Naval Shipbuilding Giants Form Alliance

Hanwha Ocean and HD Hyundai Heavy Industries form strategic partnership to secure major international naval contracts and enhance South Korean defense industry's global standing

US Navy officials visit a HD Hyundai shipyard in February 2024. (Source: Yonhap News)

In the realm of naval exports, it is uncommon for shipyards from the same country to compete against each other. A recent example of this was observed in Australia’s frigate program, where South Korea’s two major naval shipyards, Hanwha Ocean and HD Hyundai Heavy Industries, submitted competing bids. Though they entered the competition separately, both companies were eliminated together in November 2024. This outcome was widely criticized in South Korea as a grave disappointment.

In response, on February 25, 2025, the two South Korean naval shipyards signed a memorandum of understanding to collaborate on future export opportunities. Moving forward, they are expected to form a unified consortium, known as One Team, to represent South Korea in international bids.

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Under the One Team arrangement, reportedly coordinated by the Defense Acquisition Program Administration (DAPA), the two shipyards will share the lead contractor role. Hanwha will lead all submarine programs, while HD Hyundai will take the lead on surface combatant programs. Additionally, both companies will pool their expertise and talent when pursuing export opportunities, leveraging their extensive experience in designing and building both submarines and surface combatants.

South Korean media reports indicate that several significant export bids will be impacted by this collaboration, including the Canadian submarine and Saudi frigate programs. Notably, there is also speculation about potential opportunities with the US Navy, linked to a recent bill introduced by Senators Mike Lee and John Curtis. The bill, titled, ‘A bill to authorize an exception to the prohibition on the construction of naval vessels in foreign shipyards, and for other purposes,’ would permit the construction of US Navy ships in the shipyards of NATO and Indo-Pacific allies.

Hanwha and HD Hyundai’s partnership could serve as a pivotal platform to elevate South Korea’s position in the global defense industry. The key question is whether these two long-standing rivals can set aside their differences and collaborate effectively. Given that between 60-70% of business partnerships fail, it is crucial for them to be an exception, particularly for the strategic interests of South Korea’s defense industry.