The shipbuilding industry (Image courtesy of Yonhap)
SEOUL, Nov. 26 (Korea Bizwire) – Two of South Korea’s biggest shipbuilders have withdrawn their legal complaints against each other, marking a potential turning point in their fierce rivalry amid a historic boom in the nation’s defense industry.
HD Hyundai Heavy Industries and Hanwha Ocean announced on November 25 that they would drop their respective criminal complaints, which had centered around a 7.8 trillion won naval destroyer project known as KDDX.
The reconciliation comes as both companies recognize the need for unity in the face of global opportunities, particularly as the Russia-Ukraine war and U.S. moves to counter China’s military rise create unprecedented demand for South Korean defense products.
The detente also reflects growing pressure for domestic cooperation as China dominates global shipbuilding orders and as President-elect Donald Trump signals interest in South Korean shipbuilding capabilities.
HD Hyundai Heavy Industries (Image courtesy of HD Hyundai Heavy Industries)
However, some industry observers note that while a conciliatory mood has emerged on the surface, underlying tensions haven’t completely dissipated, particularly regarding the KDDX contractor selection process.
The two companies have maintained a competitive relationship in specialized vessels for decades before their conflict intensified earlier this year over the KDDX project.
The dispute escalated after the Defense Acquisition Program Administration (DAPA) decided in February not to restrict HD Hyundai’s bid participation despite previous controversies over military secret leaks.
HD Hyundai Heavy Industries employees were found guilty in November 2023 of violating military secrets protection laws related to the KDDX project between 2012 and 2015. However, DAPA determined there was no evidence of executive involvement or violations of integrity pledges that would disqualify the company from bidding.
In response, Hanwha Ocean held press conferences in early March challenging DAPA’s decision and revealed investigation records allegedly showing executive involvement.
The company also requested a police investigation through the National Investigation Headquarters. HD Hyundai countered by filing defamation charges, claiming Hanwha Ocean had deliberately edited and distorted investigation records.
Hanwha Ocean (Image courtesy of Hanwha Ocean)
Hanwha Ocean took the first step towards reconciliation on November 22, withdrawing its police complaint regarding military secret violations. HD Hyundai followed three days later, citing “the development of Korea’s shipbuilding industry and strengthening K-defense competitiveness” as reasons for withdrawing its defamation complaint.
The two companies’ first collaboration could materialize in Canada’s Patrol Submarine Project (CPSP), estimated at 70 trillion won for up to 12 submarines. Additional joint ventures may include submarine projects in Poland and the Philippines, worth 3 trillion and 2 trillion won respectively.
However, tensions remain over the KDDX project itself. Hanwha Ocean has applied to the Ministry of Trade, Industry and Energy for defense industry certification to participate in the detailed design and construction of the lead ship. If approved as a second qualified contractor alongside HD Hyundai, DAPA will need to choose between single-source contracting or competitive bidding, with the procurement method expected to be decided by year-end.
While Hanwha’s criminal complaint withdrawal doesn’t automatically end the military secrets investigation, as such violations are prosecuted regardless of the victim’s wishes, police are expected to conclude their probe soon considering Hanwha’s position. HD Hyundai’s defamation case will be closed following their complaint withdrawal.
M. H. Lee (mhlee@koreabizwire.com)
