HD Hyundai eyes U.S. Navy's Aegis maintenance deal

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HD Hyundai eyes U.S. Navy's Aegis maintenance deal

Published: 07 Jul. 2025, 07:00

LEE JAE-LIM
[email protected]

Audio report: written by reporters, read by AI

Jeongjo the Great, the first vessel of the next-generation Aegis destroyer, the KDX-III Batch-II class, built by HD Hyundai Heavy Industries and delivered to the Korean Navy in late 2024, conducts a sea trial. [HD HYUNDAI]

[NEXT CHIP]

For decades, semiconductors and automobiles have dominated Korea’s exports, driving growth and defining its global trade identity. But as shifting global dynamics and mounting uncertainties over U.S. tariffs unsettle traditional trade patterns, a new industrial order is taking shape. Sectors such as shipbuilding and defense are emerging as the next engines of growth. In our “Next Chip” series, we examine the rise of these industries and their potential to reshape Korea’s economic future.

Amid warming shipbuilding ties between Seoul and Washington, HD Hyundai, Korea's largest shipbuilding group, is quietly positioning itself to expand into the United States' naval maintenance and high-end warship support market, including for Aegis-equipped destroyers.

At the core of its strategy is a partnership forged in April with Huntington Ingalls Industries (HII), the largest U.S. military shipbuilder. Together with Bath Iron Works, HD Hyundai and HII are the only shipbuilders globally capable of producing Aegis-class destroyers — a rare alignment that could pave the way for future collaboration in both shipbuilding and maintenance, repair and overhaul (MRO).

“Our partnership may not immediately lead to a major expansion of MRO activities,” said Jeong Woo-maan, vice president and head of naval & special ship business strategy at HD Hyundai Heavy Industries, a subsidiary of HD Hyundai, in a written interview with the Korea JoongAng Daily. “But because both companies manufacture Aegis destroyers, there is definite potential for collaboration in that segment.”

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HII's Newport News Shipbuilding facility in Virginia is also the only U.S. yard capable of constructing nuclear-powered aircraft carriers and submarines.

With tensions simmering between the U.S. and China over defense and trade, HD Hyundai is taking a more measured path than its rival Hanwha Ocean, which has already won two U.S. Navy MRO contracts, not only targeting the MRO market but eyeing the larger U.S. market in defense and commercial shipbuilding opportunities. The company has been steadily forging ties with both military contractors and commercial shipbuilders, aiming to help modernize the aging U.S. maritime infrastructure while navigating complex regulatory hurdles.

An aerial view of the HD Hyundai Heavy Industries shipyard in Ulsan [HD HYUNDAI]

Technology-focused expansion
The newly formed alliance goes well beyond ship construction, encompassing technology cooperation, supply chain integration, joint training and potential co-investment. Crucially, it also includes efforts to explore legal and institutional pathways that could eventually allow joint bidding, co-production, and MRO services on U.S. naval vessels.

“We plan to integrate our respective capabilities in naval shipbuilding to maximize production efficiency and share know-how to reduce costs and improve delivery timelines,” Jeong said. “With HII's position as the largest shipbuilder under U.S. law, we see potential for broader collaboration once legal frameworks evolve.”

The Korean shipbuilder has also landed a string of partnerships with other U.S. defense and shipbuilding firms. Beyond HII, the company has inked deals with Fairbanks Morse Defense for supply chain cooperation, with Edison Chouest Offshore (ECO) to co-build commercial vessels and with defense tech firm Anduril Industries to co-develop unmanned surface vessel systems.

A partnership with ECO expands the Korean company's U.S. footprint to build commercial ships there. The two companies plan to jointly build mid-sized container carriers at ECO shipyards through 2028. The agreement has the potential to cover additional vessel types and port security-related infrastructure such as harbor cranes.

A render of a 3,400-ton frigate, center, a 2,200-ton offshore patrol vessel, bottom, and a 1,400-ton landing ship ordered by Peru from HD Hyundai Heavy Industries [HD HYUNDAI]

Even as it pursues larger-scale shipbuilding opportunities stateside, MRO has not been sidelined in the process. In March, the company participated in its first-ever U.S. Navy MRO bid alongside Hanwha Ocean for the maintenance of a logistics support vessel. Both Korean firms failed to secure the contract, which was awarded to a Singaporean competitor. The project, considered low in complexity, was conducted under an open competition format that prioritized cost over technical qualifications — a structure that disadvantaged Korean shipbuilders despite their advanced capabilities.

Internally, HD Hyundai created a dedicated MRO department last year and is aiming to win two to three U.S. Navy MRO contracts by year-end.

“If future Korea-U.S. negotiations secure a stable volume of MRO work, the company is prepared to respond immediately,” said Jeong. “We have already established — or are in the process of establishing — global production bases in key regions including South America, the Middle East, Southeast Asia and the United States.”

Jeong Woo-maan, vice president and head of naval & special ship business strategy at HD Hyundai Heavy Industries [HD HYUNDAI]

HD Hyundai also has a longstanding partnership with Peru’s state-owned Servicios Industriales de la Marina, holds equity in Saudi Arabia’s International Maritime Industries, and is leasing Subic Shipyard in the Philippines to expand its repair operations.

To overcome parts supply issues for older ships — where original manufacturers may no longer exist — HD Hyundai has turned to 3-D printing. In May 2024, it became the first firm globally to receive the Stage 2 New Technology Qualification certification from the American Bureau of Shipping for a metal 3-D printing system that allows parts to be fabricated directly aboard operating ships. The company plans to introduce the system to the U.S. Navy and shipyards in the United States as part of its broader bid to deepen technological collaboration.

Tackling legal roadblocks
When it comes to U.S. investment, HD Hyundai is treading more cautiously than Hanwha Ocean, which has already acquired Philadelphia-based Philly Shipyard and seeks to acquire a larger stake in Austal, an Australian defense shipbuilder with deeper ties to the U.S. market than to its own.

The restrained engagement stems from the fact that, despite calls from the Donald Trump administration for allied nations like Korea to help revive the U.S. maritime industrial base, foreign participation in its naval MRO is highly restricted. Military shipbuilding is treated as a national security matter under the Defense Federal Acquisition Regulation Supplement, which imposes strict limits on foreign involvement unless rare waivers are granted.

Several bills could open the door to change: the Ensuring Naval Readiness Act, the Ensuring Coast Guard Readiness Act and the Ships for America Act. These measures aim to address bottlenecks in U.S. shipbuilding and maintenance by incentivizing expansion — though all three remain stalled at the introductory stage in Congress.

Although each bill is domestically focused, they’ve sparked cautious optimism within Korea’s shipbuilding industry, which views them as potential policy openings for trusted foreign partners down the line.

The most recent bill, the Ships for America Act, is a bipartisan measure reintroduced in May by Senators Mark Kelly, Democrat of Arizona, and Todd Young, Republican of Indiana, that aims to revitalize the U.S. commercial shipbuilding base. If passed, it could open the door to bilateral cooperation with allied nations such as Korea.

A source from the U.S. Senate Committee on Armed Services told the Korea JoongAng Daily that there is no clear timeline for the bill to advance to the next legislative stage.

"There is momentum building behind the bill, though," the source said. "We are working to secure broader support from lawmakers."

“Legal reform in the United States is the No. 1 priority to realize Korea’s ultimate goal of entering the U.S. warship market,” said Yang Jong-seo, principal researcher at the Export-Import Bank of Korea. “Without legislative changes, Korean participation in sensitive areas like naval MRO remains out of reach. Even acquisitions, such as taking over a U.S. shipyard, would carry enormous legal and operational risk.”

BY LEE JAE-LIM [[email protected]]