[Why&Next] Why Did Game Company Krafton Join Forces with a Defense Firm?

Stepping Beyond Gaming to Become a Technology-Driven Global Company
Leveraging Data and Simulation Technology for Physical AI

Krafton's recent move to pursue a joint development of physical AI technology and establish a joint venture (JV) with Hanwha Aerospace is closely tied to its strategy of diversifying its artificial intelligence (AI) business portfolio to dilute the company's current image as being centered on a single product, "PUBG: Battlegrounds."

Krafton (left) and Hanwha Group CI. Courtesy of each company

Krafton is aiming to transform itself into a global AI technology company by leveraging the data operations experience and simulation technologies accumulated through its years in the gaming industry. In areas such as robotics and autonomous driving—commonly referred to as physical AI—repeated learning in virtual environments is essential to minimize errors. This is where a game company's strengths come into play.

Game engines are optimized for technologies that calculate physical elements such as gravity and friction in real time. Moreover, learning that would take a hundred years in the real world can be completed in a short period through thousands of simulations in virtual environments. It is also possible to set up unexpected scenarios to enhance AI’s response capabilities. When it comes to data, game companies can generate unlimited amounts using graphic technologies. They also have abundant interaction data from massively multiplayer online role-playing games (MMORPGs) that accommodate large numbers of users simultaneously.

Krafton has accumulated vast amounts of data through a single intellectual property (IP), "Battlegrounds." The game has especially achieved remarkable success in populous markets such as China and India, and has performed well in North America and Europe as well. Last year, revenue from the PC version of this IP increased by 16 percent year-on-year, reaching an all-time high. On mobile platforms, the number of paying users showed a double-digit growth rate. However, there are concerns about a slowdown in the overall growth of the gaming industry.

Krafton is seizing opportunities to expand beyond the boundaries of the gaming industry. The company’s ambitions clearly extend beyond being a mere content provider, as it aims to lead the paradigm shift in the AI era. In fact, since 2021, Krafton has been focusing on the potential of deep learning and AI, ramping up research and investment. The company established a deep learning division in the following year, and in 2023 and 2024, presented 12 main-track papers at the world’s top three AI conferences. In October of last year, Krafton also officially declared its transition to an "AI First" company.

This year, Krafton is placing even greater emphasis on physical AI and robotics. The company has built out its U.S.-based subsidiary, Ludo Robotics, and the recent partnership with Hanwha Aerospace aligns with this strategy. Krafton is expected to position physical AI not as a single technology project, but as a new business that fosters an entire ecosystem. Regarding the joint venture, Krafton CEO Changhan Kim stated his ambition to "grow it into a global defense technology company like Anduril."

This content was produced with the assistance of AI translation services.