COVER STORY Labor rigidity hinders Korean shipbuilders' ability to take more orders

Korean shipbuilders are struggling to expand production capacities despite order books stretching years ahead. Their main struggle is not about technology or infrastructure, but labor.

They need to hire workers quickly enough to scale up and capitalize on additional orders, but they say Korea's inflexible employment practices, combined with the industry's cyclical nature, are complicating workforce planning: Hiring aggressively during a boom can leave shipbuilders with excess labor costs when orders decline, making them cautious about expanding their permanent workforce.

While they are struggling with the rigid labor arrangements, Chinese rivals are rapidly ramping up capacity. Domestic industry officials worry that China's expanding shipbuilding experience could erode Korea's technological edge as Chinese shipyards build more vessels and hone their technical capabilities.

“As shipbuilding is a cyclical industry with large swings between booms and downturns, flexibility is needed to adjust production capacity in line with market conditions,” an industry official said on condition of anonymity.

“Despite sufficient demand at present, Korean shipbuilders are finding it difficult to expand production capacity quickly because of rigidity in the labor market, limiting their ability to take on additional orders.”

The labor constraints reflect a longer-term decline in the industry's workforce. The OECD said in an April 2026 report that employment in Korea's shipbuilding industry fell 44 percent between 2014 and 2024, with skilled workers accounting for about 28 percent of shipyard employees in 2024.

“This goes beyond the problems of individual companies and is directly linked to the competitiveness of Korea’s shipbuilding industry in winning orders,” the official added.

He said Chinese shipbuilders had gained an advantage through more flexible workforce management and rapid expansion of their production capacity, allowing them to respond more quickly to changes in demand and secure additional orders during upturns.

The concerns come as Chinese shipbuilders continue to dominate the global market.

According to Clarkson Research Services’ data, China secured 63 percent of global newbuilding orders by compensated gross tonnage (CGT) last year, compared with Korea's 21 percent. China also accounted for more than half of global ship deliveries measured in CGT that year, according to the OECD.

HD Korea Shipbuilding & Offshore Engineering had 526 vessels on its orderbook as of late August, valued at about $75.6 billion, while Hanwha Ocean had orders for 144 vessels and other units worth $33.9 billion as of the end of July. Both companies have secured roughly three years’ worth of work.

However, strong orderbooks do not necessarily mean shipbuilders can take on more orders, as labor market rigidity makes it difficult to expand production capacity quickly.

Experts called for more flexible hiring rules.

“Shipbuilding has its own characteristics. It is an order-driven industry that requires a large workforce, making it highly sensitive to economic conditions,” said Kwon Hyuk, a labor law professor at Korea University.

“This means labor demand fluctuates significantly. A uniform regulatory framework emphasizing employment stability does not fit well with an industry like shipbuilding, where workforce needs vary widely with orders," he said. "If we place too much uniform emphasis on the concept of stable and good jobs, hiring workers in the shipbuilding industry becomes a considerable burden … because a downturn is bound to follow a boom.”

The professor said the argument for granting shipbuilders special regulatory treatment was consistent with calls for similar exceptions in the semiconductor industry, adding that greater employment flexibility would need to be accompanied by better working conditions and stronger protections for workers.

“It seems appropriate to provide some breathing room with employment flexibility,” he said. “At the same time, offering better working conditions and guarantees during that period, while ensuring a degree of employment flexibility, would contribute to the industry's sustainable growth.”

He noted that building social consensus would be essential before such changes could gain traction, while easing restrictions on foreign workers could also help address labor shortages.

Shortage in experienced workers

The challenge goes beyond headcount, as shipbuilding relies on experienced welders, painters, pipefitters and other skilled workers who take time to train. The industry has struggled to attract and retain domestic workers since a prolonged downturn in the mid-2010s triggered mass layoffs, while concerns over working conditions and job security continue to deter younger workers.

Kim Myung-hyun, a professor of naval architecture and ocean engineering at Pusan National University, said the shortage was particularly acute among production workers, while many skilled workers who left the industry during the downturn have had less incentive to return.

“Workers have lost some of the incentives to return, as opportunities to earn more by working longer hours have been reduced,” he said, citing the nation's 52-hour workweek system.

“The industry needs long-term measures to attract younger workers to shipyards, including incentives and vocational training programs.”

Another industry official warned that China’s growing shipbuilding experience could pose a serious long-term threat to Korea’s competitiveness, as accumulated knowhow helps shipbuilders reduce errors and improve efficiency.

“Shipbuilding is an industry where experience matters … And China has already caught up with Korea in large container ships,” the official said. “We need to move quickly to develop new growth markets for the future.”

Experts also say Korea must invest earlier in next-generation shipbuilding technologies to maintain its competitive edge, including floating data centers for artificial intelligence infrastructure, green vessels and autonomous ships.

Kim called for government support for research and development in next-generation vessels and shipbuilding technologies, saying companies may struggle to shoulder the costs alone. Shipbuilders typically operate on relatively thin margins, leaving limited room for large-scale investment in technologies where commercial returns may take years to materialize.

“Given the industry's strategic importance, government support is needed to help shipbuilders develop future technologies and maintain their competitiveness,” the professor said.