HD Hyundai-Hanwha rivalry spills over to National Assembly

Rep. Lee Che-ik of the People Power Party, third from right, poses with HD Hyundai Heavy Industries (HHI) officials and other lawmakers on the Jeongjo the Great destroyer at anchor on the quay of the company's shipyard in Ulsan, Monday. Courtesy of HD HHI

Fierce competition between HD Hyundai Heavy Industries (HHI) and Hanwha Ocean in the naval shipbuilding sector has found its way to the lawmakers of the ruling People Power Party (PPP), who have tried to support the shipbuilders, which are located in each of their respective constituencies, according to industry officials, Tuesday.

Rep. Lee Che-ik, who represents the constituents of Ulsan, home to HD HHI’s shipyard, urged the Defense Acquisition Program Administration (DAPA), Monday, to penalize Hanwha Ocean, if it turns out that its former employees leaked a submarine design to Taiwan several years ago, when the company was known as Daewoo Shipbuilding & Marine Engineering (DSME).

“The alleged leak of the submarine construction technology is a serious national security problem,” he said at a meeting on the maritime defense industry, hosted by HD HHI. “If the allegation turns out to be true, Hanwha Ocean should face a significant penalty when it bids for the DAPA projects.”

Hanwha Ocean, which has a shipyard on Geoje Island in South Gyeongsang Province, immediately refuted the lawmaker’s claim, saying that the leaked document was not related to military secrets, as it contained the design of a German submarine that Indonesia imported in the late 1970s, not the design of a DSME submarine. The company also emphasized that it will ask people found to have committed a crime to pay compensation.

Rep. Seo Il-jun of the People Power Party meets with Hanwha Ocean's employees on their way home in front of the company's shipyard on Geoje Island, South Gyeongsang Province, in this September 2023 file photo. Courtesy of Rep. Seo Il-jun

Rep. Lee’s criticism of Hanwha Ocean came about nine months after Rep. Seo Il-jun, a PPP lawmaker who represents the constituents of Geoje Island, called for an investigation into how HD HHI was able to win an order in 2020 for a project to build next-generation KDDX-class destroyers for the Republic of Korea Navy, even though its employees had stolen data from DSME.

At that time, HD HHI’s union accused Rep. Seo of abusing his power to urge the Fair Trade Commission to decide on Hanwha’s acquisition of DSME as soon as possible. The acquisition was finalized about a month after Rep. Seo asked for the investigation.

During a National Assembly audit of DAPA last October, Rep. Lee raised concerns over Hanwha Ocean’s possible monopoly in the naval shipbuilding market, as HD HHI failed to win orders for the ROK Navy’s fifth and sixth Ulsan-class Batch III frigates last July.

Hanwha Ocean was chosen as the preferred bidder for the project, after HD HHI received demerits concerning its naval shipbuilding construction bids in Korea, due to its employees who were found guilty of stealing data from DSME.

“Hanwha Ocean’s monopoly will weaken the overall competitiveness of Korea’s naval ship industry, causing a significant loss to our country,” said Rep. Lee, who is a member of the National Assembly’s National Defense Committee.