Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Hanwha Ocean's Canada setback boosts export prospects
Hanwha Ocean's KSS-III Dosan Ahn Chang-ho submarine / Courtesy of Hanwha Ocean
By Lee Min-hyung
Shares of Korean shipbuilder nosedive on botched submarine deal
Hanwha Ocean’s narrow defeat in Canada’s multibillion-dollar submarine procurement project has proven to be a strategic showcase for Korean defense technology, laying the groundwork for the firm’s future exports, experts and industry officials said Tuesday.
The analysis came shortly after the Korean shipbuilder lost the Canadian Patrol Submarine Project, a program valued at up to 60 trillion won ($39.3 billion), to Germany’s TKMS.
Experts attribute Hanwha Ocean's defeat not to technological shortcomings, but to geopolitical considerations, particularly Germany's longstanding alliance with Canada through NATO.
While political factors are believed to have played a decisive role, they argue that the closely contested bidding process underscored Hanwha Ocean's ability to compete head-to-head with one of the world's most established submarine manufacturers.
Moon Keun-sik, a professor at Hanyang University’s Graduate School of Public Policy and a former Korean submarine captain, said Korea had mounted a strong campaign, but was ultimately unable to overcome the political realities surrounding the procurement process.
"We did everything we could, but it appears Hanwha Ocean ultimately lost out because of political considerations, including Canada's NATO ties," Moon said. "Nevertheless, the competition served as an important opportunity to showcase the performance and technological excellence of Korean submarines to the global market, and that in itself is a meaningful achievement."
Hanwha Ocean echoed that assessment in a statement following the announcement.
"Supported by the Korean government's backing, the outstanding capabilities of our submarines and the Korean Navy's proven operational experience, we devoted every effort to winning the contract," the company said. "However, we were unable to overcome the barrier posed by NATO alliances."
Canadian Prime Minister Mark Carney announces that Canada has picked Germany’s TKMS to build 12 submarines for its navy, at HMC Dockyard in Halifax, Nova Scotia, Canada, Monday. Reuters-Yonhap
Although the Canadian contract slipped away, industry experts stressed that the experience gained through the bidding process could bolster Korea's position in a number of upcoming submarine procurement programs around the world.
According to Eugene Investment & Securities, several major opportunities remain on the horizon, including projects involving four submarines for Greece, two for the Philippines, between two and six for Peru, five for Saudi Arabia and four for Egypt.
Additional procurement programs are also expected in countries such as Colombia and Chile, offering significant opportunities for Korean shipbuilders to expand their presence in the global defense market.
Yang Seung-yoon, an analyst at the brokerage house, said the Canadian competition significantly enhanced Korea's international standing in the submarine sector.
"The bidding process demonstrated to the global market that Korea is capable of competing on equal footing with Germany, long regarded as the world's leading submarine builder," Yang said.
The Canadian project had been viewed as one of the largest and most strategically significant submarine procurement programs in the global defense market.
Securing the contract would have marked a major milestone for Korea's ambitions to become a leading exporter of advanced naval platforms. While the immediate outcome is disappointing, many analysts believe the visibility gained during the high-profile competition will improve the country's chances in future tenders.
Investor sentiment, however, reflected the market's disappointment over the failed bid.
Shares of Hanwha Ocean closed with a massive drop of 22.65 percent Tuesday on the benchmark KOSPI, as investors reacted to the loss of what had been considered a potentially transformative overseas contract.
Despite the sharp market reaction, industry officials remain optimistic that Korea's submarine sector is well positioned to capitalize on future opportunities.
“The Canadian competition has elevated the international profile of Korean submarine technology, laying the groundwork for sustained growth in global defense exports over the mid- to long-term,” an official from the industry said.