JV with P&W in Singapore
Hanwha Techwin Co. has joined hands with Pratt & Whitney (P&W), one of the world's three largest aircraft engine manufacturer based in the United States, to target the global aircraft engine component market in earnest.
The company announced on September 22 that it signed an agreement with P&W to run a joint venture company to manufacture airplane engine parts in Singapore and additionally participate in a risk and revenue sharing program (RSP) for mid-size jet engine called “geared turbo fan” (GTF).
The RSP is a contract method that allocates risks and profits according to shares in participation from airplane engine business development and mass production to aftermarket. It is commonly used when advanced companies in Germany, the U.K., and Japan carry out aircraft engine businesses.
With the latest contract, Hanwha Techwin will acquire 30 percent of P&W’s manufacturing firm in Singapore and involve in management of the joint venture.
In addition, the company will supply airplane engine parts worth US$4.5 billion (4.95 trillion won) to P&W in the next 40 years. When it exercises its call option, which is the right of first purchase of the remaining 70 percent shares, after 2023, sales effect will reach US$10 billion (11.2 trillion won) in total.
Hanwha Techwin has become the first Korean company to take part in managing a manufacturing company of a global aircraft engine manufacturer. Also, it is the third time for the company to join in P&W’s RSP. Hanwha Techwin secured the right to supply core parts of aircraft engines worth US$1.7 billion (1.87 trillion won) and US$3.8 billion (4.18 trillion won), respectively, through two RSP contracts in June and December last year.
An official from the industry said, “Hanwha Techwin has already secured the engine part supply rights worth more than US$10 billion (11.2 trillion won) over the next 40 to 50 years, including the latest contract. Moreover, the company showed how much it strengthened its status in the global airplane engine market by participating in the RSP projects, which guarantee stable profits in the long term, once again.”
Meanwhile, the joint venture in Singapore will produce fan blade parts and high pressure turbine disks, major components of P&W’s latest GTF jet engine.
These two are core parts manufactured by only engine producers and some RSP firms. Hanwha Techwin is now able to expand its business portfolios to high value added engine components by involving in management of the joint venture.
Hanwha Techwin CEO Shin Hyun-woo said, “Hanwha Techwin’s 40 years of experience and competence in manufacturing achieved recognition in the global market once again through the partnership in the joint venture. Using Singapore in where global airplane engine manufactures such as P&W and Rolls-Royce have entered as its overseas base, we will continuously expand our aircraft engine business.”