The coming months represent a critical moment in the U.S.-Republic of Korea (ROK) relationship, as the two nations consider close cooperation on shipbuilding. This past April, U.S. Secretary of the Navy John Phelan visited South Korea’s two largest shipyards, HD Hyundai Heavy Industries (HHI) and Hanwha Ocean. His visit came just a year after former Secretary Carlos Del Toro’s trip to South Korea in 2024 and a month after South Korea and the United States established a working group to enhance cooperation in the shipbuilding sector. This step underscores how seriously the U.S. Navy is committed to restoring its naval power in cooperation with allies. In concrete terms, one South Korean shipbuilder has been performing maintenance on two U.S. Navy auxiliary ships. However, tangible progress on shipbuilding cooperation remains limited due to political dynamics, regulatory constraints in the United States, and other challenges.
U.S. Maritime Challenges and the Need for Allied Cooperation
As of 2024, the U.S. Navy possessed 295 vessels, while China had over 370 ships—a number expected to rise to over 400 this year. However, this gap could widen in the future, given that China’s combined commercial and military shipbuilding capacity is 230 times that of the United States. U.S. ships are also older than their Chinese counterparts. Seventy percent of Chinese warships are from classes designed since 2010, compared to only 25 percent of the U.S. Navy’s fleet.
To address these challenges, the United States could pursue a full spectrum of maritime collaboration with its allies, in two overarching categories: (1) maintenance, repair, and overhaul (MRO); and (2) shipbuilding.
First, to pursue MRO cooperation with its allies and partners, the U.S. Department of Defense announced its Regional Sustainment Framework (RSF)—a plan to maintain its vessels through collaboration with regionally based allies like South Korea and Japan—in 2024. An example of this is the U.S. Navy’s 7th Fleet contracting Hanwha Ocean, a Korean shipbuilder, to perform regular overhauls on two support ships at Hanwha Ocean’s shipyards in South Korea.
Shipbuilding, on the other hand, involves far more complex security, economic, political, and legal considerations than MRO. Additionally, due to its significantly greater economic ripple effects, especially on the domestic shipbuilding industry, no concrete areas of cooperation have been realized to date, despite ongoing discussions.
In fact, the problems facing the U.S. Navy largely stem from a domestic shipbuilding base that has been eroding since the 1950s. Under current law, the U.S. military is required to acquire ships built domestically and rely solely on the domestic industrial base for support, with some exceptions for maintenance and repairs conducted overseas. However, chronic workforce shortages, supply chain problems, and other factors related to U.S. shipyards have resulted in frequent delays and cost overruns. Given these constraints, a 2025 Congressional Budget Office (CBO) report concludes that it would be virtually impossible for U.S. shipyards alone to support the 2025 Navy Shipbuilding Plan, which aims to acquire an average of 12 ships per year.
South Korea’s Maritime Strength: A Strategic Asset for the United States
In 2024, South Korea ranked second in market share for new ship orders (17 percent), following China, which leads with 71 percent. South Korea operates large-scale shipyards capable of producing over 220 vessels annually, and Korean shipbuilders have built a strong track record in both commercial and specialized vessels. HHI, one of South Korea’s leading shipbuilders with an annual capacity of up to 50 ships, has delivered more than 80 ships to the ROK Navy, including destroyers, frigates, and other types of warships, as well as logistics support ships to foreign countries such as the Philippines and New Zealand. Hanwha Ocean, another shipbuilder, has also delivered various vessels to the ROK Navy—including destroyers, frigates, corvettes, and, notably, 17 of the 24 submarines the Navy has ordered. More recently, it was contracted to maintain logistics support and refueling ships for the U.S. 7th Fleet.
In addition, South Korea continues to actively adopt advanced technologies, including steps that could ease technology transfer to the United States. For example, HHI is collaborating with the U.S. tech company Palantir to develop a smart shipyard. This initiative integrates digital twins into every phase—from design to production—and has the potential to contribute to the revitalization of U.S. shipyards. Specifically, digital twins—virtual representations of physical products—can enhance ship design and testing by enabling modeling, simulation, and prototyping that leverage shipyard-specific data. On the production side, a digital twin of the shipyard can help improve productivity by optimizing resource allocation and streamlining manufacturing workflows, with the potential to eventually support more precise control of equipment and operations within the yard. In concrete terms, HHI signed a memorandum of understanding (MOU) with U.S. military shipbuilder Huntington Ingalls to jointly implement automation, robotics, and artificial intelligence (AI) technologies in support of digital shipyards, leveraging its advanced technologies.
Despite these strengths, the Korean shipbuilding industry is also facing challenges. Externally, the industry is gradually losing market share, as shown in Figure 1, to China’s aggressive growth and subsidized low prices. Internally, Korean domestic demand for shipbuilding is declining and is expected to shrink further in the future. Thus, even though Korean shipyards’ recent revenue figures remain strong, they recognize the need to secure new sources of growth. In this context, expanding into overseas markets—including the United States—is essential to sustaining long-term competitiveness.
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