Fears grow over shipbuilding rivalry disrupting naval vessel exports

HD Hyundai, Hanwha eliminated in Australian frigate bid

By Park Jae-hyuk

A recent failure by Korean shipbuilders to win the Australian Navy's frigate project has raised concerns that they could face similar challenges in their bids to export naval vessels to Canada and Poland.

Industry experts pointed out that HD Hyundai Heavy Industries (HHI) and Hanwha Ocean may once again lose to their Japanese and German rivals if they refuse to collaborate.

On Friday, the Australian Broadcasting Corp. (ABC) reported that Japan’s Mitsubishi Heavy Industries and Germany’s ThyssenKrupp Marine Systems were shortlisted for the 11 billion Australian dollar ($7.25 billion) project to build a new fleet of general-purpose frigates for the Australian Navy, while Spain’s Navantia and the two Korean shipbuilders were eliminated from the race.

The news report came about a week after President Yoon Suk Yeol sent his foreign policy adviser, Chang Ho-jin, to Australia to campaign for Korean companies’ participation in the project.

The Australian Navy reportedly decided to choose between Mitsubishi’s Mogami and ThyssenKrupp’s MEKO, both of which cost higher than HD HHI’s Chungnam-class frigate and Hanwha Ocean’s Daegu-class frigate.

Moon Keun-sik, a professor of Hanyang University Graduate School of Public Policy who was formerly a Republic of Korea Navy submarine commander, said that the Korean shipbuilders missed a great opportunity, despite their ability to supply high-performance warships at lower prices.

“Both Japan and Germany were able to make all-out efforts for the project, responding to Australia’s request to develop its western industrial facilities,” he said. “However, Korean shipbuilders exposed their weaknesses, as they fought each other.”

The two Korean firms are in a fierce legal battle over HD HHI not being excluded from a project to construct the ROK Navy’s next-generation destroyers, even though its employees were found guilty of stealing destroyer design data from Daewoo Shipbuilding & Marine Engineering, now renamed Hanwha Ocean.

ABC also described their legal dispute over stolen warship technology as “messy” in its news report earlier this month.

Moon noted that the intensifying competition between the Korean shipbuilders could make it difficult for either of them to win the 60 billion Canadian dollar ($43 billion) order for the construction of 12 submarines for the Royal Canadian Navy.

However, HD HHI and Hanwha Ocean competed once again in introducing each of their submarine technologies to Vice Adm. Angus Topshee, the commander of the Royal Canadian Navy, who visited Korea recently to look around the shipyards of the two companies.

“We believe that the government should focus on supporting the company that is more likely to win the order,” a Hanwha Ocean official said.

In contrast, HD HHI has been expressing its intention to form a consortium with its rival.

“We feel the need for ‘Team Korea’ for overseas projects,” Choi Tae-bok, director of HD HHI’s naval and special ship business unit, said during a conference call on the company’s third-quarter earnings.

“We believe that there is room for collaboration for the Canadian submarine project, which will invite tenders two years later.”