Trump's Reasoned Trap Construction 'SOS' [Yang Nak-gyu's Defence Club]

As U.S. Struggles with Warship Construction and Maintenance
Trump Stresses Cooperation with South Korea and Other Allies

President-elect Donald Trump of the United States has been sending consecutive love calls to the domestic shipbuilding industry. Although China's naval power is rapidly catching up to the United States, the U.S. appears to be emphasizing cooperation with its allies due to its own declining warship construction capabilities.

Yonhap News

On the 6th, President-elect Trump stated, "We may be able to use allied countries for (U.S. Navy) shipbuilding." After his election in November last year, during a phone call with President Yoon Suk-yeol, Trump also emphasized the need for cooperation between South Korea and the U.S. in the ship MRO (Maintenance, Repair, and Overhaul) sector.

40% of U.S. Submarines Under Repair

The weakening of U.S. naval power has already been demonstrated through various indicators. Early last year, the U.S. Navy disclosed delays in major warship programs in a report. The Columbia-class ballistic missile submarines, jointly built by General Dynamics Electric Boat and Huntington Ingalls Industries, were delayed by 12 to 16 months. The Virginia-class submarines, blocks 4 and 5, are delayed by 36 months and 24 months respectively. The situation is similar for the ocean surveillance ships built by Austal USA and the amphibious ships by Huntington Ingalls Industries. Statistics also show that about 40% of U.S. submarines are either under repair or awaiting maintenance.

The weakening of U.S. naval power began during the Barack Obama administration. The Obama administration attempted to reduce the fleet from 282 ships to 260, but due to strong opposition from the Navy, only seven ships were cut. When Trump was elected president in 2016, he pledged to expand the U.S. Navy to a fleet of 350 ships. During his four years in office, 21 ships were constructed. However, the goal of a 350-ship fleet was never achieved. Under the Biden administration, five ships were decommissioned, reducing the fleet to 291 ships.

Urgency Due to China's Rapid Naval Growth

Meanwhile, China's naval power has expanded to 328 ships. At this pace, it is only a matter of time before China's navy surpasses that of the United States. This is the background behind Trump’s ‘SOS’ to the domestic shipbuilding industry. Since his election, Trump has promised to strengthen so-called ‘decoupling’ and containment of China.

The U.S. Congress has also taken action in response to China’s momentum. In December last year, the bipartisan ‘SHIPS for America Act’ was introduced. The core of the bill is to encourage shipbuilding within the U.S. to strengthen the ability to supply materials to the military during wartime. The bill aims to increase the number of U.S.-flagged merchant ships to 250 over the next decade to operate a ‘strategic sealift fleet,’ but recognizing the difficulty of domestic construction, it allows temporary use of foreign-built merchant ships.

If this bill passes, it is expected that South Korea, a shipbuilding powerhouse and a key U.S. ally, will benefit. In a phone call with President Yoon in November last year, Trump said, "I am well aware of South Korea’s world-class warship and shipbuilding capabilities," adding, "We need to closely cooperate with South Korea not only in ship exports but also in repair and maintenance."

Domestic Companies Win Consecutive U.S. Warship Construction Orders

The leading domestic shipbuilder is Hanwha Ocean. In June last year, Hanwha Ocean acquired 100% of the shares of Philly Shipyard in Philadelphia, USA, for $100 million (approximately 138 billion KRW). This is interpreted as a strategy to enter the maintenance and repair market for the 2nd to 4th Fleet, which must be serviced on the mainland under the U.S. Jones Act.

According to market research firm Modo Intelligence, the global naval ship MRO market is expected to grow from $57.76 billion (approximately 78 trillion KRW) this year to $63.62 billion (approximately 88 trillion KRW) by 2029. The U.S. market alone accounts for about 20 trillion KRW annually. Since MRO is not just simple repairs but involves lifecycle management of warships, it provides steady revenue for shipbuilders and is emerging as a new cash cow.

Results followed immediately. In August last year, Hanwha Ocean became the first shipbuilder to win the U.S. Navy’s logistics support ship (USNS Walter S. Diehl) MRO project. Earlier in February, after U.S. Secretary of the Navy Carlos Del Toro visited Mitsubishi Heavy Industries in Japan and Hanwha Ocean, Hanwha Ocean was selected. In November, Hanwha Ocean also secured the MRO project for the U.S. Navy’s replenishment ship (USNS Yukon). After maintenance at the Geoje shipyard, the ship is scheduled to be delivered to the U.S. Navy next year.

An industry insider said, "The fact that the U.S. Navy’s 7th Fleet has entrusted all warship MRO work previously done at its base in Japan to South Korea shows a shift in the landscape," adding, "However, competition will intensify as Japan’s Mitsubishi Heavy Industries has been selected over our shipbuilders for the Australian Navy’s frigate bid."