Rivalry between Korean shipbuilders at center of delayed next-gen destroyer project

The Korean Destroyer Next-Generation (KDDX) Aegis destroyer model will be the first in the world to feature a 25-megawatt-class high-capacity electric propulsion motor, described as a “power plant at sea." Courtesy of HD Hyundai

A growing rivalry between Korea’s two major shipbuilders, HD Hyundai Heavy Industries and Hanwha Ocean, has been at the center of the country’s next-generation destroyer program — a project viewed as vital to both national defense and future export prospects in a rapidly expanding global arms market.

The 7.8 trillion won ($5.48 billion) Korean Destroyer Next-Generation (KDDX) program aims to deliver six state-of-the-art, 6,000-ton Aegis-equipped destroyers by 2030. Designed and built entirely with domestic technology, the ships would be the first homegrown vessels of their kind, enhancing Korea’s naval capabilities and bolstering its credibility as a defense exporter.

However, a bitter dispute between the two contractors over who should lead the project had plagued decision-making and cast uncertainty over the program’s future. Hanwha Ocean, which handled the concept design, accused HD Hyundai of illegally obtaining military secrets during the bidding process. The Defense Acquisition Program Administration (DAPA), which traditionally awards the prime contract to the basic design provider — in this case, HD Hyundai — opted instead to designate both companies as co-participants, escalating tensions and delaying progress.

The feud pits two defense heavyweights against each other at a critical juncture for the country’s shipbuilding and arms industries.

While a leading defense expert previously warned of potential significant delays due to the complexity and unprecedented nature of developing the domestically designed air defense destroyer, current indications suggest the project has gained momentum, making contract signing likely later this month.

Lee Il-woo, director at the Korea Defence Network, said the KDDX program represents uncharted territory for the country’s defense industry.

“This is Korea’s first time developing an air defense destroyer, and there are so many systems that need to be integrated, so in reality, it’s like heading into the unknown — starting completely from scratch,” Lee said.

“Since everything has to be done from the ground up, unless there’s an existing prototype to build on, this being a completely new development means there will be delays inevitably as there will be a lot of trial and error in the early stages.”

Bird's-eye view of a Korean Destroyer Next-Generation (KDDX) Aegis destroyer / Courtesy of HD Hyundai

HD Hyundai Heavy Industries, headquartered in Ulsan, is the world’s largest shipbuilder and has a long history of naval construction, including destroyers, frigates and amphibious vessels for the Republic of Korea Navy. The company has been a pillar of Korea’s naval modernization since the 1980s and has the infrastructure and experience to deliver large-scale surface combatants.

Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering (DSME), was acquired by defense conglomerate Hanwha Group in 2023 as part of a sweeping restructuring of the Korean defense sector. With decades of experience in submarine design and production — including the Jang Bogo and KSS-III classes — Hanwha Ocean has been expanding its ambitions into surface vessels, bolstered by Hanwha’s growing portfolio in aerospace, munitions and electronics.

Although historically rivals, the two firms signed a memorandum of understanding in February with DAPA, pledging to cooperate on overseas exports by dividing responsibilities — Hyundai focusing on surface ships, and Hanwha on submarines. But industry watchers say that cooperation has yet to materialize meaningfully in the KDDX project.

The timing of the dispute is especially noteworthy.

The global naval and defense shipbuilding market is booming due to rising geopolitical tensions, and Korea — encouraged by recent defense exports to Poland, Egypt and the Middle East — is well-positioned to seize new opportunities.

Despite the export potential, Korea’s domestic defense shipbuilding market is shrinking as major naval programs, including the LPX-II light aircraft carrier and KDDX, face delays or funding constraints. This has intensified competition between the two firms over limited high-value contracts, turning what could have been a collaborative effort into a zero-sum game.

In 2023, Korea lost a $7.5 billion frigate deal in Australia, while rivals from Japan, Germany and Spain presented unified government-industry bids. In contrast, Hyundai and Hanwha submitted competing proposals. Experts say the lack of coordination may have cost Korea the contract.

The KDDX project is currently set for deployment in October 2030. Experts said any further delays could be costly.

“If this delay continues, it will not only compromise our naval readiness but also damage our reputation abroad,” an industry official familiar with the matter said.

As geopolitical winds shift and global competition intensifies, observers say Korea’s defense industry must quickly choose between rivalry and unity.

“We’ve proven we can build world-class warships,” said a defense official familiar with the matter. “Now the question is whether we can act like a world-class defense industry.”