South Korea’s two warship builders – HD Hyundai Heavy Industries Co. and Hanwha Ocean Co. – have agreed to join forces to pursue a series of high-stakes international warship construction deals, beginning with a 70 trillion won ($49 billion) Canadian submarine project.
On Tuesday, the two companies signed a memorandum of understanding on setting up one team to jointly seek lucrative overseas defense contracts.
The MOU signing ceremony was attended by senior executives from the two shipbuilders and the state-run Defense Acquisition Program Administration (DAPA).
“The message is clear. By working together, we can secure bigger, more strategic deals on the world stage,” said a DAPA official. “This is just the beginning of a broader push to dominate the global warship market.”
The two companies have fiercely competed for shipbuilding projects in Korea and abroad and were recently embroiled in a legal battle over the 7.8 trillion won next-generation Korean destroyer project, dubbed KDDX.
TO START WITH CANADIAN SUBMARINE DEAL
Their partnership will begin with their joint bid for a 70 trillion won Canadian project to build 12 units of 3,000-ton diesel submarines.
On Tuesday, senior executives from the two companies held a closed-door meeting to discuss their strategy for the Canadian bid.
Hanwha Ocean, with its strengths in submarine technology, will take the lead, while HD Hyundai Heavy will share construction responsibilities if contracts are secured, sources said.
The two shipbuilders also agreed to collaborate on intelligence gathering, competitive analysis and compliance with Canadian government specifications.
POLISH SUBMARINE PROJECT
Subsequently, the Korean duo is expected to jointly bid for a Polish submarine project worth 8 trillion won and a 2 trillion won Philippine submarine project.
In the Polish submarine project, Hanwha Ocean will take the lead with HD Hyundai’s support to win the deal, given Hanwha’s stronger track record in submarine manufacturing.
Hanwha Ocean has been the only supplier of submarines for the Korean Navy since 1987.
HD Hyundai Heavy, with its strengths in surface warships, will lead in projects such as Thailand’s frigate procurement, Malaysia’s littoral mission ship program and Ecuador’s naval modernization initiative.
With $993 billion in global naval defense contracts expected to be awarded by 2031, the Korean team targets to win a majority of the deals, according to executives of the two firms.
HIGH HOPES ON US NAVY SHIP MARKET
Among the biggest prizes in their crosshairs are US Navy warships.
Moves to amend the Burns-Tollefson Act, which currently restricts foreign-built warships from being constructed or maintained in the US, could open the door for international defense firms.
Earlier this month, Mike Lee and John Curtis, Republican senators from Utah, introduced the Ensuring Naval Readiness Act and the Ensuring Coast Guard Readiness Act, designed to modernize and expedite the construction and procurement processes for US maritime forces by fostering increased collaboration with allied nations.
Once the bills are enacted, HD Hyundai and Hanwha will emerge as the top beneficiaries of US President Donald Trump’s push to forge deeper shipbuilding ties with allied nations, analysts said.
Hanwha has been exploring ways to build ships on US soil regardless of legal changes, acquiring Philly Shipyard Inc. in June.
Hanwha executives said in January the company also aims to secure up to six MRO, or maintenance and repair work, contracts for US Navy ships this year.
LESSONS FROM FAILED AUSSIE BID
The HD Hyundai-Hanwha alliance comes after a major setback in Australia last November, when both companies separately bid on a naval contract, only to be eliminated early. By contrast, Japan and Germany advanced to the shortlist with unified national teams.
“This was a wake-up call,” said a Korean defense industry official. “Japan, which has no prior record of exporting warships, made the shortlist while Korea’s two biggest defense firms canceled each other out.”
Industry officials said the failure resulted from their discord over the Korean Navy’s KDDX project.
Hanwha Ocean recently withdrew its complaint to the police against HD Hyundai Heavy, filed in March over allegations HD Hyundai executives were involved in tech leaks of Hanwha-owned warship secrets.
Sources said Hanwha Vice Chairman Kim Dong-kwan and HD Hyundai Senior Vice Chairman Chung Ki-sun negotiated the reconciliation.
Formerly Hyundai Heavy Industries Co., HD Hyundai Heavy is a unit of HD Korea Shipbuilding & Offshore Engineering Co.
HD KSOE, the intermediate holding company of HD Hyundai Co., a shipbuilding, oil refining and machinery conglomerate, has three shipbuilding affiliates under its wing – HD Hyundai Heavy, HD Hyundai Mipo Co. and HD Hyundai Samho Co.
By Hyung-Kyu Kim and Hyun-Il Lee
khk@hankyung.com
In-Soo Nam edited this article.
