Could South Korea Build America’s Next Warships?

Section: Business
Format: Special Report
Author: Sinisa Brkic (sb)

A major change in U.S. naval procurement has created an opening that would have been politically difficult to imagine only a few years ago. President Donald Trump is allowing qualified foreign shipbuilders to construct a limited number of U.S. Navy vessels abroad, and South Korea’s industrial giants are among the companies best positioned to test how far Washington is prepared to take the new model.

Washington Changes the Rules of Naval Shipbuilding

For decades, the basic direction of American naval procurement was clear: warships for the U.S. armed forces were expected to be built in the United States. The Trump administration has now created a path around that restriction, but only under tightly defined conditions designed to expand American shipbuilding capacity rather than replace it.

Under a National Security Presidential Memorandum signed on August 13, qualified foreign shipbuilders may use their home shipyards to construct the first two vessels under selected procurement programs. To qualify, the foreign company must simultaneously establish a new U.S. shipyard or take ownership or a majority position in an existing one, train an American workforce, transfer shipbuilding technology and develop a U.S. supply chain.

Every vessel after those first two ships would have to be built in the United States. Individual contracts would also require a national security determination, followed by notification to Congress before a contract could proceed. That distinction matters. Washington is not outsourcing the future of the U.S. Navy. It is attempting to use foreign industrial strength as a bridge to rebuild its own.

South Korea Suddenly Has an Opening

Few countries are better placed to exploit that opening than South Korea. Its shipbuilding groups operate some of the world’s most sophisticated yards and combine commercial scale with extensive experience building destroyers, submarines, frigates and naval support vessels.

Hanwha Ocean and HD Hyundai Heavy Industries have already been positioning themselves for a larger role in the American maritime industrial base. U.S. authorities went a significant step further in July when Korean shipbuilders were asked to provide information about their capabilities for combat vessels and fleet support ships.

Those requests were not contracts, and they did not guarantee that Korean yards would build U.S. Navy vessels. They did, however, demonstrate that Washington was already examining Korean capacity before Trump formally introduced the new procurement framework.

The August directive now turns what had largely been an industrial and political discussion into a potentially executable procurement strategy.

Hanwha Starts With an Important Advantage

Among the Korean contenders, Hanwha may have the most immediately relevant position. The group acquired Philly Shipyard in 2024 and has since committed billions of dollars to expanding the Pennsylvania facility, giving it something the new policy specifically rewards: a substantial physical presence inside the United States.

Hanwha is also seeking to expand further into the American naval market. Its ambitions extend beyond building ships in Korea. The broader strategy is increasingly centered on becoming part of the U.S. defense industrial base itself.

Investors recognized the significance almost immediately. Hanwha Ocean shares rose 5.6 percent after the new U.S. policy became public, reflecting expectations that the Korean group could become one of its earliest beneficiaries.

HD Hyundai should not be discounted. The company has advanced its own cooperation with U.S. defense shipbuilders and has openly identified American naval construction as a major long term opportunity.

What Kind of Ships Could Korea Actually Build?

The most important question is also the one that remains unanswered: which U.S. Navy ships, if any, will actually be constructed in South Korea?

Trump’s memorandum calls for a new competitive acquisition approach for surface combatants capable of submarine warfare, surface warfare and convoy escort missions. It also covers consolidated cargo replenishment tankers and roll on roll off vessels used to transport military equipment.

The inclusion of surface combatants is what makes the policy strategically significant. It creates a legal and procurement pathway under which an overseas shipyard could potentially construct an American combat vessel, provided all required conditions and national security approvals are satisfied.

That does not mean a U.S. destroyer contract has been handed to Seoul. No such award has been confirmed, and the memorandum does not identify Hanwha, HD Hyundai or any other Korean company as a selected supplier.

In practice, support vessels may provide the easier starting point. Tankers and transport ships generally present fewer integration challenges than highly complex frontline combatants whose weapons, sensors, software and supply chains are deeply tied to the American defense industry.

The Real Target Is American Capacity

Trump’s policy may appear to open American naval construction to foreign competition, but its underlying objective is distinctly domestic. Foreign companies gain temporary access to overseas construction only if they help create additional shipbuilding capacity in the United States.

That makes South Korea particularly relevant. Seoul has already placed shipbuilding at the center of its industrial relationship with Washington, while Korean companies possess the production expertise that the United States is trying to recover.

The arrangement could therefore become an unusual industrial bargain. South Korean yards could supply ships more quickly in the short term, while their capital, production methods and technical knowledge are used to expand American yards for subsequent construction.

For Korea, the prize would extend far beyond two vessels. A successful entry into the U.S. naval supply chain could establish Korean companies as long term participants in one of the world’s largest and most strategically sensitive defense markets.

China Is the Strategic Background

The policy cannot be separated from Washington’s wider concern over China’s maritime industrial power. China possesses an enormous commercial shipbuilding base that also supports the rapid expansion and modernization of the People’s Liberation Army Navy.

The United States, by contrast, has struggled with limited yard capacity, workforce shortages, delayed programs and rising costs. Rebuilding that industrial base through domestic investment alone would take years, which explains the growing attraction of deeper cooperation with allied shipbuilding powers.

South Korea offers Washington something difficult to manufacture quickly: established industrial scale, experienced engineers, modern yards and a workforce accustomed to delivering large, technologically demanding vessels.

The strategic calculation is therefore broader than procurement. The United States is effectively asking whether allied industrial capacity can help close a maritime production gap without creating a new dependence on foreign shipyards.

An Opening, Not Yet an Order

For South Korea’s shipbuilders, the August directive represents the clearest opening yet into a part of the American defense market that has historically been protected by formidable legal and political barriers. Hanwha’s U.S. investments make it especially well positioned, while HD Hyundai brings significant naval construction expertise and growing American partnerships.

But the dividing line between opportunity and contract remains essential. No U.S. warship construction order for a Korean yard has been confirmed, and Washington has not announced that existing destroyer classes will simply move to South Korean production.

What has changed is the architecture of what is possible. For the first time under the new framework, a Korean built U.S. Navy surface combatant is no longer merely an industrial thought experiment. Whether Washington ultimately uses that option will reveal how urgently it believes allied shipbuilding power is needed to rebuild American maritime strength.