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Korea’s confidence grows against Germany in Canada's $40B submarine race

Published: 28 May. 2026, 18:36 Updated: 28 May. 2026, 20:01

KIM MIN-YOUNG
[email protected]

The 3,000-ton ROKS Dosan Ahn Chang-ho enters the Canadian naval base in Esquimalt, Victoria, on May 23, marking the first trans-Pacific voyage ever undertaken by a Korean submarine. [YONHAP]

[NEWS ANALYSIS]

At the beginning of Canada’s closely watched $40 billion submarine bidding process, Korea appeared to be somewhat behind Germany, but the tide has since shifted, largely thanks to a hefty investment package that includes local manufacturing and technology transfers in hydrogen, auto, steel and even space launchers.

The strength of the German consortium, led by TKMS, lies in Germany's status as a member of NATO and the EU, a bloc that Canada is trying to align with to balance its traditionally close U.S. ties. Korea's appeal comes from its proven operational capabilities, manufacturing capabilities and ability to meet delivery schedules — factors openly favored by some defense heavyweights in Canada.

“Korea’s submarine is an actual operational platform, whereas Germany’s submarine remains at the design stage," said Industry Minister Kim Jung-kwan at a press briefing on Thursday. "Korea also has advantages in terms of price and specifications.” Kim's tone was cautiously more optimistic than his previous comments in March, when he described the deal as "a process of doing everything we possibly can without prematurely concluding whether things are going well or poorly."

The chief of the state-run defense procurement agency, which spearheads the government-level support for the export program, acknowledged the shift as well.

“At this point, Korea and Germany are locked in a very close race," Lee Yong-Cheol, Minister of the Defense Acquisition Program Administration (DAPA), said in an interview with Korean media outlet News1 on May 21. "Early on, the atmosphere suggested Korea was at a significant disadvantage in several respects."

The Canadian Patrol Submarine Project (CPSP) will replace the country's four aging Victoria-class submarines with up to 12 new diesel-electric submarines. The total contract value, including construction, maintenance and decades of operations, is estimated at 60 trillion won ($40 billion). Ahead of an impending disclosure of a preferred bidder, set for June, the Minister of DAPA, a Korean Navy admiral and Hanwha and Hyundai executives are converging in Canada in pursuit of success.

"It looks like Hanwha will end up with a split award or a straight win," said a source in the local defense industry, commenting on the competition between Germany and Korea for Canada's submarine bid.

The ROKS Dosan Ahn Chang-ho departs from a naval port in Jinhae District, Changwon, South Gyeongsang, on March 25 to take part in a joint Korea?Canada naval exercise. [NAVY]

The Korean edge

Korea's Hanwha Ocean, partnered with HD Hyundai Heavy Industries, is offering the 3,600-ton KSS-III Batch II submarine. Germany's TKMS is offering the 2,800-ton Type 212CD.

The Korean submarine Dosan An Chang-ho — which shares the same base as the KSS-III — docked at the home of the Canadian Navy's Pacific fleet in Esquimalt on May 24 after a 14,000-kilometer (8,700-mile) crossing, marking the longest deployment in Korean submarine history.

Canadian Navy submariners had been aboard for the final stretch from Hawaii, where they embarked on May 7 for a firsthand evaluation of the vessel. Canadian sailors who embarked on the Pacific crossing described the vessel favorably in Canadian press reports, with one petty officer comparing the experience to upgrading from a '99 Honda Civic to a new Tesla.

Hanwha Ocean has committed to delivering the first submarine to Canada by 2032 and four submarines by 2035, with continued annual deliveries afterward. The first KSS-III Batch II for the Korean Navy is scheduled for delivery in 2027, which means Canada can inspect the production vessel before signing.

"Assuming a contract award in 2026, the Koreans have projected delivery of the first KSS-III by 2032, with four submarines delivered by 2035 and subsequent boats arriving annually thereafter," wrote Dr. Kevin Budning, Director of Scientific Research at the Conference of Defence Associations Institute, wrote for Canada's Policy Magazine on May 21. "Crucially, the KSS-III is not a conceptual design or developmental platform: it is already operational and rolling off active production lines — one arriving in Victoria later this month for a full display."

TKMS, on the other hand, has not transparently disclosed its delivery timeline, with Canada's first German submarine expected only in the mid-to-late 2030s. Korea's Dosan An Chang-ho submarine's arrival in Esquimalt this week added a layer of operational validation that the Type 212CD cannot match, since the German submarine remains in the design phase.

The 212CD, a 2,500-ton stealth diesel submarine jointly developed by Germany and Norway, is seen in this file photo provided by TKMS [TKMS]

Korea also has a strong accompanying industrial package, where Hanwha has consistently outbid TKMS on the offset commitments that matter most to Ottawa. Hanwha raised its committed economic impact for Canada from $60 billion to $70 billion in mid-May, after Canada's Defense Investment Agency rejected the March round of proposals as insufficient and demanded that both bidders improve their industrial participation terms.

The Hanwha package includes plans to produce armored vehicles in Canada and a 345 million Canadian dollar ($248 million) investment in Algoma Steel in Ontario, which the company has positioned as a contribution to Canada's broader industrial revival amid U.S. tariff pressure.

Hanwha Aerospace and Hanwha Ocean also signed a memorandum of understanding (MOU) with the Automotive Parts Manufacturers’ Association of Canada in Ontario on April 29 to establish a joint venture to produce military and special-purpose vehicles.

Hanwha Aerospace is also set to sign an MOU with Canadian spaceport operator Maritime Launch Services, according to Hanwha Defence Canada CEO Glenn Copeland. Hanwha plans to support Canada's effort to develop active launchpads, which the country currently lacks.

Hanwha projects the deal would create between 15,000 and 22,500 Canadian jobs per year through 2044, with global accounting firm KPMG estimating the Korean proposal would generate a Canadian GDP impact of approximately 94.1 billion Canadian dollars (102 trillion won) through 2044. The company has built partnerships with more than 30 Canadian firms and educational institutions to date.

Prime Minister Kim Min-seok speaks with Canadian Prime Minister Mark Carney as they tour the Hanwha Ocean Shipyard in Geoje Island, South Gyeongsang, on Oct. 30, 2025. [AP/YONHAP]

The breadth of Korea's commitments reflects a deliberate strategic calculation, said Choi Gi-il, a professor at Sangji University's Department of Military Studies.

"Proposals expanded to include aircraft parts manufacturing facilities through Korean Air, hydrogen and energy investments, and other industrial projects,” said Prof. Choi. “None of those things has anything to do with submarines."

TKMS has matched the offset framework, but on a different scale. The German bidder cannot use Canadian steel directly because the Type 212CD requires specialized magnetic steel, leaving its industrial participation case to be made through alternative routes, including hydrogen infrastructure partnerships and unspecified investment in Canadian steel separately.

The contrast is structural. Hanwha is offering concrete dollar figures and named investment targets. Germany is offering a longer-term, less defined cooperation framework.

"However, Canada now appears eager to use this transnational project as an opportunity to establish a comprehensive industrial cooperation framework," said Minister Lee. "To overcome these geopolitical disadvantages, I believe Korea needs to secure a comparative advantage in the industrial cooperation package that Canada places great importance on.”

Park Yong-yeol, head of the Naval Ship Division at HD Hyundai Heavy Industries, right, and James Davies, CEO of Davie Shipbuilding, pose for a commemorative photo during a visit to Davie Shipbuilding’s Ottawa office on May 26 (local time). [HD HYUNDAI]

Senior executives from Canada’s Irving Shipbuilding pose for a commemorative photo in front of the bust of HD Hyundai’s founder, Chung Ju-yung, while visiting HD Hyundai Heavy Industries' Ulsan headquarters in early May. Sixth from the left is Joo Won-ho, president of HD Hyundai Heavy Industries and head of the naval and medium-size shipbuilding business unit, and seventh from the left is Dirk Lesko, president of Irving Shipbuilding. [HD HYUNDAI]

Contentious Pitching

German Defense Minister Boris Pistorius traveled to Ottawa on Wednesday for the defense trade show Cansec 2026, following an earlier visit by German Vice Chancellor and Finance Minister Lars Klingbeil.

Minister Lee and Admiral Kim Kyung-ryul of the Korean Navy also attended the event. Executives from HD Hyundai Heavy Industries, which is also participating in the submarine project in partnership with Hanwha Ocean, met with management from Canada’s Davie Shipbuilding at the company’s Ottawa office on Tuesday to discuss ways to strengthen strategic cooperation across the shipbuilding and naval vessel sectors.

Berlin is treating the contract as a top national priority, with TKMS framing Canadian adoption of the Type 212CD as joining an existing German-Norwegian submarine pool where doctrine, training, parts and ammunition are already shared across NATO.

"TKMS’s principal counterweight to Hanwha’s expansive and public economic pitch, however, lies less in direct job creation and more in industrial integration," wrote Dr. Budning. "This includes the transfer of advanced submarine design and engineering knowledge, deeper integration between Canadian and German/Norwegian naval ecosystems and enhanced interoperability across logistics, training and sustainment systems within TKMS’s broader NATO submarine fleet."

NATO Secretary General Mark Rutte, left, meets U.S. Secretary of State Marco Rubio at the State Department in Washington on April 8, 2026. [UPI/YONHAP]

Korea's edge in this front is that NATO interoperability is no longer a German monopoly. Since 2022, Korea has become one of the most significant non-NATO arms suppliers to NATO countries, anchored by a $44.2 billion framework agreement with Poland covering K2 tanks, K9 howitzers, FA-50 aircraft and K239 Chunmoo rocket systems.

Finland, which joined NATO in 2023, signed a $634 million K9 howitzer deal in April 2026. Korea and NATO signed an Individually Tailored Partnership Programme in July 2023 formalizing cooperation on military interoperability and defense industry collaboration.

Prime Minister Mark Carney has also been openly reorienting Canada's trade and security relationships away from dependence on the U.S. amid the Trump administration's tariff disputes. Korea benefits from being neither European nor American at a moment when Ottawa is actively seeking strategic optionality.

"We need top-level diplomatic engagement,” said Jang Won-joon, an associate professor at Jeonbuk University's Department of Defense Technology and Industry. “Ideally, the president should visit Canada directly. If not, opportunities should be sought through bilateral meetings or other diplomatic events. This isn't simply about selling weapons. It's about the next 30, 50 or even 100 years."

Prof. Jang noted that Canada was among the first countries to support Korea during the Korean War, with the Canadian Parliament approving aid ahead of many other NATO allies. "We should build on that history and frame this in terms of a long-term partnership."

“We even joked to the minister that old friends are just your existing friends, but new friends can become your best friends,” Industry Minister Kim said Thursday, referring to discussions with Canada’s industry minister Mélanie Joly. “Ultimately, though, we’ll have to wait and see how things turn out.

[KPMG, THYSSENKRUPP MARINE SYSTEMS, CBC NEWS]

The Korean submarine Dosan Ahn Chang-ho arrives at Canadian Forces Base Esquimalt in Victoria, British Columbia, on May 23 to participate in a Korea-Canada joint naval exercise. [REPUBLIC OF KOREA NAVY]

The cautions

Despite the signals of ultimate Korean success, the deal is far from done. TKMS has a stronger global submarine export track record and a respected reputation for design and engineering, factors that should not be dismissed even with Hanwha's current momentum.

Prof. Jang also flagged Arctic operations as a German advantage. "Germany has experience operating in northern waters similar to the Arctic, given Norway's use of the Type 212 and Germany's own operating environment," he said. "That's one of our disadvantages."

Prof. Choi was slightly more confident about the overall outlook but still cautioned that the contest is close. "If I had to make a cautious prediction, I'd say Korea is slightly ahead, maybe 51 to 49," he said. "Even if Korea wins, I think people will describe it as an extremely close contest and say that Korea secured the contract by a narrow margin."

The contract has not been signed. Both bidders are still finalizing offset and industrial-participation packages. External perception of momentum is not the same as a Canadian government decision. The next four weeks of lobbying, exhibitions and final negotiation will determine the outcome.

Industry Minister Kim compared the Canadian bid to the Battle of Myeongnyang in 1597, in which Joseon successfully defended itself against a Japanese naval invasion. The battle has legendary status among Koreans, particularly because Joseon Admiral Yi Sun-shin (1545-1598) defeated more than 300 Japanese ships with 12 Joseon warships.

“Those 12 submarines are Admiral Yi Sun-shin’s 12 ships,” Kim said. “We are approaching this with the determination that we are far from finished.”

BY KIM MIN-YOUNG [[email protected]]