South Korea’s Defense Sector Faces a Startup Gap as Order Backlogs Rise
South Korea’s traditional defense giants continue to dominate the region, backed by significant government spending and growing global demand. Media outlets report that as of late 2024, these major contractors hold an impressive $69 billion in order backlogs. At the same time, the government is accelerating investment in next-generation weapons, while strengthening partnerships—particularly with Europe—under the EU–South Korea Security and Defence Partnership (2024). Combined with surging exports of military vehicles and artillery, South Korea has now become the second-largest arms supplier to European NATO members.
Despite this industrial momentum, the country’s defense-tech startup ecosystem remains sparse. Few young companies have emerged to challenge entrenched giants, revealing a gap between Korea’s manufacturing strength and early-stage innovation.
A New Challenger Emerges: Bone AI’s Bid to Transform Physical Defense Tech
Founded earlier this year in Seoul and Palo Alto, Bone AI is among the first startups aiming to disrupt this landscape. Its mission: build an end-to-end, unified AI platform that merges software, hardware, robotics, and manufacturing into one integrated system.
The company is developing autonomous systems across aerial (UAV), ground (UGV), and marine (USV) vehicles for government and defense use. Although the long-term vision spans all three categories, Bone AI’s initial focus is its defense-grade aerial drones designed for logistics support, wildfire monitoring, and anti-drone countermeasures.
Funding, Strategic Partnerships, and Early Revenue
Bone AI, founded by DK Lee, who previously co-founded MarqVision, recently secured a $12 million seed round. The round was led by Third Prime with investment from Kolon Group, a major South Korean player in advanced materials and manufacturing. According to Lee in an interview with TechCrunch, Kolon aligns strongly with Bone AI’s cross-disciplinary approach across AI, robotics, and production engineering.
The company is already generating income, recording $3 million in revenue during its first year and closing a seven-figure B2G contract. Bone AI was also chosen to participate in a South Korean government-sponsored logistics programme deploying both UAVs and UGVs powered by its autonomy stack.
Acquisitions Fuel Early Acceleration
Asked how a company less than a year old is already landing major contracts, Lee explained that Bone AI purchased the South Korean drone manufacturer D-Makers, along with its IP, just six months into operations. Originally concentrating on AI models for robotics, Bone AI is now merging its AI capabilities with the newly acquired hardware expertise—an approach Lee says will continue with future acquisitions.
Lee also personally invested more than 10% of the round, about $1.5 million. “That was important to me because I wanted to show both investors and my team that I’m fully invested, financially and emotionally, in this mission,” he said.
From Digital AI to “Physical AI”
This marks Lee’s second startup journey. His experience scaling MarqVision globally gave him insights into AI product growth—but also convinced him that the next phase of AI extends beyond the digital realm.
“After leaving MarqVision, I basically started from zero — going to robotics conferences like IEEE ICRA, cold-emailing the engineers behind Google RT-1/RT-2, and even walking up to Jim Keller, CEO of Tenstorrent, at a cafe just to introduce myself and grab a coffee later,” Lee told TechCrunch.
He argues Bone AI should not be boxed into the defense-tech category, describing it instead as a “physical AI” company. This model unifies AI simulation, autonomy algorithms, embedded systems engineering, hardware design, and large-scale production.
But the heart of the challenge, Lee says, lies in bridging fragmented innovation efforts.
“No one was building the connective tissue, the industrial backbone that allows intelligent machines to exist at scale. Even Nvidia, the most valuable AI company today, relies on a vast ecosystem of fabrication and manufacturing partners across Asia and Europe,” he said.
Why South Korea Is Positioned for the Next Robotics Wave
South Korea’s legacy as a hardware powerhouse—home to global giants like Hyundai, Samsung, and LG—reinforces Bone AI’s belief that the country can support a new generation of advanced robotics firms.
“This is why we should see more drone and small-robotics companies emerging here, and why Korea is fully capable of supporting them,” Lee explained. “Our mission at Bone is to build the supply chain for physical AI within South Korea, and then expand that capability to the U.S., Europe, and other allied countries.”
The Broader Landscape: Global Competitors and Asia’s Untapped Potential
While the U.S. has breakout defense innovators like Anduril, valued at more than $30 billion, and Europe boasts heavyweights like Helsing with valuations near $13 billion, Asia has not seen similar momentum. Even smaller ecosystems such as Israel have gained visibility through companies like Kela Technologies.
According to Michael Kim, general partner at Third Prime, this disparity underscores the wider opportunity:
“As economies around the world focus on reindustrialization, not just the U.S., Bone sits at the intersection of sovereign AI, multipolarity, and reindustrialization,” he told TechCrunch.
Kim adds that South Korea’s strengths in competitive, high-quality hardware—across sectors including shipbuilding, semiconductors, cars, and heavy industry—provide fertile ground for startups following Bone AI’s strategy.
“Many niche hardware players exist but haven’t received Bay Area VC funding; Bone has a strong ‘buy versus build strategy’ to acquire and integrate these assets, accelerating product maturity and commercial traction,” he said.
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