[Population Decline Hits Industry] Shipbuilding Faces Labor Shortage Despite Overflowing Orders... Workforce Halved in 9 Years

Manpower Reduction in the 'Most Sensitive Industry' Shipbuilding
Number of Workers Halved Compared to 2014
Among 93,038 Workers, 6.4% Are Foreigners

The workforce in the shipbuilding industry, which is directly hit by population decline, is already dominated by foreigners. As the domestic working-age population continues to decrease, the shipbuilding industry, a representative labor-intensive sector, has become the most sensitive industry. Even during a record-breaking boom in orders, there could be situations where ships cannot be built due to a lack of workers. Shipbuilders plan to replace the gap caused by population decline with foreigners and robots.

Last year, the number of workers in the domestic shipbuilding industry was 93,038. Among them, foreigners numbered 6,031, accounting for 6.4%. The number of shipbuilding workers is less than half of the peak level of 203,400 in 2014. In just 10 years, the workforce has been halved. The Korea Shipbuilding & Offshore Plant Association forecasted that from this year, there will be an annual shortage of more than 12,000 workers, and from 2027, an additional 130,000 workers will be needed.

The inflow of new production workers is also gradually decreasing. In particular, the size and number of specialized colleges, which are central to training field workers, are rapidly declining. The number of specialized colleges related to shipbuilding and marine studies, which was 14 colleges with 17 departments in 2016, sharply dropped to 3 colleges with 5 departments last year.

At the '20th Shipbuilding and Offshore Day' held last year at EL Tower in Seocho-gu, Seoul, Jung Jin-taek, Chairman of the Korea Shipbuilding & Offshore Plant Association and President of Samsung Heavy Industries, presented the 'Outstanding Shipbuilding and Offshore Personnel Award' plaque to Mr. Komkrit, who works at Daero ENG, a Samsung Heavy Industries partner company. Photo by Korea Shipbuilding & Offshore Plant Association

The manpower shortage in the shipbuilding industry emerged in 2016. Shipbuilders faced a cliff in orders and struggled. Naturally, wages fell. Due to the low birthrate, the economically active population (ages 15-64) began to decline from the late 2010s, reducing the overall labor market size, and the number of workers started to decrease. Reducing the workforce was not difficult. However, the reduced workforce is now hampering shipbuilders. Orders are flooding in uncontrollably, but there are not enough people to build the ships.

According to Statistics Korea’s projections, Korea’s working-age population is expected to continuously decline from 37.28 million in the 2020s to 33.81 million in the 2030s and 24.19 million in the 2050s. Moreover, the population in regions where shipyards are concentrated is decreasing even faster, putting the Korean shipbuilding industry in a position where survival is a concern.

Amid the shipbuilding industry's 'super cycle' (period of ultra-boom), the domestic shipbuilding industry's order backlog (remaining construction volume) exceeds three years, and the manpower shortage is expected to worsen. While labor is disappearing, shipbuilders have exceeded their order targets for two consecutive years in 2021 and the past two years, and are likely to exceed targets again this year. HD Korea Shipbuilding & Offshore achieved its annual order target of $15.74 billion (21 trillion 522 billion KRW) early last month.

The solution to the shipbuilding manpower shortage lies in foreigners and robots. The Ministry of Trade, Industry and Energy and the Ministry of Justice, among other government bodies, have taken steps to improve the system for introducing foreign workers to address the manpower shortage in the shipbuilding industry. By the first quarter of last year, more than 5,000 additional foreign workers were secured. Shipbuilders are offering various support measures to help foreign workers settle smoothly. HD Hyundai Heavy Industries, which employs a total of 2,000 foreign workers including those at affiliated companies, operates the industry's first foreigner support center. Hanwha Ocean remodeled nine dormitory buildings for foreign workers at the Okpo shipyard. Samsung Heavy Industries also provides settlement support funds to newly hired foreign employees.

Shipbuilders are also investing heavily in automation. HD Korea Shipbuilding & Offshore is investing more than 120 billion KRW in Samho Heavy Industries to install automation equipment and is promoting a project to transform it into the world’s first smart shipyard. The plan is to build a smart shipyard optimized and automated using artificial intelligence (AI), the Internet of Things (IoT), robotics, and more. Hanwha Ocean developed the robot 'Goknuri' in 2020, used for producing curved blocks at the bow and stern, and deployed it on site to improve productivity. Samsung Heavy Industries also utilized collaborative robots in welding processes at the Geoje shipyard, increasing productivity by about 40% and reducing the risk of safety accidents.

However, there are voices saying that these efforts alone cannot fundamentally solve the manpower shortage. Professor Kim Young-hoon of the Department of Shipbuilding and Marine Systems Engineering at Gyeongnam National University said, "When trying to deploy foreign workers on site, many are not able to be deployed due to insufficient skills, and there are cases where they leave the production site due to issues such as safety and wages. It is necessary to promote structural advancement by automating production processes and strengthening research and development for digital application to reduce dependence on manpower."