Korean speed vs. NATO ties: Hanwha marketing blitz narrows Canadian submarine race with Germany's TKMS

Korea's Hanwha Ocean has waged an unusually aggressive marketing blitz to win Canada's largest-ever military procurement, with the campaign seemingly rattling its German rival, TKMS.

The German manufacturer has since fired back with industrial pledges and pointed remarks as Ottawa prepares to name a preferred bidder as early as this week. The final-stretch contest has narrowed what was once a clear German advantage.

The Canadian Patrol Submarine Project, a plan to acquire up to 12 conventionally powered submarines to replace the navy's four aging Victoria-class boats, is valued at up to 60 billion Canadian dollars ($42.3 billion) over its full life cycle. A decision is expected before a NATO summit in July, and military experts describe the technical gap between the two finalists as razor-thin.

Retired Vice-Admiral Mark Norman, a former vice chief of the defense staff, compared the choice to picking between two midsize sedans in an interview with The Canadian Press published June 21.

"The difference between a Toyota Camry and a Honda Accord is fundamentally buyer preference," Norman said. "They both basically do the same thing. They are both the same configuration, basically the same product. They're just packaged differently, and they deliver their capability in slightly different and nuanced ways."

Building in Canada

In the run-up to the decision, TKMS has moved to deepen its industrial footprint inside Canada, the central condition Ottawa has attached to the bid. On June 17, the company placed an initial order of non-magnetic submarine steel with Valbruna ASW, a specialist in stainless steels and nickel alloys, and signed a cooperation agreement to qualify the firm's Canadian operations to produce the material. Non-magnetic steel is critical to submarine construction because it reduces a vessel's magnetic signature.

"TKMS values strong partnerships with leading industrial suppliers capable of meeting the demanding material requirements of next-generation submarine platforms," Thomas Keupp, the company's chief sales officer, said in a statement reported by Naval Today on June 17, adding that the deal would explore ways to support Canada's future submarine program. The company has also partnered with the Canadian simulation firm CAE on electronic navigation, simulators and training systems, as part of a broader supply-chain localization effort aimed at delivering economic benefits for Canada.

TKMS has paired those moves with a direct assault on Hanwha's biggest selling point, delivery speed. At the Cansec defense exhibition in Ottawa in late May, German Defense Minister Boris Pistorius pledged that TKMS could deliver four Type 212CD submarines to Canada by 2036, and to make that timeline credible, Germany and Norway each offered to cede one of their own production slots in the joint program, allowing Canada to slot into an existing series build.

The German bid also leans heavily on alliance logic. The Type 212CD is operated by both the German and Norwegian navies, so a Canadian order would bring the combined fleet to 24 boats, with parts, training and crews interchangeable across three NATO navies. The company frames that alliance value as central to its pitch.

"TKMS believes interoperability and commonality with allied navies are important long-term considerations," it said in a written response to the Korea JoongAng Daily. "These benefits are strongest when aligned with the customer's facilities, personnel and sustainment planning. TKMS would support Canada in assessing all of these factors against its national requirements."

The German NATO edge

The strength of that alliance argument is not lost on Seoul. Industry Minister Kim Jung-kwan has said the outcome will hinge on whether Canada prioritizes Korea's industrial capabilities or Germany's NATO alignment. Speaking to reporters at a briefing in Sejong on Monday, Kim said Canada may feel a stronger need to deepen NATO cooperation amid current conflict and security tensions, and that such considerations could outweigh industrial factors in the final evaluation.

"From Korea's perspective, the submarines themselves and the accompanying industrial package are objectively superior," Kim said. "But the concern is that Canada may not base its decision on those merits alone."

Kim also pointed to circulating reports that the contract could be split evenly between the two bidders, with each supplying six boats. "We have also received reports from local sources that if a decision is not reached by the end of June, it could signal that Canada is moving toward a divided contract between the two countries," he said.

President Lee Jae Myung, who met Canadian Prime Minister Mark Carney at the recent Group of 7 summit in France, struck a similarly cautious note at a subsequent press briefing, saying he was "hopeful but not optimistic."

A double-edged backlog

Yet TKMS is contending with a problem of its own making, the sheer weight of its order book. The company reported a record backlog of about 20.6 billion euros ($23.5 billion) at the end of March, up from 18.7 billion at the end of December, equivalent to more than nine years of production, and its primary Kiel submarine line is booked into the 2040s.

Converting that backlog into delivered ships requires a rapid scaling of its workforce. TKMS has posted more than 330 open positions, and its personnel director, Angelika Kambeck, has said the company plans to hire more than 1,000 people across its Kiel and Wismar yards, where it is investing more than 200 million euros to convert a former commercial site into a hybrid submarine-and-surface-vessel shipyard, targeting up to 1,500 jobs by the end of 2029.

The market is watching that execution challenge closely, and not every read favors the Korean bid. The German equity-research firm mwb research has assessed TKMS's probability of winning the contract at 70 percent, well above the company's own "50/50" internal estimate, and reaffirmed a buy rating with a 125 euro price target, according to a June 16 report by the Korean defense outlet The Guru and subsequent coverage in European financial media.

The firm's analyst, Jens-Peter Rieck, argued that delivery speed alone should not decide the award of a strategic asset meant to remain in service for decades, and that the alliance logic favors TKMS, noting that the company already supplies a large share of NATO's conventional submarine fleet.

That is among the more bullish views on the street, rather than the consensus. TKMS shares closed at about 72 euros on Monday, roughly 30 percent below a 52-week high of 102.90 euros set in January, after a steep spring sell-off was triggered by a Morgan Stanley downgrade of the European defense sector, and investors took profits. The stock has clawed back some ground in recent days as the market began pricing in the prospect of contract wins, but analysts remain split.

In mid-June, European financial services company Kepler Cheuvreux advised investors to reduce exposure to a fair value of 66 euros, citing an excessive valuation and negative free cash flow of 72 million euros in the first half, against mwb's far more bullish 125-euro target.

German timing

Asked how it would meet a Canadian timeline without straining its existing programs, TKMS pointed to its track record and declined to commit to a delivery date.

"TKMS has extensive experience delivering submarine programs for allied navies and would work closely with Canada to support its requirements," the company said in a written response. "A program of this scale involves more than delivery timing alone, and any schedule would need to be based on detailed planning with the customer, taking into account capability, industrial capacity, workforce, infrastructure, training, sustainment and the Navy's readiness to receive, operate and support the submarines."

On its capacity to take on new work, it added: "TKMS continues to invest in its workforce, facilities, and supply chain to support current and future programs. We manage program commitments carefully and would only make commitments to Canada based on a responsible assessment of capacity, resources, and schedule." The measured answer is notable given that Pistorius publicly committed to the 2036 timeline.

That execution risk is precisely the opening Hanwha Ocean has worked to exploit. The Korean package, which includes HD Hyundai Heavy Industries, is offering the KSS-III, a diesel-electric class already in service with the Korean Navy and recently showcased when one boat sailed 14,000 kilometers (8,700 miles) to Canada for joint exercises.

Hanwha is putting forward the larger Batch II variant, which displaces about 3,600 tons, and has promised to deliver the first four boats by 2035 and all 12 by 2043. Because the design is operational and the line is running, Hanwha argues it can field proven boats on a schedule TKMS cannot match. Designed to keep North Korea in check, the KSS-III can vertically launch ballistic or cruise missiles to strike land targets, a capability the German boats lack, and its more spacious hull allows greater range and easier modification.

Selling submarines like sedans

Hanwha has matched that technical pitch with a marketing campaign unlike anything the staid world of European submarine sales has seen. The company blanketed Canadian airports, broadcast television and streaming platforms with advertisements, plastered bus stops and street signs with images of the KSS-III, and enlisted veteran Canadian news anchor Peter Mansbridge to front the effort.

The approach visibly unsettled its rival. "This is nuts, honestly," TKMS chief executive Oliver Burkhard told The Canadian Press in an interview at Cansec in May. "We're not used to this." His usual competitors in France, Spain, Italy, Britain and Sweden, he noted, do not advertise submarines to the public.

"This is unusual. Let them try it," commented Burkhard. "If they have success, then maybe say this was a big strategy and we have won this because of our advertising. If they do not win it, then they are the more popular one who has lost, the most popular loser."

Hanwha defended the strategy as a long-term investment. "It's about brand recognition, and it's about understanding what our capabilities are, and as people have understood, it's a pretty powerful company," Glenn Copeland, chief executive of Hanwha Ocean's Canadian unit, told The Canadian Press in an interview after the Cansec show.

Copeland noted that the company is a household name in Korea but not yet a recognized defense supplier in markets like Canada, and said the advertising had drawn the attention of several levels of government. The contrast reflects a deliberate choice. While European builders have traditionally lobbied governments quietly, Hanwha has pursued a long game aimed at officials and the public alike.

Their loss

The split-screen competition has left even seasoned observers uncertain. "Korea has gone all-out to win this," Paul Mitchell, a professor of defense studies at the Canadian Forces College, told The Canadian Press. "In some ways, I think it's theirs to lose."

Mitchell said the German boat's edge was harder to pin down. "The strengths that the German boat has over the Korean boat are harder to quantify: interoperability, the layout of the boat itself, and I would argue the language factor," Mitchell said, noting that the German and Norwegian navies have strong English-language capabilities. "And language is going to be a real significant issue."

Economic benefits aside from the submarines themselves may prove decisive as well. Canada has tied the award to 50-year local partnerships and binding investment commitments in mining, rare earths and automotive manufacturing, and both bidders have built their offers around that demand. Hanwha has proposed a military-vehicle joint venture with Canada's automotive parts manufacturers and local maintenance infrastructure, while TKMS has answered with its steel and simulation deals and promises spanning critical minerals, batteries and space.

Mitchell noted that Canada has long extracted hard bargains in major defense purchases, telling The Canadian Press that it demanded an additional 50 million Canadian dollars in discounts when it acquired the Victoria-class boats from Britain in the 1990s.

For Hanwha Ocean, the stakes reach beyond a single sale. A win would mark Korea's first major submarine export to a Western navy and a foothold in the NATO market, validating the KSS-III against the very German lineage that taught Korea to build submarines.

In the 1980s, Korea assembled its earliest boats from German designs under license from the Kiel shipyard, now operating as TKMS. Four decades later, the former student is bidding against its old teacher, and the result may turn less on the boats themselves than on which builder Canada believes can deliver.

BY KIM MIN-YOUNG, LEE JAE-LIM [[email protected]]