Japan shipyard merger challenges Korea's role in US naval projects
Experts say the widening gap stems from Japan's long-standing decline in shipbuilding, which cannot be fixed by size alone. Still, Japan's renewed push is raising concerns that Korea's bargaining power may weaken, given Tokyo's established ties in servicing US Navy vessels.
Gap far from closed
Imabari, Japan's largest shipbuilder, announced on Thursday that it will increase its stake in JMU from 30 percent to 60 percent, turning the country's second-largest shipbuilder into a subsidiary.
'Imabari Shipbuilding and JMU will leverage each other's strengths to compete with China and Korea, and will also make efforts to develop the Japanese shipbuilding industry by making quicker and more comprehensive judgments in terms of management,' the company said in a press release.
If completed, the merger would create a company responsible for roughly half of Japan's shipbuilding output, which totaled 4.8 million compensated gross tons in 2024, bringing it close to Hanwha Ocean's output of 2.8 million CGT.
However, experts say Japan's shipbuilding struggles stem not from the industry's size but from a long-term lack of investment dating back to its 1988 restructuring.
'Japan has strong basic technology, but shipbuilders have lagged in facility investment and faced workforce shortages,' said Yang Jong-seo, a researcher at the Overseas Economic Research Institute under the Export-Import Bank of Korea.
'The country lost many skilled technology personnel in the late 1980s and closed numerous naval engineering departments in universities, leaving little momentum to restore its industrial competitiveness.'
Industry sources also cite Japanese shipbuilders' limited recent experience with high-value vessels, such as liquefied natural gas carriers — an area where Korean shipbuilders have established expertise.
According to SK Securities, Imabari last delivered LNG carriers in 2018, and JMU in 2019, while Korean shipbuilders secured 68 orders in 2024 alone. This gap, driven partly by a shortage of skilled personnel, would make clients hesitant to place orders with Japanese firms lacking proven expertise in complex ship types, sources say.
A challenge to Korea's efforts toward US Navy collaboration
Japan's renewed push in shipbuilding, however, is raising concerns that Korea's position may weaken in bidding for US Navy projects, given Japan's long-standing involvement in US Navy maintenance and repair work.
This comes as the US seeks greater collaboration with South Korea and Japan — its top shipbuilding partners outside China — to strengthen its naval capabilities in response to growing maritime challenges from China.
'The rapid progress of the merger between Japan's two leading shipbuilders shows that Japan is putting everything on the line to collaborate with the US on maintenance, repair and overhaul,' said Choi Ki-il, professor of military studies at Sangji University.
'It seems Japan is hoping for a revival of its shipbuilding industry by anticipating demand for new US warships and MRO.'
Korean shipbuilders have been actively seeking to participate in the US' efforts to strengthen its maritime presence. Korea's largest shipmaker, HD Hyundai, is expanding its network to US-based shipyards and academic institutions, while Hanwha is acquiring US shipyards experienced in US Navy vessel construction.
However, Korea needs to build trust with the US through simpler maintenance work, a factor crucial in projects involving US national security, said the Federation of Korean Industries, Korea's main business lobby.
Last year, Hanwha secured Korea's first US Navy maintenance contracts for the Wally Schirra, a logistics vessel, and the Yukon, a replenishment oiler. In contrast, Japanese companies and personnel have been involved in MRO projects for the US Navy for over 70 years, primarily supporting the US Seventh Fleet.
Experts say Japan will push ahead with shipbuilding restructuring to leverage its expertise as a strategic asset, especially in tariff negotiations with the US. Additionally, JMU's specialization in warships is expected to strengthen Japan's position, raising concerns about Korea's role in the US Navy's expansion efforts.
'I expect strong competition to emerge between Korea and Japan in the future military ship MRO market,' said Choi. 'It will be difficult for individual companies to deal with it alone. The government and shipbuilders must work together to develop a multifaceted strategy.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Korea Herald
an hour ago
- Korea Herald
Korea's slow growth risks credit downgrade: S&P
South Korea's weakening growth trajectory could eventually impact its sovereign credit rating, according to a senior analyst at S&P Global Ratings. "The Korean economy has been slowing down for various reasons," Kim Eng Tan, managing director of Asia-Pacific sovereign ratings at S&P Global Ratings, said at a press conference held in central Seoul, Wednesday, discussing growth deceleration and rising household debt. The press conference took place ahead of a seminar jointly held by the credit appraiser and the Korea Center for International Finance on the same day, under the title "Credit Could Cost More in a Less-Trade World." At the conference, Kim Eng Tan stressed that growth may be the most important economic indicator to watch for Korea. "There are reasons to be less optimistic about Korea's growth rate, which may have an impact on the ratings at some point in the future because we now count the country's relatively strong growth as a positive factor for the government fiscals," he said. Korea has been grappling with sluggish growth, with major institutions such as the Bank of Korea and the Korea Development Institute forecasting gross domestic product to grow just 0.8 percent this year. Kim Eng Tan further suggested that the country's export-dependent economy may suffer from more changes in the global trading regime, sparked by the US administration's imposition of tariffs. 'In the past, the World Trade Organization set the trading regime, where no matter the size of the economy, countries had to follow the same kinds of rules, more or less. If a country deviates from the rules, it faces sanctions or pushbacks,' he said. 'But what the US has done makes every other big economy decide that it is in their interest to use their economic size and market to enforce trading rules more friendly to themselves. This is not a great development for all exporters, particularly for a relatively medium-sized economy like Korea, with a medium-sized domestic market.' Yet Kim Eng Tan further highlighted that Korea has been maintaining a relatively strong economic growth despite its aging demographics. "Despite the slow and negative impact of aging, something in Korea has managed to offset that and still provide very strong outcomes in areas that aging can negatively affect. That is why the rating is so high,' he said. S&P Global Ratings has kept Korea's long-term sovereign credit rating at the third-highest notch on the company's table of "AA" since August 2016. 'Of course, if the factors go away or aging becomes even more pronounced than today, and the negative impacts of aging show more clearly, we may have to adjust the rate. But at the moment, I do not see that happening.'
Korea Herald
6 hours ago
- Korea Herald
S. Korea inks 2nd K2 tank export deal with Poland
Latest deal marks 'first large-scale arms export' after launch of new administration, says DAPA South Korea signed its second 'large-scale' deal to export a second batch of K2 tanks to Poland, the state arms procurement agency said Wednesday, amid growing calls for the country to tap its military manufacturing firms to navigate new global security challenges. 'Polish Minister of National Defense Wladyslaw Kosiniak-Kamysz officially announced on July 2 that the negotiations for the second deal involving K2 tanks with Hyundai Rotem were finalized and set to be signed,' Seoul's Defense Acquisition Program Administration said in a statement. The deal marks the country's "first large-scale arms export" after the launch of the Lee Jae Myung government in early June, DAPA noted. DAPA said the size and details of the deal would remain classified until a later time, but Seoul officials, declining to be named, said in June that the contract is expected to be worth around $6 billion. If confirmed, the figure would mark Seoul's biggest single arms export contract. The sources added that Poland will receive 180 K2 tanks under the new deal. Some 117 units would be manufactured by Korean defense contractor Hyundai Rotem, and the remaining would be produced by Poland's state-owned Polish Armaments Group. Seoul and Warsaw are currently negotiating the details of the signing ceremony, including its date and venue, according to DAPA. DAPA anticipates that the latest deal would allow Poland to receive some customized versions of K2 tanks "aligned with the demands of the Polish military," with the new partnership between Hyundai Rotem and PAG. A manufacturing facility for K2 tanks will be established in Poland as well, increasing the chance for additional deals to be smoothly negotiated and inked. The latest supply contract is part of a broader arms agreement reached between the two countries in 2022, which amounted to $13.7 billion and included a clause to supply 1,000 South Korean K2 tanks to Poland. Besides K2 tanks, Seoul agreed to supply the country with rocket launchers and fighter jets. The agreement came as Poland decided to increase its defense spending following Russia's invasion of Ukraine in February that year. Later in 2022, Hyundai Rotem signed a deal worth around $3.3 billion to supply Poland with the first batch of 180 K2 tanks. The deal to supply the second batch was projected to be signed late last year, but was pushed back. Observers cited the political turmoil stemming from impeached President Yoon Suk Yeol's failed Dec. 3 martial law bid as a major hurdle. DAPA on Wednesday, however, pointed to issues related to the "expanded scope of the deal" compared to the first as a reason behind the delay. "The deal was confirmed today as the negotiation period became prolonged due to the expanded scope of the deal and the scale of the project, by including plans involving the development of the Polish version of the K2 tanks and local manufacturing," it explained. In South Korea, there have been growing calls for the government to utilize its military manufacturing firms to navigate new security challenges and shifting demands posed by the NATO members' recent decision to raise defense spending to 5 percent of gross domestic product. 'With NATO members now committed to raising defense spending to 5 percent of GDP, demand for advanced weapons systems and defense technology is set to rise sharply,' the Asan Institute for Policy Studies said in a Monday report. 'To fully capitalize on these opportunities, South Korea should treat defense industry cooperation not simply as a commercial venture but as a core pillar of its broader security and alliance strategy." DAPA, nodding toward such calls, said, "The latest deal is expected to be a fresh momentum for the country's arms exports," with countries in Europe and NATO members. South Korean President Lee has picked the defense industry as one of the sectors that his administration plans to foster with expanded support. He aims to position his country among the world's top four arms exporters. In a phone call with United Arab Emirates President Mohamed bin Zayed Al Nahyan on Tuesday, Lee agreed to deepen bilateral cooperation in defense industries alongside advanced technologies and energy. The UAE, alongside Poland, is a major arms industry partner for South Korea. Meanwhile, South Korea's arms exports fell to $9.5 billion in 2024 after hitting a record high of $17.3 billion in 2022 and sliding to $13.5 billion in 2023.
Korea Herald
9 hours ago
- Korea Herald
Seoul carefully weighs Beijing's invitation to 80th WWII commemoration
Invitation tests Lee's pragmatic diplomacy at sensitive time for Seoul, observers say Seoul has been carefully weighing whether President Lee Jae Myung will attend China's Sept. 3 commemoration marking the 80th anniversary of the end of World War II, as Beijing publicly expressed that Lee would be welcome to participate. Beijing has recently floated the possibility of Lee's participation through various channels, including not only official diplomatic avenues but also private meetings involving scholars, according to multiple sources. An official invitation from the Chinese government has not yet been delivered to the South Korean government, according to government sources. However, Seoul views Beijing's continued inquiries about Lee's willingness to attend — conveyed through diplomatic channels — as effectively constituting a de facto invitation, prompting careful deliberation over its response. The Chinese Embassy in Seoul also told The Korea Herald that 'China welcomes Korea's participation in this year's commemorative event" when asked about Beijing's invitation for President Lee. 'When the 70th anniversary ceremony was held, the attendance of the Korean leader at China's invitation had a positive effect,' the embassy added on Wednesday. Seoul and Beijing also discussed President Lee's potential participation in the Sept. 3 celebrations during director-general-level talks held in Seoul on Tuesday, The Korea Herald has learned from conversations with government sources. However, a statement issued by the Foreign Ministry in Seoul following the meeting did not mention whether the two sides discussed President Lee's potential attendance at the Sept. 3 commemorations. Kang Young-shin, director-general for Northeast and Central Asian affairs at the South Korean Foreign Ministry, met with Liu Jinsong, director-general of the Department of Asian Affairs at the Chinese Foreign Ministry, for the talks, the Foreign Ministry in Seoul announced Wednesday. 'Both the Korean and Chinese sides agreed to continue communication at all levels based on a shared understanding to develop Korea-China relations on the occasion of the APEC Summit in Gyeongju,' the ministry said in a statement. Seoul has high expectations for Xi's first visit to South Korea since July 2014, on the occasion of the Asia-Pacific Economic Cooperation summit. The APEC summit is scheduled to take place in the city of Gyeongju, North Gyeongsang Province, from late October to early November. It marks South Korea's first time hosting the event in 20 years, since it was last held in Busan in 2005. President Lee has formally invited Xi to attend this year's APEC summit in South Korea during their first phone call in early June. Then-President Moon Jae-in visited China twice during his term — in December 2017 and December 2019, but Chinese President Xi Jinping did not make a return visit. Seoul views it as Xi's turn to reciprocate with a visit to South Korea. Observers note that the invitation comes at a diplomatically delicate time for Seoul and is likely to put President Lee Jae Myung's pragmatic diplomacy to the test. 'China seeks to achieve a quantum leap in Korea-China relations and to check the United States by reinforcing multilateralism in the Indo-Pacific region, through a reciprocal exchange — President Lee Jae Myung's attendance at the Sept. 3 celebrations in return for President Xi Jinping's attendance at the Gyeongju APEC Summit,' said Doo Jin-ho, director of the Eurasia Research Center at the Korea Research Institute for National Strategy. Doo said China regards this year's Victory Day on Sept. 3 and the 2025 APEC Summit in Gyeongju as major political events both domestically and internationally. 'With the launch of the Lee Jae Myung administration, Beijing is seen as having high expectations of better Korea-China ties,' Doo said. 'With a Korea–US summit yet to take place, China's invitation to the Sept. 3 event puts the Lee administration's pragmatic diplomacy — including the Korea-US alliance and Seoul's relations with China and Russia — under early pressure,' he added. China marks Sept. 3 as Victory Day, commemorating its victory in the Second Sino-Japanese War from 1937 to 1945, which it regards as part of World War II. The date follows Japan's formal surrender on Sept. 2, 1945. In particular, socialist countries tend to hold major commemorative events on milestone anniversaries that fall in five- or 10-year increments. In a previous similar case, South Korean President Park Geun-hye attended the ceremony marking the 70th anniversary of the end of World War II on Sept. 3, 2015, held at Tiananmen Square in Beijing. However, Park's presence sparked significant controversy at home over whether it was appropriate and raised concerns in the United States, as most Western leaders — including those from the US, UK, France, Germany and Japan — declined to attend, citing political and historical sensitivities.
