The situation has raised alarms about the potential loss of South Korea’s world-leading position in the sector, particularly in the crucial liquefied natural gas (LNG) carrier market. (Image courtesy of Yonhap)
SEOUL, Sept. 6 (Korea Bizwire) – In a concerning trend for South Korea’s once-dominant shipbuilding industry, Chinese competitors are rapidly gaining market share, aided by alleged industrial espionage and lenient court rulings in South Korea.
The situation has raised alarms about the potential loss of South Korea’s world-leading position in the sector, particularly in the crucial liquefied natural gas (LNG) carrier market.
Recent data from Clarkson Research, a British shipbuilding and maritime trade analysis firm, paints a stark picture. In August, South Korea’s share of global shipbuilding orders plummeted to a mere 2%, while China secured a commanding 90% of new orders.
The shift in market dynamics is particularly evident in the numbers. Last month, global ship orders totaled 3.87 million CGT (compensated gross tonnage), representing 106 vessels – a 27% increase from the same period last year.
Of this total, China claimed 3.47 million CGT (95 ships), while South Korea managed only 80,000 CGT (4 ships).
This dramatic downturn follows a brief resurgence for South Korea in July, when it briefly reclaimed the top spot with a 40% market share. However, that position was short-lived, with China swiftly reasserting its dominance.
Year-to-date figures further underscore the changing landscape. From January to August, global orders reached 42.07 million CGT (1,454 ships), a 30% increase from last year.
China accounted for 67% of these orders with 28.22 million CGT (1,015 ships), while South Korea secured 20% with 8.22 million CGT (181 ships).
The shifting balance is also reflected in the global orderbook. As of last month, China held 54% of outstanding orders with 77.15 million CGT, compared to South Korea’s 27% with 39.02 million CGT.
Compared to the previous month, China’s orderbook decreased by 920,000 CGT, while South Korea’s increased slightly by 50,000 CGT.
One area where South Korea still maintains an edge is in the construction of LNG carriers, which require advanced technology.
LNG vessels remain the flagship product of the Korean shipbuilding industry, with China yet to match Korea’s technological prowess in this niche.
However, this advantage is under threat as China actively seeks to acquire South Korean shipbuilding expertise, including core national technologies.
According to South Korea’s National Intelligence Service, there were 18 incidents of technology leaks from the Korean shipbuilding industry between 2014 and 2023, with 85% involving nationally designated core technologies.
Recent investigations have uncovered evidence of critical LNG carrier technologies being transferred to Chinese firms, often through former employees or consultants.
One such case involves the alleged disclosure of cargo hold quality improvement technology, a crucial component of LNG carriers.
The cargo hold, which stores LNG, is considered the most technologically demanding part of these vessels.
The National Intelligence Service has detected instances of this technology being transferred to Chinese companies, prompting investigations by the Korea Coast Guard and police.
Despite the severity of these leaks, legal consequences for industrial espionage have been surprisingly mild.
In a recent case, a former employee of a major South Korean shipyard was acquitted of charges related to leaking shipbuilding technologies to China.
Both the lower court and the appeals court ruled that the leaked information did not constitute core national technology or trade secrets.
This lenient approach to prosecution has led to growing concern within the industry, with some cynically noting that the potential gains from technology theft outweigh the legal risks.
Experts argue that without a shift in legal and political attitudes, along with stricter penalties for technology theft, South Korea risks falling behind in the global technology race, particularly in the strategically important shipbuilding sector.
Kevin Lee (kevinlee@koreabizwire.com)
