Intensifying competition between Hanwha and HD Hyundai in the shipbuilding industry is feared to help their Japanese rivals win construction orders for the Royal Canadian Navy’s new submarines, according to industry experts, Wednesday.

The experts expect Mitsubishi and Kawasaki Heavy Industries will organize a consortium once again, as they did in 2016 for a bid to build and maintain 12 new submarines collectively worth 50 billion Australian dollars ($34 billion) for the Royal Australian Navy. At that time, a French firm won the bid, but Australia eventually canceled the deal to adopt nuclear-powered submarines from the U.S.

“Instead of forming a consortium, Korean shipbuilders have tended to take turns in participating in bids to build warships for foreign navies,” Moon Keun-sik, professor of Kyonggi University Graduate School of Political Studies, said. “Due to the large size of the Canadian submarine project, however, both Hanwha Ocean and HD Hyundai Heavy Industries will participate in the upcoming bid.”

Canada’s navy is expected to place an order for the construction of 12 submarines. Considering maintenance and training costs, the size of the project is estimated at around 60 billion Canadian dollars ($45 billion).

Canadian naval officers will also reportedly return to Korea in October, following their previous visit to Korean and Japanese shipyards in May.

Moon, who was formerly a ROK Navy submarine commander, pointed out that Canada may choose the Japanese consortium if the Korean shipbuilders vie to offer lower prices by downgrading the quality of their submarines.

“If the shipbuilders organize a consortium, they can offer lower prices without downgrading the quality, because they will be able to share their workforce and facilities,” he added.

Both Hanwha and HD Hyundai said it is too early to comment on this issue, as the Canadian government has yet to make an official announcement of the bid.

Despite a well-known friendship between Hanwha Group Vice Chairman Kim Dong-kwan and HD Hyundai President Chung Ki-sun, Hanwha Ocean and HD Hyundai Heavy Industries are in fierce rivalry to gain the upper hand in the global shipbuilding market.

Last month, the two Korean shipbuilders separately signed a technical cooperation agreement with Babcock International for the development of Canada’s defense industry.

Hanwha Ocean also continuously mentioned the fact that HD Hyundai Heavy Industries received minus points in Korean naval ship construction bids after its employees were found guilty of stealing data on the KDDX-class destroyer’s design from the Hanwha affiliate when it was Daewoo Shipbuilding & Marine Engineering (DSME).

After the penalty led Hanwha Ocean to be chosen as the preferred bidder last week for the construction of the fifth and sixth Ulsan-class Batch III frigates, HD Hyundai asked the government to debrief on the result and emphasized that it outstripped its rival in terms of technologies.
Both companies are also competing to secure workforces amid the lingering labor shortage.

Hanwha Ocean informed its employees Tuesday of its plan to increase their annual wages by 10 million won ($8,000) on average, for them to get salaries similar to those of workers of other shipbuilding companies.

The decision came as HD Hyundai Heavy Industries is waiting for the antitrust regulator’s response to a complaint filed last year by Hanwha Ocean and three other shipbuilders against the HD Hyundai affiliate’s alleged attempts to attract workers from its rivals by using unfair methods.
Source: The Korea Times

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