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Park Chan-kyong

South Korea’s failed bid for Canada’s next-generation submarine fleet has exposed a growing problem for one of Asia’s fastest-rising defence exporters: price, speed and technology may no longer be enough.
Analysts said the loss of the Canadian Patrol Submarine Project (CPSP) to Germany’s ThyssenKrupp Marine Systems showed how Nato security ties and pressure on member states to favour allied industrial bases were increasingly outweighing commercial competitiveness in decisions over major purchases.
“The failure of the CPSP bid poured cold water on South Korea’s defence industry, which has performed strongly in recent years,” said Shin Jong-woo, secretary general of the Korea Defence and Security Forum, a Seoul-based think tank.
“As far as submarines are concerned, exports appear doomed for the foreseeable future, even though they are highly competitive.”

The setback has deepened concerns that South Korea’s submarine industry could soon face a shortage of new orders, forcing its defence firms to pursue more overseas production through joint ventures and local manufacturing partnerships as defence protectionism intensifies.
It was the second such blow in under a year. Hanwha Ocean, the shipbuilder behind the unsuccessful CPSP bid, also lost out on Poland’s Orka programme – a roughly US$4.8 billion contract for three air-independent propulsion submarines – when Warsaw chose Swedish shipyard Saab Kockums’ Blekinge-class design over both the Korean and German bids late last year.
Analysts suggest Hanwha Ocean, despite being the reserve supplier for the Canadian programme, may eventually have to restructure its submarine business to reduce excess capacity if new contracts become scarcer.

Last year, the European Union launched a €150 billion financing instrument known as SAFE (Security Action for Europe) to fund the joint procurement of ammunition, air defence systems and drones among member states via low-interest loans.
Shin said this was a key element in the growing hurdles facing South Korea and other non-European defence suppliers as the EU ramps up efforts to develop its own defence industrial base.
SAFE is designed to accelerate Europe’s defence readiness while strengthening its industrial base. Crucially, Canada also recently joined the framework, creating a powerful financial and strategic incentive for Ottawa to buy a European-designed platform.
Emptying order books
South Korea’s most successful submarine export market has been Indonesia, with three Nagapasa-class submarines, based on the KSS-I design, being delivered to the Indonesian Navy by Hanwha Ocean’s predecessor Daewoo Shipbuilding and Marine Engineering, under contracts worth more than US$1 billion, which also incorporated technology transfers and local construction.
A contract for a second batch of three submarines ultimately fell through, however, with Indonesia turning to France’s Naval Group for two Scorpene-class submarines instead.
South Korean shipbuilders have also submitted proposals to supply export versions of the KSS-III diesel-electric attack submarine to the Philippine Navy and are actively marketing their submarines to several countries considering fleet modernisation, including Peru, Egypt, Saudi Arabia and Greece.
Despite those efforts, industry analysts warn that South Korea’s submarine sector could run out of backlogged work after the current programme to build three 3,600-tonne upgraded versions of the KSS-III for the country’s navy is completed in 2029.
The first upgraded KSS-III submarine was launched in October last year, while the second and third vessels are undergoing testing or are under construction. No follow-on conventional submarine project has yet been announced.

Jang Won-joon, an associate professor of advanced defence technology and industry at Jeonbuk National University, said South Korea had benefited from Europe’s urgent demand for military equipment following Russia’s full-scale invasion of Ukraine.
“Four years on, however, European countries have largely returned to normal procurement practices, consolidating their defence industries through regionalised procurement centred on strategic alignment,” he said.
With Nato members now accounting for roughly 55 per cent of the global defence market and favouring suppliers who could contribute militarily in a conflict, Jang said South Korea increasingly found itself on the outside looking in.
His prescription is to build what he calls “quasi-alliance relationships” – covering joint production deals, technology partnerships and co-development arrangements – with Nato members and other potential customers rather than competing purely on merit.

Seoul and Nato have already agreed to begin negotiations on a procurement framework agreement that could open the door to South Korean firms joining the alliance’s joint defence procurement programmes.
Jang also dismissed concerns that deeper ties with the transatlantic security alliance would necessarily inflame tensions with Beijing and Moscow, arguing instead that “South Korea would be treated as a more equal partner by China and Russia through stronger cooperation with Nato”.
An autonomous future?
Industry insiders are increasingly anxious about what the future might hold for South Korea’s submarine industrial base.
An estimated 100 to 150 core suppliers make up the country’s submarine supply chain, expanding to as many as 300 companies once subcontractors and others are included.
“If left alone, I fear the entire submarine industrial ecosystem could collapse,” said one industry expert, speaking on condition of anonymity.
Large shipbuilders that also build surface warships and commercial vessels are expected to weather any downturn more easily, though smaller, specialised firms may not.

South Korea is planning to build nuclear-powered submarines, but Seoul first needs to renegotiate its nuclear cooperation agreement with Washington and industry officials expect years to pass before any contract materialises.
Experts also note that the industrial base required for nuclear-powered submarines is fundamentally different from that for conventional diesel-electric submarines.
“South Korea’s ambivalent diplomatic stance is also hindering the expansion of its defence exports,” the defence industry expert said.
Lee Il-woo, a senior analyst at the Korea Defence Network, said Seoul could simply place more orders to keep production lines alive, “but the government has shown little interest in procuring more conventional submarines”.
Shin suggested that South Korea’s shipyards could pivot towards large unmanned underwater vehicles instead, drawing on the country’s strengths in artificial intelligence.
“South Korea could gain a first-mover advantage in unmanned submarines, which are likely to become an increasingly important element of maritime security,” he said.


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Why South Korea’s submarine exports are running aground

South Korean submarines take part in a naval fleet review off the southern port city of Busan last year. Photo: AFP

Canada’s Prime Minister Mark Carney announces the winning bid to make 12 submarines for the country’s navy on July 6. Hanwha Ocean was named as the “reserve supplier”. Photo: The Canadian Press/AP

Hanwha Ocean’s shipyard in Geoje, South Gyeongsang province, South Korea. Photo: Korea Times

South Korea’s Dosan Ahn Chang-ho, a KSS-III submarine that was first launched in 2018. Photo: Korea Times

Flags of member states flap in the wind outside Nato headquarters in Brussels earlier this year. Photo: AP

South Korea’s Shin Chaeho submarine, launched in 2021, takes part in a naval fleet review last year. Photo: AFP

South Korea loses Canada submarine deal but cements top-tier defence status

The Royal Canadian navy hosts the South Korean navy’s Dosan Ahn Chang-ho during a welcome ceremony in Esquimalt, British Columbia, on May 25. Photo: The Canadian Press/AP

A bottle of champagne is smashed on the hull of South Korea’s first 3,600 tonne-class naval submarine during a ceremony at the Hanwha Ocean dockyard on October 22, 2025. Photo: Yonhap/EPA

South Korea’s Dosan Ahn Chang-ho and Daejeon frigate are docked at Canadian Forces Base Esquimalt in British Columbia on May 25. Photo: The Canadian Press/AP

Prime Minister Mark Carney announces that Canada has picked Germany’s TKMS to build 12 submarines for its navy at HMC Dockyard in Halifax, Nova Scotia, Canada, on Monday. Photo: Reuters

South Korea set to power US fight for naval dominance amid rising geopolitical tensions

A ship is under construction at Hanwha Ocean’s shipyard in Geoje, South Gyeongsang province. Photo: The Korea Times

US President Donald Trump (left) talks to South Korea’s President Lee Jae Myung (right) and Black Forest Labs CEO Robin Rombach during a G7 summit meeting on June 17. Photo: AP

South Korean President Lee Jae Myung speaks at a christening ceremony for the State of Maine, a national security multi-mission vessel that Hanwha Ocean built for the US Maritime Administration, at the Hanwha Philly Shipyard on August 26, 2025. Photo: Yonhap/EPA

The US Navy’s Arleigh Burke-class destroyer USS Farragut sails past the Statue of Liberty ahead of Independence Day celebration on July 4. Photo: TNS

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After losing bids in Canada and Poland, analysts say Korean shipyards are learning how strategic alignment can trump commercial merit


After losing bids in Canada and Poland, analysts say Korean shipyards are learning how strategic alignment can trump commercial merit.


Why South Korea’s submarine exports are running aground

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}After losing bids in Canada and Poland, analysts say Korean shipyards are learning how strategic alignment can trump commercial merit

After losing bids in Canada and Poland, analysts say Korean shipyards are learning how strategic alignment can trump commercial merit