Hanwha Ocean’s endeavor to secure exclusive control of the Korean naval ship market was thwarted after rival HD Hyundai Heavy Industries (HHI) managed to avoid being banned from bidding for government contracts, according to accroding to KoreaTimes.
The Defense Acquisition Program Administration (DAPA) decided on Tuesday to allow HD HHI to bid for the 7.8 trillion won ($5.9 billion) project to build six 6,000-ton Aegis combat system-equipped destroyers for the Republic of Korea Navy. The state arms procurement agency cited a lack of evidence that the company’s executives had ordered its employees to steal data between 2012 and 2015 from Daewoo Shipbuilding & Marine Engineering, which was renamed Hanwha Ocean after Hanwha Group’s acquisition of the shipbuilder last year.
The decision led Hanwha Ocean to continue competing with HD HHI, its only rival in the domestic warship market. If the agency had made a different decision, HD HHI could have been forced to shut down its naval vessel business as it could have been excluded from the ROK Navy’s projects for the next five years.
Immediately following DAPA’s decision, Hanwha Ocean voiced its frustration and disappointment with the outcome.
“HD HHI’s theft of confidential data should be regarded as a serious crime that threatens the basis of the Korean defense industry, so we urge DAPA to review this issue and the police to investigate the crime,” the company said in a statement.
Before DAPA made the decision, Rep. Seo Il-jun of the ruling People Power Party, who represents the constituents of Geoje Island, home to Hanwha Ocean’s shipyard, called for a stern measure against HD HHI. The Anti-Corruption & Civil Rights Commission also sided with Hanwha Ocean, rejecting HD HHI’s complaint about DAPA’s selection of the Hanwha affiliate last July as the preferred bidder for the ROK Navy’s fifth and sixth Ulsan-class Batch III frigates.
HD HHI lost to Hanwha Ocean at that time, as it is facing a penalty in bidding for government projects until November 2025, due to the data theft case.
The HD Hyundai subsidiary is therefore expected to face difficulties in beating Hanwha Ocean in the forthcoming bid for the destroyer project, despite DAPA’s latest decision. HD HHI seeks to overcome point deductions by improving its technologies.
“We respect DAPA’s decision and we will make efforts to contribute to the growth of Korea’s defense industry,” HD HHI said in a statement.
Speculation remains that newly appointed DAPA Commissioner Seok Jong-gun may have refused to punish HD HHI, so as to avoid a possible backlash from voters in the shipbuilder’s hometown of Ulsan, ahead of the April 10 general elections. DAPA’s decision is also attributed to former National Security Adviser Kim Sung-han, who was nominated as a nonexecutive director of HD Korea Shipbuilding & Offshore Engineering, HD HHI’s parent firm.
However, the company explained that the former aide to President Yoon Suk Yeol is just an international trade expert.
Industry officials also expect Hanwha Ocean and HD HHI to compete fiercely to provide maintenance, repair, and operations services to the U.S. Navy. A few hours before DAPA’s decision, U.S. Secretary of the Navy Carlos Del Toro visited shipyards of the two Korean shipbuilders to discuss cooperation.