eve of the recent Indo Pacific show in Sydney.
ADM: How has being selected as the preferred tender for Phase 3 evolved your plans?
Cho: It hasn’t. It has always been Hanwha’s intention and aspiration to establish a manufacturing capability within Australia, and it extends from the original idea of expanding the sovereign capabilities beyond just the Korean Peninsula. The current geopolitical situation has been driving this in some regards and we’re glad we have the opportunity to actually implement our plans fairly quickly. And, given the successful outcome of Land 8116 and down-selection in Land 400 Phase 3, this gives us an opportunity to expedite the process we’ve always had in mind. In particular, the Indo-Pacific region where we have incredible likeminded allies that would support – and provide support – within the region itself.
ADM: You have a tight timeline for delivery of Phase 3, how are you going to achieve this?
Cho: You’re right, the schedule is very tight. Based on this, we have initiated early investment, particularly in relation to long lead items, we have already placed orders, despite the fact that we hadn’t yet entered into contract with the Commonwealth. Hanwha has always believed in being on time and within the budget. So, in this instance, it is the first opportunity for Hanwha to show our capability to Australia in a competitive environment. We’re taking extra steps to make sure we are demonstrating our capability the best we can. The company has made a considered decision to invest early so we’re able to meet that time schedule.
ADM: Was that a decision taken after you were down-selected?
Cho: It was always on our mind to initiate at that point. Of course, the trigger is the down-selection but we had already informed and engaged with our supply chains by that stage to be on standby to go forward.
ADM: What can you tell me about your Australian Industry Capability (AIC) plans?
Cho: AIC is important, and I think not only for sovereign capability within Australia but to create resilience we need to bring those participating in the AIC program to be part of the export opportunities. Relying on Australian programs on their own is not viable. Hanwha is conscious of actually bringing those SMEs we engage on the AIC program to broader opportunities in the global market. So, at this point in time they will need to produce products, but we believe there are elements of capabilities within Australia that fits well within the gaps existing in Korean supply chains. They are complementary and those products or solution providers will be encouraged to be part of our solution base internationally.
Now, unfortunately, the export element is not part of the AIC plan as such. I think there needs some level of Australian government understanding that exports matter within the AIC framework and it should be considered as a benchmarking or as a category to assess. Because the reality is, just simply locking into a program makes it very difficult for any SMEs – or even the primes – to meet a target. So, whilst we are seeking to increase the AIC content, really our focus should be about how we bring industry into international markets and provide that demand that generates globally, not just from Australia.
ADM: Is there an argument for parallel production, so you have two supply sources?
Cho: Well, that’s part of it. For example, Korea manufactures armoured steel, however, we’re focusing on promoting the Bisalloy steel to the international market. Whilst Hanwha has the two supply chains in hand, we see the benefit of utilising Australian industry to support certain parts of the world and Koreans to support certain parts of the world.
The way it makes sense is we are looking for a most cost-effective means to deliver a capability to the customer. Now, if we look at South Korea, to supply into Europe you need to come down all the way through Singapore and back up through the Middle East and then through into Europe for transport. Along the way you need escorts to deliver defence products or defence components. This adds costs. So really, what will determine who supplies is the competitive pricing that we can land at the customer’s destination.
Certainly, Korea has some advantage in terms of pricing but that’s only on labour costs and that’s not that significantly different. In fact, if you look at the industry norm for defence-related organisations in Korea versus Australia, it’s quite marginal. The way it’s calculated is different: when you add all the ancillary payments for the Koreans as a total in comparison to Australian earnings, there’s about 5-10 per cent difference.
So South Korea is not as labour cost effective as you might think. However, where they do have advantage is their mass production capacity. But in certain areas in defence, often the volumes are small. By using a mass production capacity to produce a small quantity, your overheads will be high. That’s the area where we see Australia playing an important role, and competitiveness within the market itself. Raw material cost is raw material cost; it’s how we define that value and present it to the customer.
ADM: Republic of Korea Defense Acquisition Program Administration (DAPA) Minister Eom has called for a strengthening of industrial ties between two countries, what will this actually look like?
Cho: It certainly will help our aspirations for defence industry in Australia to tap into, not only global markets, but also into Korean defence requirements. Minister Eom would have spoken about the consideration being undertaken in Korea for that. We don’t know the numbers or details as to what the requirement would be, but certainly the Australian contribution into the Korean programs is made real – based upon what we’re doing here in Australia and needs to be encouraged.
Every nation is asking for sovereign capability, but it doesn’t solve the problem. If you have every nation producing the same product, who are you going to export to? We need to be strategic about by whom and where certain components are produced. It’s not so much a niche market we’re talking about but identifying where the strength lies.
For example: Europe or UK have their own strengths, Australia has its own strength, Korea has its own strength. How do we then marry this up to deliver the best system that we can? Those areas are where we encourage to create a more collaborative industrial base. I like to think about it in the sense of single industry that is global, rather than multiple different industries from different nations.
ADM: Is the Korean Army interested in Redback?
Cho: There is certainly a change in thinking happening in Korea. Until now the Korean Army has been very much focused on rapid deployment for defence against North Korea. Now, you’ve been to Korea so you’d understand the terrain difference – mountains, rivers and creeks. An amphibious crossing capability is something that was very important to the Korean armed forces, hence the reason a platform such as K-21 was created.
However, the situations in Ukraine and other areas are highlighting the importance of protection.
There’s a sliding door moment now in Korea where the Korean Army is now looking at potentially having the lighter rapid deployment forces go in early, then supported by heavier brigades behind them. Many of the current acquisition programs are in that direction; for example, ROK are now buying German M-3 vehicles, which is a bridging system which can rapidly move across rivers. The introduction of those kinds of platforms is now allowing the heavier vehicles to be introduced into operations.
ADM: Is your H-ACE (Hanwha Armoured vehicle Centre of Excellence) facility at Avalon on schedule?
Cho: At the moment, we’re almost two months ahead of schedule, mainly thanks to the good weather. We are planning to have the facility completed by August 2024 and then we have to commission the facility to accept the first three Huntsman vehicles made in Korea for their local fit out. Commencement of production will begin in the first quarter of 2025.
ADM: With that in mind then, if the Korean Army does come on board with Redback, what opportunities would there be for H-ACE?
Cho: It really depends on the configuration the Korean Army will go with. What is clear at this time, the KNIFV (Korean New Infantry Fighting Vehicle) is one of the models being considered. It’s based upon the Redback chassis, with some tweaking to the turret because the Koreans have a different operational concept. What we have adopted in Australia may not suit the operational concept of South Korea but Australian industry will be involved in both the turret and hull work packages.
The turret configuration is a question for Korea to answer, whether it’s going to be Korean solution or adapt the Redback turret. Either way, the armoured steel that will be used is coming from Australia. This will see Bisalloy steel shipped to Korea for production of the turret structure, and we will do the hull and the chassis here.
At this point in time, nobody knows which way the Korean government is going to go. We’re waiting on their guidance as to their preferred approach.
ADM: What other Hanwha technologies or capabilities would be of interest to Australia?
Cho: We recently acquired Daewoo Shipbuilding and Marine Engineering (DSME), and have rebranded as Hanwha Ocean. The company has a strong pedigree in surface ships, both civil and military, and submarines. I don’t know if completed conventional submarines are a possibility for us in Australia, but a surface ship would make sense. We’re building large number of vessels for both commercial and for Defence forces. However, again, Hanwha’s intention is to broaden its horizon. Now there are some elements of activity going on within Australia by Hanwha Ocean to position themselves as a possible supply chain partner into Australia.
And there’s space communications. We own a small part of One Web, a large global Low Earth Orbit satellite constellation. The solution we’ve created for the South Korean Army could be used as a benchmark for Australia to consider as a part of the broadening of the Australian Army network, with the possibility of adding Air Force and Navy platforms into that network.
Beyond that, we have guided weapons and explosive ordnance (GWEO) experience. Hanwha started with explosives and one of the things we bring to the table is not about the solution itself, but about what we’ve learned to become so capable. We spent many, many years trialling things, making mistakes – costly mistakes.
What we have found is that, from the beginning you need to be cost-effective all the way through production. Starting from the design of the production lines, you have to create the whole suite of the capabilities to become competitive globally. I think what Hanwha brings to the table for Australian industry is not so much what we can do or supply, it’s more about what not to do. Not to make the same mistakes we have and to achieve the capability quicker; that’s where the big value comes in.
In terms of being able to provide GWEO capability, we are strong contenders. For example, the Korean Chunmoo system delivers performance comparable to the HIMARS family of weapon systems, which were both part of the most recent Exercise Talisman Sabre. They are similar, though not the same system, but the price point of the Chunmoo makes it an attractive solution for our regional partners.
At the end of the day, the defence budget comes from the public and it is our objective to reduce the burden on the public as much as we can while maintaining readiness and effectiveness.
ADM: What are you doing in the areas of autonomy and AI?
Cho: South Korea is one of the countries leading the world in terms of automation and autonomy and we are starting to introduce the capability into the heavier, larger platforms. As part of that, HDA is currently involved in creating a solution in that space and if we get it right, this would be a game-changer for many nations.
One of the biggest challenges, and you can see it in Ukraine, is the logistic support; the ability to bring in munitions into the fight, being able to fuel the advancing tanks. The Russians couldn’t do it, so you ended up with a whole bunch of Russian tanks stopped in the middle of the road going nowhere. So, your ability to provide that support so they can continue the operation is of paramount importance. This is where we see the technology that currently sits with Deakin University and so forth, in collaboration with Korea, being applied.
ADM: What is Deakin’s role?
Cho: Deakin University has been working closely with Defence on the autonomous side of the equation for many years, and they have some credible solutions which we are very keen to explore further. From our perspective, the ideal situation would be government-to-government, industry-to-industry economic partnerships to create the working solution. But not just between Korea and Australia – it could also be between the UK and Australia, for example. And we as Hanwha, as an industry player, harnesses that capability from various parts of the world to bring it in and that would then set a standardised system. Not project related, but more the standardised baseline solution that everyone taps into.
ADM: What feedback have you had from prospective customers after your Land 400/3 success?
Cho: Firstly, we can’t underrate the win against the might of Rheinmetall. It’s always been revered for its engineering skills. The win against Rheinmetall has given us confidence that South Korean industries can compete at that high level.
Secondly, our win has illustrated most effectively that leading edge technology can reside outside of traditional suppliers presented by the major US and European companies. Ever since the Redback announcement, governments that we have not yet even dealt with are calling up and asking for brochures or want to know more about Redback. Those countries that traditionally we would have never thought that even would give a wink to Korean technology are now asking for us to come to the trials, for us to participate in their programs. We’ve seen a marked improvement in the interest in Hanwha internationally.
ADM: What keeps you awake at night?
Cho: The value of the land domain beyond 2028. It is important to HDA that we quickly establish ourselves as an organisation focused on international businesses, and we’re working towards that at the moment. I’m encouraged by the interest shown from various parts of the world – particularly Central and Eastern Europe, as well as the Middle East. We can’t miss this opportunity, we need to expand on this and one of the key areas we’re really looking at is how we develop the ‘Three Eyes’ (Australia, the UK and the US) as a central core opportunity.
We must be part of AUKUS Pillar 2 if we’re going to be successful into the future. I think the progress of the UK government and its influence on NATO and the Australian government’s influence on the Indo-Pacific provides that very strong baseline for technological collaboration and cooperation between South Korea, Australia and UK. That will then provide opportunities for standardisation of the systems and interoperability between the likeminded allies.
Having said that, if we are successful in creating a strong partnership, what comes into play is the question of where the US sits. Does the US demand US products, which are not interoperable with likeminded users within the region?
One of the biggest challenges the US has found in Ukraine is their ability to support the war. In other words, they’re quickly running out of war stocks. They can’t source it, they can’t deliver it. The problem is ramping up the industries after so many years smaller scales. It’s going to take many, many years to catch up after the peace dividend that saw the supplier base contract. The US government is starting to look outwardly at third party supply chains that are networked into the US.
It comes back to that need to see the US accepting the technology bases in the Indo-Pacific and Europe as also suitable for the US operations in that area. Not necessarily for the US armed forces in America but those deployed forces. It becomes a much more palatable scenario where they are using similar systems, similar capabilities to their allies that may not be interchangeable but are interoperable.
I think the current geopolitical situation is demanding them to think differently. For example, one of the reasons why the US is looking at Australia building sovereign capability for missiles is exactly that; they want to have a secondary supply chain located in the Indo-Pacific. They’re talking to the South Korean companies, including Hanwha, to have the capacity to support the US requirements, ranging from manufacturing through to testing and certification. Greater collaboration with likeminded allies – particularly in the areas of Five Eye or Three Eyes, AUKUS and the Quad – is going to become more important and I think we as an organisation would like to be a part of that.
This interview first appeared in the December 2023/January 2024 edition of Australian Defence Magazine.