Hanwha Philly Shipyard and Hanwha Defense USA have joined the U.S. Navy’s concept design project for its next-generation auxiliary ship. Concept design is an initial phase that reviews “what performance and cost are feasible” before actual ship construction. This marks the first step for a Korean company into the U.S. Navy shipbuilding sector, occurring 1 year and 3 months after Hanwha acquired Philly Shipyard in December 2024. It is also the first time a Korean enterprise has participated in U.S. Navy ship design based on a local shipyard. HD Hyundai Heavy Industries also entered the bid with a U.S. partner but was eliminated.
The project involves the U.S. Navy selecting multiple companies to compare designs. Participants include NASSCO, the largest West Coast shipyard, and VARD, a specialized ship and offshore vessel design firm. Hanwha is participating as VARD’s partner. Future steps include basic and detailed design phases, with separate construction bids expected. The U.S. Navy plans to introduce a total of 13 ships. While competition with U.S. shipbuilders like NASSCO is inevitable, participation in the design phase itself strengthens future bid competitiveness.
Hanwha Defense-Philly Shipyard Secures First U.S. Navy Contract
On the 30th (local time), Hanwha Philly Shipyard and Hanwha Defense USA announced a contract with VARD, a specialist in ship and offshore vessel design, for the U.S. Navy’s next-generation auxiliary ship concept design. VARD leads the project as the primary contractor, while Hanwha handles market research, design support, production method analysis, and cost reviews. The project aims for completion by the first quarter of 2027. HD Hyundai Heavy Industries also participated in the bid with Huntington Ingalls but reportedly failed to secure the contract.
Philly Shipyard, acquired by Hanwha Ocean and Hanwha System for approximately $100 million and launched in December 2024, is the only U.S. shipyard owned by a Korean company. The Byrnes-Tollefson Amendment prohibits foreign shipyards from constructing U.S. military ships and major components, but Hanwha overcame this barrier by acquiring Philly Shipyard and establishing a local production base.
Located in Philadelphia, Pennsylvania, the shipyard had an annual construction capacity of around one ship at the time of acquisition. Hanwha immediately began aggressive investments, announcing a $5 billion (approximately 7 trillion Korean won) additional investment plan in August of last year. Plans include expanding docks, quays, and a 120,000-pyeong block production base to increase annual capacity to 20 ships by mid-term.
Concept design is the initial phase of outlining how and at what cost a ship will be built. Even though actual construction requires separate bids after functional and basic design phases, the industry focuses on this stage because U.S. Navy ship design is treated as confidential. Companies that pass this threshold gain an advantage in future construction bids. However, NASSCO, the largest U.S. defense shipbuilder, is also participating in the concept design, making direct competition with established U.S. players unavoidable in actual bids.
K-Shipbuilding Big Three Accelerate U.S. Market Push
This case aligns with the Korean shipbuilding “Big Three” accelerating efforts to penetrate the U.S. market. Following the Mars project, Korean shipbuilders are exploring various methods, including investment, partnerships, and maintenance projects. Hanwha has achieved the first visible result in the design phase.
HD Hyundai signed a memorandum of understanding with Huntington Ingalls, the largest U.S. defense shipbuilder, in October of last year to collaborate on commercial and military ship design and construction. It also formed a multi-billion-dollar joint investment fund with Severus Capital and Korea Development Bank. The company aims to achieve $2.2 billion in annual sales from U.S. Navy ship construction by 2035. It is also merging subsidiaries HD Hyundai Heavy Industries and HD Hyundai Mipo to strengthen its U.S. market entry through scale expansion.
Samsung Heavy Industries partnered with Vigor Marine, a U.S. military ship maintenance specialist, to enter the U.S. Navy’s MRO (Maintenance, Repair, and Overhaul) market. In December of last year, it signed a trilateral business agreement with General Dynamics NASSCO and DSEC, a Korean engineering firm, to jointly review the “U.S. Navy next-generation auxiliary ship” project. Recently, it has also been pursuing the acquisition of a Maintenance and Ship Repair Agreement (MSRA) with the U.S. Navy to expand its business scope.