How a South Korean Shipbuilder Plans to Revive American Shipbuilding

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The United States possesses the world’s most powerful navy, yet it faces a profound industrial crisis. The domestic shipbuilding capacity that forged its fleet is faltering, struggling to build new ships, maintain existing ones, and keep pace with global rivals. For the past two decades, the U.S. Navy has failed to increase its fleet size as planned, despite nearly doubling its shipbuilding budget.

This strategic challenge has trapped the Navy in what experts describe as a “doom loop” of maintenance backlogs and new-construction delays. The result is the smallest U.S. fleet since before World War II, a decline that coincides with growing maritime threats.

This decline in naval output reflects a near-total collapse of the nation’s commercial shipbuilding industry. Today, the United States constructs less than one percent of commercial ships globally.

This industrial atrophy is no longer a problem the U.S. can solve alone. In response, the U.S. government has embraced a new strategy, welcoming foreign investment and expertise to rebuild its yards. At the center of this strategy is Hanwha Ocean, a South Korean shipbuilding giant, and its ambitious plan to modernize a historic American shipyard.

In This Article

• U.S. shipbuilding capacity has eroded, causing long delays, high costs, and fleet-readiness challenges.
• South Korea’s Hanwha Ocean wants to invest in and modernize Philly Shipyard, bringing Korean efficiency, modular construction, and automated production methods.
• Supporters say this could cut timelines, lower costs, and expand the U.S. shipbuilding industrial base.
• Critics warn that foreign ownership of a U.S. yard tied to national-security work raises security, regulatory, and intellectual-property concerns.
• Any deal would require CFIUS review and likely congressional scrutiny.

So What?

• The U.S. Navy needs faster, cheaper ship production to keep pace with China.
• Korean shipbuilders are among the world’s most efficient—and could meaningfully improve U.S. capacity.
• But accepting foreign investment in defense-adjacent shipbuilding forces a tradeoff between urgency of capacity gains and control over critical defense infrastructure.

What Went Wrong with US Shipbuilding

The struggles of the U.S. shipbuilding industry are not new. For years, government watchdogs have issued stark warnings. The U.S. Government Accountability Office and the Congressional Research Service have documented a clear picture of the failure. According to the GAO, the Navy’s shipbuilding acquisition practices have consistently resulted in cost growth, delivery delays, and ships that do not perform as expected.

This systemic failure is built on three core problems.

1. Aging Infrastructure and Lack of Capacity

The U.S. industrial base is physically “on the brink.” Shipyards report facing challenges with aging infrastructure and simply lacking the physical space needed to handle the volume of work the Navy wants. These physical and infrastructure constraints are a primary driver of the cascading delays that plague nearly every program.

2. Critical Workforce Shortages

Even with modern facilities, ships cannot be built without skilled labor. Shipbuilders report they do not have enough workers to meet the Navy’s demands. These companies “struggle to recruit and retain staff,” especially those with the specialized skills required for complex naval construction.

This labor crisis is exacerbated by “boom-and-bust” cycles created by fluctuating and inconsistent federal vessel procurements. This instability, driven by shifting government budgets and plans, makes it impossible for shipyards to maintain a steady, skilled workforce.

3. A Crisis in Policy and Management

GAO analysis shows the Navy itself is a major cause of the problem. Its own management and acquisition practices have broken the trust of its industrial partners. For example, the Navy started construction on the new Constellation-class frigate before completing the ship’s design, a move that leading commercial shipbuilders avoid and which has contributed to massive delays.

The Navy’s management of the industrial base has been “largely ineffective at encouraging private industry to invest independently.” The Navy communicates a need for “stable shipbuilding demand” to inspire investment, but its own unpredictable budgeting and planning have failed to provide the very stability that industry needs to risk its own capital on modernization.

These problems are a self-reinforcing cycle. Inconsistent Navy orders create the boom-and-bust cycles, which cause the skilled workforce to leave. Because industry does not trust the Navy’s long-range plans, it refuses to invest independently, leaving the yards to decay.

The results are catastrophic. The Navy’s 45-day Shipbuilding Review, cited by the Congressional Research Service, revealed significant, system-wide delays in no fewer than eight major shipbuilding programs.

US Navy Shipbuilding Delays (2024-2025 Data)

These delays are not just a budget problem. They are a strategic liability that “exacerbate issues with obsolescence and capabilities becoming irrelevant as threats evolve.”

The China Shipbuilding Gap

The U.S. industrial crisis is happening at the worst possible moment. The nation is not failing in a vacuum. It is failing while its primary strategic competitor, the People’s Republic of China, is succeeding at an unprecedented scale.

The U.S. has effectively ceded the global commercial market. A 2025 report from the Center for Strategic and International Studies revealed that China now controls more than half of the world’s commercial shipbuilding market. The U.S. share has fallen to just 0.1%.

To put this in perspective: in 2024 alone, one Chinese shipbuilder constructed more commercial vessels (by tonnage) than the entire U.S. shipbuilding industry has built since the end of World War II.

This commercial dominance translates directly into military power. The Department of Defense states China’s navy is the largest in the world, with a battle force of over 370 platforms.

The trend lines are even more alarming. Congressional reports project the Chinese navy will grow to 395 ships by 2025 and 435 ships by 2030. By contrast, the U.S. Navy’s own 2025 budget submission projects its fleet will shrink to 294 battle force ships by 2030.

This “China Gap” is not just a numbers game. It’s a systems game. China is able to “share costs, spread technology, and sustain growth across both sectors”. China is leveraging a massive, state-subsidized commercial industry to support its naval ambitions, giving it economies of scale, a vast skilled workforce, and continuous innovation.

The U.S. is trying to compete with a brittle, defense-only industrial base. This is an unwinnable strategy, and it has forced U.S. policymakers to realize they must import a new system.

Make American Shipbuilding Great Again

In response to this crisis, the U.S. government has embarked on a new industrial policy, representing a radical departure from past protectionism. The “Make American Shipbuilding Great Again” initiative is a strategic and industrial partnership agreed upon by the U.S. and South Korea in August 2025.

The policy is an official admission by the U.S. administration that its shipbuilding industry is “anemic” and needs “foreign help.” MASGA is designed to “capitalize on Korean expertise” and welcome South Korean “know-how” and “capital” to revitalize U.S. yards.

This policy is backed by significant capital. As part of a larger $350 billion investment deal between the two nations, South Korea has committed to a $150 billion fund to support the MASGA shipbuilding cooperation initiative.

MASGA is a two-pronged strategy:

• The U.S. is purchasing some ships directly from South Korean providers
• Reviving U.S. domestic production by having world-class Korean operators, like Hanwha, HD Hyundai, and Samsung, invest in and modernize U.S. shipyards

This new policy exists in direct tension with long-standing U.S. protectionist laws, most notably the Merchant Marine Act of 1920, or the “Jones Act.” The Jones Act requires all cargo moved between U.S. ports to use vessels that are U.S.-built, U.S.-owned, and U.S.-crewed. For a century, this law was intended to foster and protect the very domestic shipping and shipbuilding industry that has now collapsed.

MASGA represents a historic pivot. It is the U.S. government implicitly acknowledging that 100 years of protectionism have failed to maintain a viable industrial base. The new strategy is a hybrid: partner with allies to rebuild the protected “U.S.-built” industrial base.

This is what think tanks like CSIS call the “allied acquisition of U.S. shipyards” pathway. The flagship example of this new strategy is Hanwha’s acquisition of Philly Shipyard.

Hanwha’s $5 Billion Bet on Philadelphia

The central test case for the MASGA policy is unfolding in Philadelphia. The acquirer is Hanwha Ocean, a global shipbuilding leader based in South Korea. Its 1,200-acre Geoje shipyard is one of the world’s most advanced, producing highly complex vessels.

Hanwha is the world’s number one provider of container ships and a leader in Liquefied Natural Gas carriers. It also builds advanced frigates, submarines, and destroyers for allied navies.

In late 2024, Hanwha Systems and Hanwha Ocean finalized their acquisition of Philly Shipyard, a key U.S. commercial yard, for $100 million.

The acquisition was just the first step. Hanwha subsequently announced a massive $5 billion infrastructure investment plan to completely transform the Philadelphia facility into a “next-generation shipbuilding hub.” The goal is to dramatically scale production, from the yard’s current rate of roughly one vessel per year up to an “unprecedented” 20 vessels per year within a decade.

The Crawl-Walk-Run Strategy

Hanwha is executing a methodical strategy:

Crawl (Jones Act): Hanwha is starting by solidifying the yard’s core business: building Jones Act-compliant commercial vessels. Philly Shipyard has already delivered about half of all large Jones Act commercial ships since 2000.

To create immediate, stable demand, Hanwha’s own new U.S. subsidiary, Hanwha Shipping, placed an order for 10 medium-range oil and chemical tankers—the largest U.S. commercial vessel order in more than 20 years.

Walk (Maintenance and Advanced Commercial): The next step is to expand into more complex vessels, such as transferring its world-leading technology to build LNG carriers in the U.S. It will also pursue maintenance, repair, and overhaul contracts for U.S. naval and government ships.

Run (Naval Construction): The long-term goal is to position the modernized Hanwha Philly Shipyard to play a “pivotal role in supporting U.S. naval defense needs” by building new ships for the U.S. Navy.

This approach is a vertically integrated solution to the very crisis the GAO identified. Where the U.S. government failed to provide stable demand, Hanwha is privately solving the “boom-and-bust” cycle by creating its own stable demand via the 10-tanker order. This de-risks the $5 billion investment and allows Hanwha to build up the yard’s workforce and capabilities on commercial projects before tackling the extreme complexity of naval contracts.

The Smart Yard Playbook

The $5 billion is not just for new cranes. It’s to import Hanwha’s world-leading “smart yard” production philosophy from its Geoje shipyard.

This modernization will “introduce smart yard innovations… adapted from Hanwha Ocean’s proven shipbuilding model in Korea.” The ultimate goal for advanced shipbuilders like Hanwha is a fully autonomous shipyard, where “robotics, digital twins, artificial intelligence, the Industrial Internet of Things, and augmented reality all work together” in a seamless, data-driven ecosystem.

Key technologies being transferred to Philadelphia include:

Robotic Welding and Automation

Hanwha is deploying collaborative robots and “welding autocarriages” to assist with high-risk, labor-intensive tasks like welding, painting, and material handling. This improves worker safety, increases production consistency, and directly addresses the U.S. skilled labor shortages.

Modular Construction

A core part of the model is building and pre-outfitting large ship blocks in dedicated assembly areas, then moving them for final construction.

Digital Twin Modeling

This is the “brain” of the smart yard. Hanwha will use a “digital twin” to create a complete, data-driven virtual replica of the shipyard and the ships being built. This allows for process optimization, predictive maintenance, and simulated assembly.

This is not just a technology transfer. It’s a knowledge transfer. Hanwha has already brought experienced shipyard workers from South Korea to Philadelphia to “work as instructors on rotations,” directly training the American workforce.

This “smart yard” playbook is a direct antidote to the specific U.S. failures identified by the GAO.

U.S. Problem: The Navy started building the Constellation-class frigate before the design was complete, a flawed process that led to a 3-year delay.

Hanwha Solution: The “digital twin” philosophy, which is standard in leading commercial shipbuilding, forces design completion before fabrication. This model is proven to “reduce engineering time by up to 30% and cut assembly time by around 20%.”

U.S. Problem: The U.S. “doesn’t have enough workers,” especially those with critical skills.

Hanwha Solution: “Robotic welding” and “cobots” augment the human workforce, increasing the productivity of every worker, improving safety, and ensuring production consistency.

Hanwha is not just fixing what is being built. It is transferring a 21st-century production philosophy to change how America builds.

The Nuclear Submarine Controversy

Hanwha’s methodical plan was based on a commercial-first, conventional-defense-second approach. This plan was thrown into disarray by a major geopolitical announcement.

In late 2025, President Donald Trump made a surprise announcement that he had given South Korea approval to acquire a nuclear-powered submarine capability. He then explicitly stated the submarines would be built “at the Philadelphia shipyard.”

The announcement was met with immediate “confusion” and signs of “limited coordination.” South Korean officials displayed “uncertainty about the scope, timeframe, and location of the program.” It was unclear if critical U.S. bodies, like the Naval Nuclear Propulsion Program or the Department of Energy, had even been consulted.

South Korean officials quickly and publicly contradicted the U.S. build plan. South Korea’s Defense Minister Ahn Gyu-baek stated that Philly Shipyard “lacks such facilities” and “is not prepared enough in terms of technology and manpower,” concluding that “domestic construction is the most rational approach.”

A South Korean presidential official confirmed that their president had asked Trump for help with nuclear fuel, while maintaining that South Korea would build the submarine domestically.

This clash revealed two different political objectives. For the U.S. president, the announcement was a “win-win” that tied his MASGA (U.S. jobs) policy to a key ally’s defense needs. For South Korea, whose desire for nuclear-powered submarines is driven by North Korean threats and “AUKUS envy,” the U.S. build plan undermined its goal of sovereign capability.

This political confusion has had severe real-world consequences. The Wall Street Journal reported the announcement “significantly increased the project’s complexity” and “compounded risks” for Hanwha’s $5 billion modernization effort, which was focused on commercial and conventional military support vessels.

Investment vs. Security

Beyond the political confusion, the nuclear submarine proposal faces two immense, practical hurdles: the physical reality of the shipyard and the legal reality of U.S. law.

The Practical Barrier

Philly Shipyard is a commercial facility. In its 150-year history, it has never built a submarine, conventional or nuclear. It is “not presently equipped with the infrastructure, security controls or highly-trained workforce to build nuclear vessels.”

Experts note that commercial and nuclear submarine construction are fundamentally different businesses, requiring specialty steels, unique welding techniques, and nuclear-rated facilities. The cost to upgrade and certify the yard for nuclear work is estimated to be over $700 million, with a new modular assembly building costing an additional $640 million.

The Legal Barrier

This is the most critical distinction for understanding the limits of foreign investment. Hanwha’s ownership of Philly Shipyard is subject to two different U.S. government frameworks.

FOCI (Foreign Ownership, Control, or Influence): This is the Department of Defense standard for any foreign-owned company performing classified contract work. U.S. policy allows foreign investment, and FOCI can be mitigated. The U.S. government has well-established policies that allow allied companies like Hanwha to operate under a mitigated FOCI status, enabling them to build conventional ships or perform maintenance and repair for the U.S. Navy. Hanwha’s “crawl-walk-run” plan operates within this solvable FOCI framework.

FOCD (Foreign Ownership, Control, or Domination): This is a separate, much stricter law under the Atomic Energy Act. It governs all U.S. nuclear reactor licenses. The Atomic Energy Act prohibits the U.S. Nuclear Regulatory Commission from issuing a license to any entity “owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.”

This policy, born from the Cold War, is a strict “ineligible to apply” standard.

This is the core of the issue: Hanwha’s $5 billion plan to build tankers and conventional naval ships is an FOCI issue, which is solvable. President Trump’s nuclear submarine proposal is a FOCD issue, which is not.

The nuclear submarine controversy is not just a technical or financial challenge. It is a legal impossibility under current U.S. law. To build a South Korean nuclear submarine at the foreign-owned Hanwha Philly Shipyard would require a billion-dollar-plus physical transformation and a direct act of Congress to fundamentally rewrite a 70-year-old U.S. law governing nuclear secrets. This illustrates the profound gap between a political announcement and the industrial and legal reality.

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