U.S. Navy Sends 'SOS' to Korean Shipbuilders for Warship Construction… Why K-Shipbuilding Instead of Japan?

Beyond one-off warship construction, the U.S. is looking for a partner that can provide continuous services, and for that the shipbuilding scale must not be small. In particular, Korea is seen as a candidate country that can fill the shipbuilding capacity the U.S. needs.

Apart from China, the major shipbuilding nations are Korea and Japan, but Japan's shipbuilding is currently contracting. Compared with 2020 after the COVID-19 pandemic, China and Korea have both greatly increased construction volume by 2026, while Japan's has declined or stayed flat, and its share of orders keeps falling. This is an indicator of the weakening competitiveness of Japanese shipbuilding.

The RFI that the U.S. sent to Korean shipbuilders stands for 'Request for Information,' meaning a request for information. It is a preliminary procedure usually conducted in defense deals, aimed at understanding what a specific country or company has built in the past, how much current infrastructure and human resources it has, and how likely future delivery is. Through this, the requesting country can concretely consider what kind of orders to place and where. Therefore, the RFI can be seen as an important preparatory stage that takes place before the actual contract.

This suggests the U.S. is leaving open the possibility that warship construction or related projects could begin within Korea. In other words, it can be interpreted as an event that goes beyond mere information gathering and could serve as the starting point for actual project execution.

Among merchant ships, there are strategic merchant vessels that operate commercially in peacetime but are pledged to be deployed to war. As the U.S. carried out several limited wars, it came to recognize the importance of logistics supply as much as that of combat ships, but strategic merchant vessels are now highly aged and their numbers have shrunk. As even ordinary merchant ships could not be built properly, criticism has arisen internally that the regulations once introduced to protect domestic shipbuilding have actually weakened competitiveness.

In wartime, merchant ships play a role just as important as combat ships. In particular, vessels designated as strategic merchant ships operate commercially in peacetime but, in an emergency, carry out missions essential to national security, such as transporting military supplies. Korean shipping companies also have vessels designated and operated as strategic merchant ships. This is one of the key preparations for maintaining a stable logistics supply system in the event of war.

The Jones Act regulates that merchant ships sailing along U.S. coasts, other than warships, must be built only within the U.S., and the Byrnes-Tollefson Act regulates that warship construction must be done only within the U.S. The problem is that if the merchant ship market shrinks, it becomes difficult to maintain the scale of warship business. This has caused the entire shipbuilding industry ecosystem to shrink and lose competitiveness.

Such regulations brought about industrial decline, and as parts suppliers within the value chain failed to become active, even warship construction capacity was undermined. This can be understood as a case showing that domestic industrial protection policies can, in the long run, lead to a loss of competitiveness.

Despite these strengths, it gradually lost competitiveness because it failed to respond effectively to changes in the international shipbuilding market. A lukewarm attitude toward technological change was one of the main causes of Japan's shipbuilding decline.

In particular, when a large-scale order came from Qatar in 2004, two shipyards on Geoje Island in Korea absorbed nearly all of it. This shows that Japanese shipbuilding failed to properly meet international market demands, especially the trend toward larger and more advanced vessels. Ultimately, this failure to respond to change led to the weakening of Japan's competitiveness.

In the 2000s, there was strong demand to increase vessel size not only for LNG carriers but for all ship types. However, enlarging ships requires not just increasing size but a complete change in infrastructure and technology. Japan refused to invest in large-vessel technology and remained confined to building small and mid-sized ships. This ultimately left it behind the changes in the international market and became a decisive factor in its weakening competitiveness.

This led to deteriorating profitability and became a decisive factor that greatly weakened Japanese shipbuilding's competitiveness.

To cut costs, Japanese shipbuilding began by reducing its most expensive workforce, the design staff with engineering capability. This reduction in personnel prevented it from moving on to the next stage of technological development, which in turn led to stagnation in technological competitiveness. The loss of skilled personnel became a factor hindering innovation and growth over the long term, and consequently accelerated Japanese shipbuilding's decline.

Amid the rapid growth of Chinese shipbuilding, with its warship and even merchant ship construction capacity expanding quickly, and with most ships calling at U.S. ports being built in China, the U.S. feels a security threat. In this situation, Korea is judged to be the country with the best sustainability even if business starts now, so the U.S. appears to have chosen Korean shipbuilding for strategic partnership. Korean shipbuilding's stable growth potential was an important consideration for the U.S.

Beyond the excellence of the weapon systems, the vessels are known to have very high stability and operational precision. Officials who have seen the actual Aegis destroyers in person are expected to be even more impressed by these points. Backed by advanced technology and outstanding performance, Korea's Aegis destroyers are drawing the attention of the U.S. Navy, and this technological capability is one example demonstrating the high competitiveness of Korean shipbuilding.

The localization rate of parts for Korean warships is higher than for other weapon systems. On average it reaches over 65%, and some high-rate series come close to 80%. Such a high localization rate shows that Korea has independent technological capability and production capacity, which reduces dependence on overseas suppliers and contributes to securing stable warship construction capacity. It is also expected to have a positive effect on the future growth and technological development of the defense industry.

This phenomenon has appeared not only in warships but also in general merchant shipping. For example, it maintains profits by receiving royalties from Everllence, the maker of GT ship propulsion engines. Even without directly owning huge shipbuilding factories, Europe is holding its last stronghold by generating revenue through technology royalties as many ships are built.

Korea has an advantage in that it owns the 'factories' that actually build ships. This provides an environment where mechanical applications can be tried out physically, and based on this, it is expected to move toward further raising its localization rate. A high localization rate will strengthen the independence of defense technology and have a positive effect on the overall domestic industrial ecosystem. It will also lay the foundation for Korean shipbuilding to lead technology development and innovation beyond mere production. Accordingly, Korean shipbuilding is expected to secure continued competitive advantage in the future.

Unlike ordinary commercial ship orders, defense projects can have even longer lead times than offshore plants. Therefore, it is important to approach them from a long-term perspective rather than getting excited or discouraged by news reports. This means not being swayed by short-term stock price fluctuations and making investment decisions with a long view.

This means that investing in shipbuilding demands long-term perspective and patience rather than short-term results. Investors should therefore make investment decisions while steadily monitoring market trends and corporate value with a long breath. Rather than being swayed by rapidly changing market conditions, one should understand the essential characteristics of shipbuilding and approach it from a long-term perspective.