Hanwha Techwin Co., a defense and aircraft engine parts unit of South Korean conglomerate Hanwha Group, has clinched a 198.9 billion won ($176.6 million) deal to supply aircraft engine components to the U.S.-based General Electric Co., the company said in a regulatory filing on Wednesday.

Under the deal, Hanwha Techwin will supply 107 different types of aircraft engine parts to GE until 2022, a deal tantamount to 5.65 percent of its revenue in 2016.

Hanwha Techwin wants to become a global leader in aircraft engine parts business through supplies to the world’s three leading engine manufacturers GE, Rolls-Royce Ltd., and Pratt & Whitney Co. Engine parts business take up 40 percent of Hanwha Techwin’s overall air defense business, which is a major business that account for 77 percent of its total sales of 3.5 trillion won.

In the mid- to long-term, Hanwha Techwin aims to become part of the so-called inner circle of the global engine industry through acquisition of a U.S. company in the field.

According to Korea Aerospace Industries, the size of Korea’s aircraft manufacturing market is significantly small - $270 million or 0.6 percent of the global market. The U.S. has a 43 percent market share. Not only is the market small but the domestic industry is also focused on manufacturing combat aircrafts, leaving limited room for privately assembled commercial aircrafts.

An unnamed senior official from Hanwha Techwin said that to become an engine major, there needs to be a track record of accumulated technology or performance lasting 20 to 30 years. It isn’t easy, however, to fulfill that requirement in a short period of time, so an option for the company would be to merge with a manufacturer that is among the top in the global engine value chain, the official added.

By Kim Jung-hwan

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