[Yang Nak-gyu's Defence Club] HD Hyundai VS Hanwha Ocean... 60 Trillion Submarine Different Dreams

HD Hyundai and Hanwha Ocean, who competed for the next-generation naval frigate 'Ulsan-class Batch-Ⅲ 5th and 6th ships,' are having conflicting interests over a 60 trillion won overseas submarine contract. Canada and Poland are planning to acquire submarines, and the domestic shipbuilding company that wins this project will gain the lead in 'K-defense,' leading to intense competition.

According to industry sources on the 4th, the Canadian Navy plans to order 12 submarines at a cost of about 60 trillion won. The 60 trillion won includes maintenance, and the construction cost per submarine is estimated to be around 2 trillion won. The Canadian submarine project is expected to select a contractor as early as 2026.

[Image source=Yonhap News]

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HD Hyundai believes it should join forces with Hanwha Ocean to compete for the contract. Since the large-scale submarine project, expected to involve 12 submarines, is difficult for one company to handle alone, their logic is that the Korean government should secure the submarine construction project through a government-to-government (G2G) deal with Canada and then share the volume with Hanwha Ocean. Woo Won-sik, Managing Director of HD Hyundai's Special Ship Business Division, recently said at a corporate briefing, "The Canadian submarine project can be seen as a national competition," adding, "It will likely be a competition between countries in a form like 'Team Korea.'"

However, Hanwha Ocean draws a clear line. A Hanwha Ocean official said, "Although Japan sometimes conducts defense exports through G2G deals, competition is fundamental in our defense market," adding, "If the project volume is large, it can be divided into first and second phases for production." The official also said, "When exporting defense products, conditions such as technology transfer exist, and forming a consortium complicates matters."

The rivalry between the two shipbuilders is expected to continue in the Polish submarine contract project. Polish President Andrzej Duda is scheduled to visit Korea next week for the second contract of K2 tanks and K9 self-propelled howitzers. The price for the second contract, including 820 Hyundai Rotem K2 tanks and 360 Hanwha Aerospace K9 self-propelled howitzers, is about 30 trillion won. Poland reportedly requested additional financial support exceeding 20 trillion won as a condition for the second contract.

If the additional financial support is positively concluded during President Duda's visit and the export contract is finalized, it is expected that the Polish submarine contract project will also be advantageous for Korean companies. Poland plans to order three submarines, with construction costs estimated at around 4 trillion won. HD Hyundai and Hanwha Ocean plan to actively promote their submarines at the Poland International Defence Industry Exhibition (MSPO 2023) held next month in Kielce, Poland, and the 2023 International Aerospace and Defense Exhibition (ADEX) held in October at Seongnam Seoul Airport.

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