Update on Magellan, Hanwha, Missiles and Manufacturing Stuff

Noah Note

I think it's fair to say that Hanwha has taken the news cycle this week. With two major back to back announcements in Magellan-LIG and the Automotive Parts Manufacturers' Association, Hanwha has managed to touch on two of thr major holy grails of the Canadian defence scene - Missiles and Armoured Vehicles that aint General Dynamics.

Both, of course, are not a new idea from Hanwha. We first reported the companies proposed packages that they laid out to Canada back in September, and included in that was domestic manufacturing of vehicles like Chunmoo, Redback, and the K9 family of vehicles.

That package was presented last March though, and lots have changed since then. Part of that if course comes as competition and demands around CPSP take center stage in the Governments watchful eye.

The Federal government has notably taken an aggressive stance to securing offsets from both Hanwha and TKMS since both were downselected as the two qualified bidders back in August. A lot of this file has come from the folks in the PMO and ISED, primarily the likes of Minister of Industry Melanie Joly and several close advisors to the Prime Minister.

Joly has led the offsets side of things from ehat I understand, also Champagne who never gets mentioned. Both have pushed certain companies that have been identified as valued partners, people the government is encouraging Hanwha and TKMS to engage with.

Outside the obvious I can't say names exactly, but it aint just coming from Cabinet. Often it isnt honestly. People forget how much influence advisors and Deputy Ministers can retain when it comes to choices like this. I digress though. I am not a politics channel. So I won't say stuff that gets me in trouble.

For how much the community barks at Madame Joly though, can't argue that she's probably laughing agter this week. Might not be what they wanted, with both Korean and German automotive manufacturers deciding they want to stay as hands off as possible despite their own governments prussure, but hey it's close enough to still be a win probably.

Automotive has been a major issue since last year, something we were the first to identify. With tariffs beating the Ontario automotive industry like its three months behind on rent, the federal government had hoped to leverage the automotive power of Germany and Korea as a crutch to try and prop up the struggling industry with a lifeline of investment.

Instead Hyundai decided to take thr Hydrogen way out, and super promise that they want to be involved. Volkswagen, who I guess everyone decided was the lead here on the German side despite them constantly saying they don't want involved, has expectedly decided that they might invest, maybe, down the line.

I can't fault as many have in the aggression we've taken. I have given criticism for being stubborn on files like automotive, and the recent revision period granted to both companies only really served to piss both of them off for no real changes in the plans submitted in the original RFP submission, both of which were over a thousand pages and promising hundreds of thousands of jobs.

Can't say exact on TKMS, though Hanwha did release an assessment of theirs. Of course both sides also have a whole host of goodies we don't know about stanped into the RFP bid that should be coming out leading into CANSEC.

The actual gossip

Anyways, Hanwha. First we have the Trios of Hanwha-LIG-Magellan investing in the establishment of a sovereign munitions capacity in Canada. The companies are taking a phased approach to this, where initial focus will be on establishing a production line for the Tiger Shark Heavyweight Torpedo for the hypothetical KSS-III CPS. That and Mobile Mines, and Tube-Launched Acoustic Countermeasures will dominate. You can read about all the KSS-III munitions here.

They will also, afterwards, expand into smaller munitions like 70mm, 130mm, and 140mm rockets, things that Magellan has historical knowledge and experience in, though no offence that might be stretching these days with CRV-7. I digress though.

The primary focus, initially, will be on supporting the future Canadian Patrol Submarine through setting up a production line for things like Torpedoes. That will eventually transition into supporting and building a Canadian supply chain, however fron the start there will be a focus on getting things situated instead of trying to do both at the same time.

There is an export angle from the start, or more so demand outstripping capacity. There is a desperate need on both sides of the aisle to scale up Torpedo production while, yes, creating some form of a safe supply. Having Canada involved allows another, seperate supply chain to develop and expand cocurrently.

Germany, as example, is looking to scale its current supply by several hundred over the next several years. Korea is in a similar situation. There is a personal angle to supporting certain munition manufacturing in Canada. The demand is there, both through us and existing demand. That isnt counting for potential future export orders.

And that's kinda where the press release left off. Torpedoes, Rockets, and eventually maybe some export. There were a lot of questions to the plans, and what exactly was planned on the cards. Admittedly the existing discussions were kinda vauge in that regard, so it's understandable.

So… as far as I know it there is nothing off the table. That is the message I have gotten. There is no solid plans at this time, however, the idea is to have a facility that could rapidly onload multiple different lines for multiple potential munitions. M-SAM has been a discussion the last few days, with demand growing in the MENA region as a result of the ongoing Iran Conflict (and the reported success of M-SAM)

Hyunmoo is on the cards. That I know for certain. That is being discussed, along with the Haeseong-III for obvious reasons. That is specifically focused on the Hyunmoo IV-4, no other memebers of the family. That is a long-term plan though, like end stage plans, so don't expect to see movement on that for another decade.

There is an inherent export focus on these facilities, this isnt different, however for high-end munitions the focus is on Canadian demand. You won't see Hyunmoo V or Air-Launched munitions here. You might see something like M-SAM as an export focused product, but the primary focus for this facility is on Canadian-demand while having it available for excess capacity.

That alone will be very hard to execute in the medium. Munitions are inherently complex pieces of manufacturing Torpedoes, as example, especially modern ones, are highly digital, complex systems in themselves. Modern torpedoes are no easier to construct in terms of technology and infrastructure as, say, a modern cruise missile. Both require significant investment and technology.

However, the Tiger Shark does have a few benefits over many others on the market, like Tiger Shark utilizes a Lithium-Ion battery as its primary power source, unlike others that use limited supplier products like Silver-Zinc batteries, which are a niche, toxic, and expensive chemical process, or god forbid Otto Fuel II.

But the focus, as you can see, is slowly building that caoacity here over a period of time, and trying to concurrently set production of things like SLCM, SLBM, or Surface-to-Air Missiles poses a risk of overloading local capacity beyond just local assembly, which itself is debatable in how efficent that would be beyond a set period.

Basically, while possible, I dont think the reality would see that any time soon. At least a decade or more, and then it raises questions. However even having the option and openness on the table for Canada is a major development in itself. Even the prospect of such a development is enough to entice people, and presents the most significant opportunity to build a critical munition supply chain in decades.

That might be by design. People are smart. They understand leverage and political capital. Even a commitment here is a significant step for us. That makes these prospects far more significant than some others. Either way, in any win a Canadian LIG facility would be developed with the prospect of manufacturing a wide range of munitions from their catalogue, with the excess capaxity built in to the plans.

For the Hanwha factory though, destined to build armoured vehicles in Ontario, the prospext is more simple. For Hanwha the focus on this facility would be almost entirely set on Export demand. We can confirm that. No matter what the army does Hanwha plans to build this facility.

Primarily the focus would be on Chunmoo, in collaboration with munition development at Magellan-LIG, and on the K9. Both of which have increased demand. Of course K9 being thr most sucsessful SPH on the market right now and Chunmoo receiving new commitments from Estonia and Norway.

Hanwha expects more orders for both in the future, along with further domestic demand in Korea, to help create a stable base for a Canadian facility able to support export opportunities in Europe, South America, and thr MENA region.

The facility with be modeled after the Hanwha Armoured Vehicle Center of Excellence (H-ACE) in Australia, with the ability to produce a range of vehicles including also Redback, K-NIFV, and possibly others like Tigon for export. That on top of UGV and future Class 8 vehicles for bith the defence and commercial markets.

Those stuff I have zero clue whats happening. No idea. However, Hanwha envisions that Global demand would be enough to support this facility without relying on Canadian contracts. Of course, good Canadian orders is always nice, and certainly helps keep people employed. However it doesn't need it in Hanwha’s plans.

Along with these will be integration of Canadian suppliers into the Hanwha supply chain. Folks like PV Labs, a current CPSP partner, is an example of a company that could be integrated into the supply chain. Paradigm Shift, Hexagon… both Hanwha partners who could be integrated into the global supply chain.

Thats the concept here. Buuld capacity, slowly integrate Caandian systems and suppliers over a period. In both facilities the approach is phased, sloqly building up. For that you won't see immediate results. Things will go slow, will be tempered as things develop.

However, the end goal is simple. Cansdian facilities producing a range of Korean munitions and vehicles, with a distinct mentality for using these facilities to:

• Meet existing Korean and Export demand for several critical munitions and platforms

• Help diversify the Korean Industrial Base with a safe supplier able to support Indo-Pacific, European, and MENA supply chains in conflict

• Gain access to Canadian suppliers and Critical Minerals at a time when the government is handing out preferential access

How long that takes? Likely in the 10-15 year timeframe. That is unless thr Canadian government shows interest and support. That could speed things up, but it is a ball in their court here to speak. It would be us who makes that choice.

And like the Koreans have their own reasons for all this. Least of all they habe to throw some stuff out there. The benefit of CPSP outweighs the risk and cost associated with these plans. As always, twelve submarines would be the largest singular submarine order since the Aussies told the French to go kick rocks.

That alone is greay incentive to throw things to the wall, but the Koreans have the added need of a win. They need a win here. They need a win on thr naval front. I know ive said this a lot before, but it bares repeating. They need this win in their mind. They need someone to give them that contract that they think will open the floodgates.

The Koreans broke through on the land domain. They're getting there with platforms like the FA-50 and now the KF-21, which has interest. They ahve bit gotten that win naval wise. They sold the Nagapasa-class submarines to Indonesia. They've done well in the Phillipines and with Makassar-class.

They haven't got that win in the NATO/FE domain. That last win to open up the western market. That win that shows they can pull it off and deliver a naval platform that meets NAGO standards on time, on budget, etc, etc.

Thats the real gem here. Thats the prize they're after. A win in the naval domain that they believe will open the west to Korean submarines, frugates, etc. There's a lot of value and money there, and the Koreans (as seen in Australia) have struggled to break in.

For them this is a contest of prestige, acknowledgement. It is a fundemental moment that rhey believe could be the catalyst for a truely global K-Defence enterprise, one that propels them into their desired position as one of the worlds top arms exporters.

That is ehy they're being seemingly generous here. It's very easy to look at things from a financial rate of return, or even an economic in this case as well, however there is also the political, the social. There is the developmental. Theres many avenues of which these decisions are made, and looking merely from a financial and economic benefit standard can oftentimes obscure many peoples understandings of a government-to-governmemt deal like CPSP.

Make no mistake. It is G2G at this stage. The companies are the frontlines, but they are not the only player leading the effort anymore. That itself makes the discussion and analysis a lot more complex and nuanced than before.

Of course any promise like this, espexially ines as grand and lifechanging, come with a but of salt and skepticism. We don't know the full plan, if one is there. We have no garuntees of success, nor the extent to which industry benefits. We have insanely complex industrial projects being built without a fundamental tier II and III supply chain necessarily ready to support it.

There are many questions, concerns, and details I would wish to see more from everyone before judging value and success. Does that matter to the decision makers? Maybe, but it's never that simple, never so straight as to call it an assessment and be done.

Maybe it won't matter, and the commitment will be enough. Unfortunately that is fir people many levels above us to give their judgement on. For now though, the concept is laid out for us, and it continues the K-Defence tradition. Spectacular, wonderful, a showman performing his final act as we await to see whether he can deliver.

Time will tell there. They have the mandate to get things done from both political sides. If there is an opportunity to succeed here it's now. Perhaps the best, only time we might have to capatalize. Lord knows we waited this long to reavh the point…