Since the beginning of this year, a shipbuilding battle has been heating up between seventh-ranked Hanwha Group and ninth-ranked HD Hyundai Group. After Hanwha acquired Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean) last year, the two groups emerged as new rivals in the shipbuilding industry.
Having already competed in two warship tenders in 2023, the two companies are now battling it out in order to land a next-generation Korean destroyer order worth more than 7 trillion won.
Hanwha Ocean, part of the defense-heavy Hanwha Group, is strongly determined to win the ROK Navy’s big project. HD Hyundai Heavy Industries (HHI) is also eyeing the project with its pride as the world’s No. 1 shipbuilder.
The Korea Destroyer Next Generation (KDDX) Project between the two groups is to localize a total of six 6,000-ton mini-Aegis ships, according to sources in the shipbuilding industry on Jan. 25. The Defense Acquisition Program Administration (DAPA) of Korea is expected to receive tenders for the 7.8-trillion-won project from companies by the end of this year at the earliest.
The project is carried out in the order of conceptual design, basic design, detailed design and the construction of lead ships and following ships. Hanwha Ocean won an order for the conceptual design in 2012 when it was Daewoo Shipbuilding & Marine Engineering, and HD Hyundai Heavy Industries landed an order for the basic design in 2020.
In usual warship orders, the company that wins a basic design order is usually awarded the contract to build the lead ship. However, HD HHI lost points in the security sector following its conviction for leaking military secrets in November 2023, making it unclear for the shipbuilder to take orders for the detailed design and lead ship construction. According to DAPA regulations, HD HHI may face the revocation of its defense contractor status and a five-year bidding ban.
HD HHI, on the other hand, is arguing that Hanwha Ocean’s monopoly in the defense sector will be deepened if DAPA slaps additional sanctions on HD HHI. In addition, some Ulsan-based politicians have begun to argue that DAPA sanctions should be imposed on Hanwha Ocean, which recently came under fire for leaking submarine design drawings.
In 2011, Daewoo Shipbuilding & Marine Engineering was suspected of leaking the design drawings for the DSME 1400 submarine ordered by Indonesia. Police are investigating that two former employees of Daewoo Shipbuilding & Marine Engineering stole the drawings and leaked them to a submarine development consulting firm by moving to the firm.
DAPA will discuss sanctions against HD HHI employees for leaking military secrets as early as February. If HD HHI is found to have systematically and secretly managed military secrets, HD will be restricted from bidding for the KDDX project.
In addition, Hanwha Systems, a defense affiliate of Hanwha Group, is also reportedly on the agenda to be considered for losing bidding qualifications. This comes after Hanwha Systems ultimately lost a lawsuit against the Korea Fair Trade Commission (FTC) in October last year to revoke its suspension from participating in public bidding and business operations.