South Korea's two largest shipbuilders, Hanwha Ocean (042660.KS) and HD Hyundai Heavy Industries (329180.KS), are likely to jointly develop the country's nuclear-powered submarine project rather than compete head-to-head, given the government's launch timeline and the scale of the program.
According to industry sources Thursday, the budget for the government's nuclear submarine construction program, dubbed the "Jangbogo N Project," is estimated at approximately 28.9 trillion won, based on projections from Park Hong-keun, Minister of the Office for Government Policy Coordination. The long-awaited military project, which began in 2003 with the formation of "Project Group 362" for basic reactor design and was kept classified, aims to launch the first vessel in the mid-2030s and achieve operational capability by the late 2030s.
Industry watchers initially expected fierce competition but now anticipate a joint approach due to scheduling constraints. A conventional competitive bidding process would not allow the first vessel to be launched by the mid-2030s. The fact that the reactor propulsion system design has yet to be finalized adds further weight to the joint approach. "Given the tight schedule, the most likely scenario is a state-led consortium involving Hanwha Ocean and HD Hyundai Heavy Industries, with submarine platform design, reactor propulsion system design, and procurement processes pursued in parallel," said Kang Kyung-tae, an analyst at Korea Investment & Securities. Considering the strategic nature of nuclear submarines as defense assets, joint development, joint construction, or distributed construction is more likely than entrusting the entire project to a single company.
Hanwha Ocean holds an edge in order performance. The company has built a total of 23 submarines, including three Jang Yeong-sil-class (3,600-ton) vessels, the largest submarines built domestically. This is more than double HD Hyundai Heavy Industries' cumulative submarine orders of nine. Its basic design for the nuclear submarine, conducted jointly with the Agency for Defense Development (ADD), is also expected to be completed within this year. Combined with the infrastructure of its Geoje shipyard, where the Jang Yeong-sil submarine was launched, Hanwha Ocean is seen as having strengths in field experience, technology, and know-how. "We will do our best if we are given the necessary role in accordance with the government's follow-up guidelines and procedures," a Hanwha Ocean official said.
HD Hyundai Heavy Industries has consistently expressed its interest in joining the project, aiming for joint participation. The company is highlighting its reactor manufacturing capabilities — the heart of a nuclear submarine — based on its small modular reactor (SMR) development experience, including the construction of a 15,000 TEU nuclear-powered container ship. It is also keen on the maintenance, repair, and overhaul (MRO) business for nuclear submarines. Since 2018, HD Hyundai Heavy Industries has accumulated extensive MRO experience, including major overhauls of seven Son Won-il-class (1,800-ton) submarines. Building on this, the company plans to align with the government's policy of pursuing operations, maintenance, and nuclear fuel management throughout the entire lifecycle. HD Hyundai Heavy Industries has secured six docks at its Ulsan shipyard in preparation for the project. "Developing nuclear submarines requires bringing together all the technology and capabilities of Korea's defense industry," an HD Hyundai Heavy Industries official said. "We will cooperate with the government project to contribute to strengthening maritime security."
This is not the first time the two companies have attempted a one-team approach. They have also formed a consortium for the 60 trillion won Canadian Patrol Submarine Project (CPSP), pursuing offset trade. Under the cooperative framework, Hanwha Ocean is sharing some work, such as submarine overhauls, with HD Hyundai Heavy Industries, while HD Hyundai Heavy Industries transfers submarine technology to Canada to help win the contract. "If the two companies join forces, the process will be faster and risks reduced, allowing them to meet delivery deadlines more quickly," said Moon Keun-sik, an adjunct professor at Hanyang University Graduate School of Public Policy.
However, obstacles remain to the joint approach. At last year's Korea-U.S. summit, U.S. President Donald Trump pointed to the Philadelphia shipyard acquired by Hanwha Ocean as the construction site for the nuclear submarines, creating a variable. Additional consultations with the United States may be required regarding the government's policy of domestic construction. Other challenges include persuading the U.S. Congress to allow imports of low-enriched uranium with enrichment levels below 20%, and the possibility of a change in U.S. administration during the project period. The government plans to fully launch a working-level consultation channel with the United States on nuclear submarines starting in mid-June.
Meanwhile, Hanwha Ocean and HD Hyundai Heavy Industries have both entered the second round of bidding for the detailed design and lead vessel construction of the Korea Destroyer Next Generation (KDDX) program, signaling competition. The 7.8 trillion won project, which involves building six 6,000-ton mini Aegis destroyers, was scheduled to begin detailed design and lead vessel construction in 2024 after basic design was completed in December 2023. However, the project has been delayed by about two years as the Defense Acquisition Program Administration (DAPA) failed to reach a conclusion amid intense competition between the two companies. An earlier bidding round this year also fell through after HD Hyundai Heavy Industries did not register, leaving Hanwha Ocean as the sole bidder.
