Korea to cut investments if Canada splits submarine contract

Hanwha Group Vice Chairman Kim Dong-kwan, front row second from right, gives Canadian Prime Minister Mark Carney, front row third from right, a tour of Hanwha Ocean's plant on Geoje Island, South Gyeongsang Province, Oct. 30, 2025. Courtesy of Hanwha Ocean

Seoul made it clear Thursday that investments by Korean firms in Canada would be smaller than proposed if Ottawa splits a contract for 12 new patrol submarines worth 60 billion Canadian dollars ($43 billion) by purchasing an equal number from both Hanwha Ocean and Germany’s TKMS.

Speaking to reporters before departing for Canada to support Hanwha’s bid and attend the completion ceremony for LG Energy Solution’s battery plant in the province of Ontario, Industry Minister Kim Jung-kwan said the level of industrial cooperation with the North American country would not remain the same if it orders only six submarines from the Korean shipbuilder.

“Of course, we have been trying to win an order for 12 submarines,” he said. “However, it totally depends on the Canadian government’s decision.”

Citing Canadian government sources, The Globe and Mail newspaper reported earlier this week that Ottawa is considering purchasing six KSS-III Batch-II submarines from Hanwha for the Pacific coast and six Type-212CD submarines from TKMS for the Atlantic coast.

Following the report, concerns have grown over the profitability of the deal, as Hanwha may find it difficult to cut costs through mass production. A split contract would also limit future revenue from submarine maintenance, repair and overhaul services.

However, cautious optimism has also grown that a split contract could justify Korean companies’ refusal to meet Ottawa’s daunting demand for large-scale investments to “offset” the submarine purchase.

Trade, Industry and Resources Minister Kim Jung-kwan speaks during a Korea-Canada industrial cooperation forum in Toronto, Jan. 27. Courtesy of Ministry of Trade, Industry and Resources

One of the requests made by Canada was for Hyundai Motor to build a local automobile plant. This put the carmaker in a difficult position because adding such a facility to its existing North American operations in the United States could drive up costs. Instead, the company proposed investing in Canada's hydrogen fuel cell infrastructure.

“Korea should reconsider its investment plan from scratch if Canada splits the contract,” said Moon Keun-sik, a professor at Hanyang University’s Graduate School of Public Policy and a former Republic of Korea Navy submarine commander.

Some industry officials noted that Hanwha could avoid the risk of missing delivery deadlines if it receives an order for only six submarines.

Glenn Copeland, head of Hanwha Defence Canada and a former senior officer in the Royal Canadian Navy, also told The Globe and Mail that the company fully supports Ottawa’s decision to split the contract if it decides to do so, though it still hopes to build all 12 submarines.

“We believe it’s a pretty good chance for us to still prove our technology and deliver systems and platforms to Canada on time and on budget,” Copeland was quoted as saying.

Hanwha Ocean’s headquarters in Korea said the procurement policy and methods are entirely at the discretion of the Canadian government.

Korea Investment & Securities analyst Kang Kyung-tae advised investors to increase their holdings in shipbuilding stocks, citing a strong likelihood that Hanwha would secure an order for at least six submarines.

“It is a matter of choosing between an uncertain order for 12 submarines and a certain order for six submarines,” he said.