Korea is going all out to win a large-scale submarine contract from Canada, mobilizing not only its top shipbuilders — Hanwha Ocean and HD Hyundai Heavy Industries (HHI) — but Hyundai Motor and Korean Air in an effort to craft the most compelling bid possible.
However, Korea is facing a formidable competitor — Germany, led by TKMS, formerly known as Thyssenkrupp Marine Systems. TKMS is offering its upcoming Type 212CD class submarines, which are expected to first be deployed to the Norwegian and German Navy starting in 2029.
Hanwha Ocean is offering the KSS-III CPS, based on the KSS-III Batch II currently operational by the Korean Navy. The Korean Navy currently operates three KSS-III Batch II submarines, two built by Daewoo Shipbuilding & Marine Engineering — now Hanwha Ocean — and one by HD HHI.
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Hanwha Ocean will be leading the bid, with HD HHI in a supporting role to share construction responsibilities once the deal is made. It was reported that the roles will be reversed if Korea decides to bid for a surface vessel overseas.
The Canadian Patrol Submarine Project is a multidecade project estimated by Korean news outlets to cost up to 60 trillion won ($44 billion), and which aims to replace the country’s aging Victoria-class submarines with eight to 12 new diesel-powered submarines capable of long-range patrols in the Atlantic, Pacific and Arctic oceans. The price tag is a combination of the 20 trillion won spent on the procurement of the submarines and the remainder consisting of 30 years of maintenance, repair and operations (MRO) efforts for said ships. Canada is expected to select its preferred bidder by May or June of this year.
Hanwha Ocean said its ability to offer the first submarine by 2032 and all four submarines by 2035 is a key strength that its competition lacks. At the moment, Type 212CD is estimated to have its first subs delivered to Norway in 2029, with TKMS offering to speed up the first submarine delivery to Canada to sometime between 2032 and 2033.
“[Hanwha Ocean’s] proven delivery schedule is made possible by an active submarine production line already building and integrating submarines today, and a resilient supply chain with qualified suppliers efficiently delivering critical components,” the Korean shipbuilder said.
Offset trade matters
The deal, however, is not just about which country offers the submarine with better performance or can offer it faster. It’s really about who can offer the better overall package.
Only 20 percent of the decision will be weighted on the platform itself, according to bid instruction documents formally sent to TKMS and Hanwha Ocean. A whopping 50 percent of the weighting will come from local MRO efforts, another 15 percent is from economic benefits and the final 15 percent will be the country’s financial wherewithal, according to reports from CBC. Germany, with its deep NATO ties, has been advertising interoperability, cooperation in raw materials and other fields and procurement of Canada-made Bombardier airliners.
Seoul responded with a Korea-Canada Industrial Cooperation Forum on Monday in Toronto, where Hanwha Ocean and Hanwha Systems, Hanwha’s defense solutions affiliate, and HD Hyundai all promised big numbers in return of the submarine deal.
Hanwha Ocean signed a $250 million binding memorandum of understanding (MOU) with Algoma Steel to help build a new structural steel beam meal in Sault Ste. Marie in Ontario, where it can produce Canadian-made steel that can be used at the submarine production and during MRO infrastructure construction.
“By anchoring steel production, infrastructure and long-term sustainment in Canada, we are committed to strengthening Canada’s industrial resilience and supporting a submarine capability that Canadians can rely on today and for generations,” Hanwha Ocean President and CEO Kim Hee-cheul said.
The deal also involves the Korean shipbuilder purchasing up to $50 million worth of products made by Algoma.
Hanwha claimed that the parentship can result in creating 15,000 jobs within Canada, citing an estimation from KPMG.
Oil purchases, AI cooperation
HD Hyundai, leveraging its subsidiary HD Hyundai Oilbank, pledged to import “trillions of won” worth of Canadian crude oil during the duration of the submarine project. The Korean shipbuilder also offered to provide shipbuilding and submarine construction know-how to Canadian shipbuilders.
Hanwha Ocean and Hanwha Systems, meanwhile, signed an MOU with Canadian AI firm Cohere to jointly develop large language and multimodal AI models.
“This partnership is a declaration of Hanwha’s commitment to becoming deeply integrated into Canada’s technology ecosystem,” Hanwha Ocean’s naval ship division president Eoh Sung-chul said.
Hanwha Systems also signed an MOU with Telesat, a Canadian satellite communications company, to collaborate on satellite connectivity solutions and user terminals compatible with Telesat’s network, aiming to cooperate on developing Korea’s own low-earth-orbit communications satellite technologies.
The tipping point, however, might depend on Korean firms that are not directly connected, such as Hyundai Motor Group — the auto conglomerate that technically has no primary business in the submarine industry. While HD Hyundai and Hyundai Motor Group share a historic lineage, they have been operating as two independent firms for over two decades.
“Canada was the one who asked Hyundai Motor Group to join the bid, and while offset trades in weapon procurement can be limited to the defense industry, it may also involve seemingly unrelated investments, like the case with Hyundai,” Jang Won-joon of Jeonbuk National University’s defense industry convergence program, told the Korea JoongAng Daily.
Despite requests for a new EV manufacturing plant in the country, Hyundai Motor is likely to have offered support for hydrogen infrastructure, including hydrogen production, storage, charging and effective energy use, since the automaker recently completed construction of a large-scale EV production plant in the United States. Hyundai Motor’s previous attempt to build a manufacturing plant in Canada failed in 1993 when the plant was shut down after just four years of operation, due to high maintenance costs and tariff issues.
Korean Air, too, commenting that the airline is “looking into ways of supporting the bid,” opened possibilities of purchasing Bombardier-made planes. The company already plans to purchase Bombardier’s business jet Global 6500 to transform it into Korea’s first electronic warfare aircraft.
“Providing a total package, helping the localization effort and helping to build the infrastructure in a long-term partnership is crucial,” Professor Chang said.
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