A new opportunity has opened up for South Korea's shipbuilding industry after U.S. President Donald Trump signed a national security presidential memorandum. Foreign shipbuilders that meet certain conditions will be allowed to build U.S. Navy vessels at shipyards in their home countries, putting Hanwha, which owns Philadelphia Shipyard, in the spotlight as a major beneficiary.

According to the memorandum released by The White House on the 13th local time, foreign shipbuilders must either build a new shipyard in the United States or secure ownership or a majority stake in an existing one in order to participate in U.S. Navy ship construction. They must also hire American workers, transfer shipbuilding technology from their parent company shipyards to the United States, and establish a U.S. supply chain. If these conditions are met, the first two vessels may be built and delivered from the parent company's shipyard overseas, but all subsequent orders must be built at a U.S. shipyard. The scope covers up to three vessel types, including surface combatants used for anti-submarine warfare, surface warfare and convoy escort missions, maritime integrated logistics support tankers, and roll-on/roll-off ships. The Secretary of Defense must submit a ship procurement plan within 90 days of the memorandum taking effect.



◆ South Korea is the only country that meets the conditions

Hanwha is the only domestic company that meets the new requirements. Its foundation is Philadelphia Shipyard, which Hanwha Ocean and Hanwha Systems acquired at the end of 2024 with a combined investment of $100 million, split 40% and 60%, respectively. Hanwha is also moving quickly to secure a second foothold in the United States, having this week proposed acquiring Austal's U.S. operations for up to $1.2 billion. Industry insiders say Hanwha is currently the most likely candidate, even if the search is expanded to Europe and Japan. European shipbuilding has long since shrunk in scale and lacks the capacity for major new investment in the United States, while Japan is already stretched just meeting demand from its own Self-Defense Forces.

The first two vessels are likely to be built at Hanwha Ocean's Geoje Shipyard and shipped to the United States, with later orders constructed at Philadelphia Shipyard. A leading candidate is the Chungnam-class frigate, the South Korean Navy's latest escort ship, also known as the Ulsan-class Batch-III and a 3,600-ton vessel. That is because the Chungnam-class was previously mentioned when the United States sent a request for information on combat vessels to South Korean shipbuilders.



◆ A move that also pressures U.S. shipyard investment

HD Hyundai Heavy Industries is cooperating with Huntington Ingalls, the largest defense shipbuilder in the United States, but it does not meet the memorandum's shipyard ownership and equity requirements. Still, because HD Hyundai has already been considering shipyard acquisitions and equity investments in the United States, the latest memorandum is expected to accelerate related moves. Industry observers say the measure will effectively serve as an incentive for shipbuilders at home and abroad, other than Hanwha, to speed up investment in the United States.

Trump's approval of home-country construction for foreign shipbuilders that invest in the United States is a bold step aimed at restoring the U.S. shipbuilding industry's capabilities and meeting urgent national security needs. In particular, it opens the door not only to combat ships but also to console tankers and roll-on/roll-off vessels built overseas, while directing the use of investment funds promised under trade agreements. Analysts say this refers to the Korea-U.S. shipbuilding cooperation project known as Make American Shipbuilding Great Again. Until now, all U.S. Navy vessels have been effectively barred from overseas construction under the Burns-Tollefson Amendment. Even for merchant ships, the Jones Act requires vessels used for domestic coastal transport in the United States to be built at U.S. shipyards. Since the start of Trump's second administration, the president has repeatedly emphasized restoring shipbuilding and cooperating with allied shipbuilders, but many expected that revising or working around these laws would be difficult because of opposition from affected regions and labor groups. Even so, Trump's decision to allow overseas construction is being interpreted as a response to the need to strengthen naval power and to stop ignoring the decline of the U.S. shipbuilding industry.



◆ Attention turns to whether Congress will agree

The latest move expands the so-called ICE Pact model, introduced last year by the United States and Finland for icebreaker construction, to U.S. Navy vessels and support ships. In a memorandum signed in October last year, Trump had already approved the overseas construction of up to four Arctic Security Cutters (ASC). The rationale was to meet short-term demand while encouraging long-term investment in the United States, despite the fact that U.S. shipbuilding lacks global competitiveness.

However, a hurdle remains in Congress. Last month, the House of Representatives passed the 2027 National Defense Authorization Act (NDAA), which includes a provision barring defense funds from being used to procure combat vessels built at foreign shipyards. The Senate has also drawn a line against overseas construction of combat ships, opening the door only for support vessels. A defense industry source said, "There is a chance the budget authority holders will put the brakes on it," but added that "among the executive actions issued by the U.S. administration so far, this is the strongest one."

[Park Seung-ju / Washington Correspondent Seungjin Choi]

This article has been translated by GripLabs Mingo AI.