Nearly a year on, Korea’s $150B U.S. shipbuilding pledge remains on paper

Decisions about manufacturing and overseas expansion in strategic industries such as semiconductors are no longer driven by economics alone. As geopolitical developments increasingly shape business decisions, Korean manufacturers across the chip, auto and shipbuilding industries are weighing a growing set of risks in drawing global strategies. In this series, “Redefining Korea’s economic security in an era of U.S.-China rivalry,” the Korea JoongAng Daily examines how Korean companies navigate geopolitical pressures and realign their global supply chains. — ED.

The Korean government and shipbuilders are passing the buck over who should take the lead in the $150 billion shipbuilding initiative, which is focused largely on investment in the United States, as Washington drags its feet on placing orders with Korean shipyards.

As Washington seeks to rebuild a shipbuilding industry vital to its economic and national security and counter China’s growing naval power, Korea has emerged as a key partner in restoring America’s diminished shipbuilding capacity.

Yet, almost a year after the two countries signed a memorandum of understanding on strategic investment in November last year, committing to the $150 billion "Make American Shipbuilding Great Again" (MASGA) initiative, no concrete projects have emerged, while investment under the initiative has largely stalled.

While the government argues that the investment pledge should hinge on shipbuilders’ commercial decisions regarding potential U.S. orders, Korea’s shipbuilding industry sources say government financing must come first to build the capacity needed for large-scale ship production.

“Ultimately, companies must make their own investment decisions first,” said Lee Di-do, Senior Deputy Director at the Ministry of Trade, Industry and Resources. “Once they do, specific projects may emerge in the United States for which they could seek financing from the government. We would assess those projects on commercial grounds and provide financing if they meet our criteria.”

Lee added, “The $150 billion is a figure that came out during negotiations. It was never broken down from the outset into specific commitments assigning each party a set amount to invest.”

A divide over who moves first

Industry insiders see it differently, saying the lack of clarity over how the $150 billion will be deployed may be slowing MASGA.

Hanwha, which bought Philly Shipyard in 2024 and pledged $5 billion under the investment commitment to upgrade its infrastructure, has seen the expansion stall while it waits for government financing, according to a source familiar with the matter who spoke on condition of anonymity.

“Hanwha Ocean had planned to use the investment fund to expand its shipyard and increase capacity, but the expansion has been delayed as the fund has yet to take concrete shape,” the source said.  

“That could cut the number of orders it can take on by half. The company is reportedly already working to modernize the yard and move office buildings off-site to free up land for shipbuilding. But further expansion will require the fund,” the source added.

Since the initiative's launch, Hanwha Philly Shipyard has won one U.S. government order, as it was selected to deliver the Missile Defense Agency's Missile Range Instrumentation Vessels with vessel construction manager TOTE Services, the company announced in July. 

A Korean shipbuilder without a U.S. shipbuilding subsidiary would similarly need more concrete government financing plans before committing to any acquisition of a U.S. shipbuilder, which could provide a faster route into the American market.

“Even after acquiring a U.S. shipyard, a company would need to commit substantial additional capital to upgrade facilities and expand its workforce," said another industry insider, who spoke on condition of anonymity. "Securing a diverse pipeline of shipbuilding orders from the United States, along with financial support from the Korean government, would help mitigate the investment risks," the source added, highlighting the importance of government support in facilitating investment.

The divergence in views persists despite ongoing discussions among the parties.

In June, Korea’s policy lenders, including the Export-Import Bank of Korea, and major shipbuilders — HD Hyundai Heavy Industries, Hanwha Ocean and Samsung Heavy Industries — signed an MOU to advance bilateral shipbuilding cooperation, including through a consultative body to identify projects, share information and coordinate policy financing.

“The participating institutions are continuing discussions, and specific financing measures will be developed to suit each project as individual opportunities take shape,” a spokesperson for the Export-Import Bank of Korea said, suggesting that financing arrangements will depend on the development of concrete projects.

Midterm elections, the key variable

While the Korean government and shipbuilders are divided over how the U.S. shipbuilding investment commitment should be put into action, advances on the Washington side have also been gradual.

A Korea-U.S. Shipbuilding Partnership Center was launched in Washington in July to produce tangible results of the MASGA initiative, and a string of U.S. officials have visited Korean shipyards to assess the country's shipbuilding capabilities, including eight members from the House Appropriations Subcommittee on Defense who toured Hanwha Ocean's shipyard in Geoje, South Gyeongsang, and HD Hyundai Heavy Industries' shipyard in Ulsan in the same month. But no major ship orders have been placed.

Industry insiders also point U.S. political divisions and the upcoming U.S. midterm elections in November as added sources of uncertainty.

U.S. President Donald Trump has sought to advance the partnership, signing a national security presidential memorandum in August that allows foreign shipbuilders that own or build U.S. shipyards to construct up to two Navy vessels at their home-country yards for delivery to the United States.

But foreign-built ships remain politically sensitive in Washington. In June, House Republican leaders urged Trump to let emergency waivers of the Jones Act — issued during the Iran conflict to keep fuel moving between U.S. ports — expire as scheduled. The law generally requires vessels carrying goods between U.S. ports to be built in the United States and owned and operated by U.S. interests.

Industry insiders expect tangible progress to take months, citing uncertainty over the midterm elections and the lengthy process of awarding shipbuilding contracts, in which funding must first be secured and a competitive bidding process may follow.

“Shipbuilders are likely to wait until after the midterm elections before making any major moves, given the uncertainty over the outcome,” an industry source said.

"The outlook will depend in part on which party controls the state where the shipyard is located. If Republicans keep their majority, the policy is more likely to be implemented as planned,” the source added. “Taking various factors into account, we expect the first order to come no earlier than the first half of next year, although political developments could still change the outlook.”

BY JIN MIN-JI [[email protected]]