'K-Maritime Defense Export' Now Begins [Yang Nak-gyu's Defence Club]

Canada, Poland, and the Philippines Enter Submarine Projects
Hanwha Ocean: The Only Domestic Submarine Exporter

The government has decided to form a 'Korea One Team' to achieve the largest-ever defense export this year. This appears to be aimed at major maritime defense exports such as the frigate export project to Australia and the submarine export project to Canada.

[Image source=Yonhap News]

Domestic defense companies involved in K-submarine exports are HD Hyundai Heavy Industries and Hanwha Ocean. The only case of submarine exports by domestic shipbuilders is the six vessels ordered by Daewoo Shipbuilding & Marine Engineering (the predecessor of Hanwha Ocean) in Indonesia. Because of this, the industry expects Hanwha Ocean to lead the global market entry of K-maritime defense.

The Largest Scale Project is the Canadian Submarine Acquisition Project

The largest project among K-maritime defense is the 'Canada Patrol Submarine Project (CPSP)'. It is a project to replace 12 new 3,000-ton class submarines. It is estimated to be worth about 60 trillion KRW. The 60 trillion KRW includes maintenance costs, and the construction cost per vessel is estimated to be about 2 trillion KRW. Both HD Hyundai Heavy Industries and Hanwha Ocean are strongly interested in participating. The industry expects fierce competition not only between the two leading domestic companies but also with Japan. Domestic companies plan to focus on delivery time and price competitiveness.

HD Hyundai Heavy Industries Advocates ‘Team Korea’ Based on Its Project

HD Hyundai Heavy Industries analyzes that it is difficult for one company to handle the large submarine project estimated at 12 vessels alone. This means that competition should be between countries in a form like 'Team Korea.' On the other hand, Hanwha Ocean maintains a stance of not forming a consortium with HD Hyundai. Even if the project scale is 12 vessels, it is usually divided into first and second phases and carried out separately, so they are confident in their production capacity for solo orders. Especially, overseas defense contracts may include conditions such as technology transfer, which could complicate consortium formation, so they are reluctant.

Additionally, both companies are likely to participate in the Poland submarine project. The competition in Poland is expected to be between the two companies rather than cooperation. The project scale is estimated at about 4 trillion KRW for the construction of 3 submarines, which is a volume manageable by one company.

The ORKA project, a modernization project of the Polish Navy's submarines, involves acquiring three new submarines to be operated by the Polish Navy. It is reported to be worth about 3 trillion KRW. HD Hyundai Heavy Industries proposed two platforms: the 3,000-ton class submarine (KSS-Ⅲ P) and the 2,300-ton class submarine (HDS-2300). Meanwhile, competitor Hanwha Ocean signed an MOU last month at the International Defence Industry Exhibition, the largest defense expo held in Poland, with WB Group, Poland's leading defense group, for submarine business cooperation. Hanwha Ocean and WB Group aim to form an independent MRO package, achieve effective localization, and provide submarines operable for more than 30 years.

Betting on Two Medium-Sized Submarines for the Philippines

The two companies also compete in the Philippine market. The Philippines plans to order two medium-sized submarines, estimated at about 2 trillion KRW.

HD Hyundai Heavy Industries has experience winning orders for a total of 10 vessels in the 'Horizon' project, which the Philippine government promoted twice for modernization and power enhancement of its navy: 2 frigates (2016), 2 patrol vessels (2021), and 6 offshore patrol vessels (OPVs) (2022). However, the lack of submarine export experience is a weakness.

On the other hand, Hanwha Ocean made a bold move by promoting submarines specialized for the Philippines at the 'Asian Defense and Security Exhibition (ADAS) 2024' held in Manila, Philippines. Based on the Korean Navy's latest submarine, Jangbogo-III Batch-II, they presented 2,800-ton and 1,400-ton submarines modified for Philippine operational use as their main offerings. Hanwha Ocean has experience exporting submarines for the first time domestically by winning the Indonesian project in 2011 during the Daewoo Shipbuilding & Marine Engineering era.