[Yang Nakgyu's Defence Club] 'K-Shipbuilding and Defense One Team' Report Card to Be Released This Year

Hanwha Ocean and HD Hyundai Form 'One Team' to Target Overseas Markets
Key Projects in Poland, Canada, and the Philippines to Be Decided in the Second Half of the Year

The performance report for the 'One Team' of domestic shipbuilding and defense companies is expected to be released in the second half of this year. HD Hyundai Heavy Industries and Hanwha Ocean have agreed to form a One Team to win overseas naval vessel contracts, and countries hoping to import such vessels, including Canada and Poland, are expected to make their final decisions within this year.

According to industry sources on July 16, Poland and Canada are scheduled to send out Requests for Proposals (RFP) for submarine procurement in August. Meanwhile, the Philippines and Saudi Arabia are preparing for the second phase of their patrol vessel projects and new frigate programs.

Poland is pursuing the 'ORKA Project', which aims to acquire three new 3,000-ton class submarines, with the budget estimated at between 6 and 8 trillion won. Hanwha Ocean and HD Hyundai Heavy Industries initially submitted separate Requests for Information (RFI) to Poland, each seeking to win the contract independently. However, following a mediation by the Defense Acquisition Program Administration in February, they agreed to form a One Team and join forces. While European giants such as France's Naval Group and Germany's TKMS are considered strong contenders, the Korean consortium is aiming for an upset by leveraging the synergy of their One Team. In response to the bloc formation in the European defense industry, the two companies have pledged to work together to shorten delivery times. They have also shared plans to establish Maintenance, Repair, and Overhaul (MRO) facilities and proposed financial support measures. They promised to launch a fund worth 100 million dollars (about 130 billion won) to support Poland's maritime industry.

Over 60 Trillion Won in Submarine Projects Including Poland and Canada

The Canadian Navy is proceeding with the Canadian Patrol Submarine Project (CPSP) to procure twelve 3,000-ton class submarines. The project budget alone amounts to about 60 trillion won, and the contractor is expected to be selected as early as 2026. HD Hyundai Heavy Industries and Hanwha Ocean have already submitted a joint bid as a One Team. Canada has the world's longest coastline, making naval power essential. Canada is also pursuing a new submarine procurement project to replace its four 2,400-ton Victoria-class submarines, which were acquired from the British Navy in 1998. The Korean shipbuilding industry has proposed the construction of the 'Dosan Ahn Changho-class submarine (KSS-III)'. The KSS-III class submarine is a 3,400-ton vessel equipped with lithium-ion batteries and an Air-Independent Propulsion (AIP) system, capable of operating in the Arctic Ocean for up to three weeks.

The Korean government is preparing special measures for the Canadian naval procurement project, which is of considerable scale. While special envoys are being dispatched to 14 countries, including the United States, Japan, and China, sending a special envoy to Canada is also under consideration. Unusually, lawmakers with a military general background are being mentioned as potential presidential envoys to Canada. Lim Woongsun, the second deputy director of the National Security Office, who oversees foreign policy at the presidential office and is a former ambassador to Canada, is expected to serve as the control tower for this initiative.

Surface Vessel Projects Continue in the Philippines and Saudi Arabia

HD Hyundai Heavy Industries is expected to take the lead in surface vessel exports, with the Philippines as a major target market. Leveraging its experience in exporting naval vessels to the Philippine Navy, HD Hyundai Heavy Industries aims to win the contract for the procurement of two new medium-class submarines being pursued by the Philippines. As part of its military modernization program to strengthen naval power, the Philippine government is implementing the 'Horizon' project, which involves ordering twelve vessels in two phases. HD Hyundai Heavy Industries has secured contracts for a total of ten vessels under this project: two frigates (2016), two patrol vessels (2021), and six offshore patrol vessels (OPV, 2022). The patrol vessels are state-of-the-art ships measuring 118.4 meters in length and 14.9 meters in width, with a cruising speed of 15 knots (28 km/h) and a range of 4,500 nautical miles (8,330 km). HD Hyundai Heavy Industries plans to continue exporting vessels in the third phase of the military modernization program based on its trust-based relationship with the Philippine government. The new submarine procurement project being pursued by the Philippine government is estimated to be worth about 2 trillion won.

The K-shipbuilding and defense export market faces stiff competition from other countries. In the Canadian naval project, Germany's shipbuilder ThyssenKrupp Marine Systems (TKMS) has entered the race. Germany is already building two vessels for Canada. Canada is reportedly weighing its options between Germany and Norway, which are emphasizing NATO and European alliances. In the Polish naval project, France's Naval Group, Germany's TKMS, Sweden's Saab, Spain's Navantia, and Italy's Fincantieri are also competing.

Germany and Other Major Naval Powers Compete with K-Shipbuilding and Defense Exports

Among the competitors, Germany is the most aggressive. In particular, Germany aims to expand its presence in the global naval vessel export market by mending its previously strained relationship with Australia. In 2016, France's defense company Naval Group signed a contract with Australia to supply up to twelve diesel submarines, a deal estimated at 56 billion euros (about 77 trillion won). However, in September 2021, Australia unilaterally canceled the contract after deciding to develop nuclear-powered submarines with support from the United States and the United Kingdom. At that time, Australia, the United States, and the United Kingdom launched a new trilateral security alliance called AUKUS to contain China in the Indo-Pacific region. Under this alliance, the United States planned to sell up to five Virginia-class nuclear submarines to Australia starting in the early 2030s.

The situation has changed. On July 15, Pierre-Andre Imbert, the French Ambassador to Australia, announced, "Defense relations between the two countries have resumed since the inauguration of Australia's new prime minister." Australia had pinned its hopes on the AUKUS alliance even at the cost of breaking its contract with France, but the situation has shifted since Donald Trump became president. Concerns have arisen in the United States about whether it has the capacity to build the nuclear submarines needed for its own navy, let alone those for Australia, due to a weakened shipbuilding industry. There are also predictions that the Trump administration, which is skeptical of collective security, may terminate the agreement.

From Germany's perspective, the Korean shipbuilding industry is a formidable rival. Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering), which once lacked submarine construction technology, began learning from Germany's Howaldtswerke-Deutsche Werft (HDW) in 1982. Now, forty years later, Hanwha Ocean has succeeded in localizing more than 80% of the technology and components for its independently developed 3,000-ton class submarines. To date, Hanwha Ocean has secured orders for 23 submarines, delivered 17, and is building 6 more. Among these, five are 3,000-ton class submarines, with three under construction (two already delivered). Only eight countries in the world, including Korea, the United States, the United Kingdom, and Japan, possess the technology to design and build 3,000-ton class submarines.