[비즈한국] The conflict between HD Hyundai Heavy Industries329180 and Hanwha Ocean042660, which had been engaged in a series of lawsuits and accusations ahead of the selection of a contractor for the detailed design and lead ship construction of the Korean Destroyer Next Generation (KDDX), has come to an end. With both companies withdrawing their complaints against each other, a conciliatory atmosphere has been established on the surface. However, some suggest that the embers of the conflict have not been fully extinguished, as the two companies hold differing views on how to select the KDDX project contractor, and some police investigations remain ongoing.
On the 22nd, Hanwha Ocean withdrew the police complaint it had filed against HD Hyundai Heavy Industries regarding alleged violations of the Military Secret Protection Act. Hanwha Ocean explained, "As the world turns its attention to the South Korean shipbuilding industry, withdrawing the complaint serves the national interest by laying the foundation for mutual complementarity and cooperation, which is necessary to expand exports of marine defense products."
In response, HD Hyundai Heavy Industries also submitted a request to withdraw its complaint against Hanwha Ocean officials on the 25th. HD Hyundai Heavy Industries emphasized, "We decided to withdraw in a broad-minded spirit to promote the development of the domestic shipbuilding industry and strengthen the competitiveness of K-Defense."
The industry believes there is a growing consensus that, given the global shipbuilding market is being threatened by China’s dominance in order volume and the need to secure major overseas projects like the Polish Orka project and the Canadian submarine procurement, the leading domestic shipbuilders must work together. In fact, other maritime defense powerhouses—such as Japan, Germany, and Spain—have all established "One Team" cooperative systems.
Behind the withdrawal of the lawsuits by the two companies, it is rumored that there was a meeting between Kim Dong-kwan, Vice Chairman of Hanwha Group, and Chung Ki-sun, Vice Chairman and CEO of HD Hyundai, who are known to be close friends.
It is reported that both companies plan to actively cooperate with the government's "One Team" strategy to combine their respective warship technologies and research and development (R&D) capabilities to expand K-Defense's reach globally. Accordingly, the first collaboration in the special ships sector between Hanwha Ocean and HD Hyundai Heavy Industries is expected to materialize in the "Canadian Patrol Submarine Project (CPSP)." The Canadian submarine project involves the acquisition of eight to twelve 3,000-ton class submarines.
However, the conflict between Hanwha Ocean and HD Hyundai Heavy Industries has not been completely resolved. With the designation of the KDDX construction contractor postponed until next year, both companies are expected to engage in fierce competition to secure an advantageous position.
Hanwha Ocean has filed an "Application for Designation as a Defense Contractor" with the Ministry of Trade, Industry and Energy to participate in the KDDX detailed design and lead ship construction project. If the ministry accepts this and designates both HD Hyundai Heavy Industries and Hanwha Ocean as eligible contractors, the Defense Acquisition Program Administration (DAPA) will decide later whether to proceed via a private contract or a competitive bidding process.
DAPA stated that it aims to begin the KDDX detailed design and lead ship construction project in the first half of next year. Seok Jong-gun, head of DAPA, said, "Realistically, there is not enough physical time to select a contractor by the end of this year. We will need to do it quickly in the first half of next year."
HD Hyundai Heavy Industries argues that, per standard practice, it should be awarded the contract through a private contract as it was responsible for the basic design. On the other hand, Hanwha Ocean contends that since HD Hyundai Heavy Industries employees were convicted of illegally leaking military secrets, the contract should be put to bid, citing that competition is the fundamental principle of procurement.
HD Hyundai Heavy Industries maintains its stance that Hanwha Ocean should withdraw its application for defense contractor designation and that the project should be handled solely by HD Hyundai. However, it is reported that Hanwha Ocean is open to the "joint development and simultaneous construction" model proposed by DAPA—a method where the design work is shared and the ship construction is conducted together.
Meanwhile, although Hanwha Ocean has withdrawn its complaint against HD Hyundai Heavy Industries, the police investigation is expected to continue, as violation of the Military Secret Protection Act is not a crime subject to the victim's request for punishment, meaning it cannot be dropped simply because the victim does not want prosecution. It is reported that the police, considering Hanwha Ocean’s stance of withdrawing the complaint, will reach a conclusion on the investigation in the near future.
Experts explain that HD Hyundai and Hanwha Ocean must cooperate to meet the delivery schedule for military readiness. Kim Min-seok, a research fellow at the Korea Defense and Security Forum, said, "The moment DAPA sides with a specific company, it faces the burden of legal risk. Since separating the basic design and detailed design contractors can cause project delays, I believe it is appropriate for HD Hyundai to build the first ship. However, considering the damages to Hanwha Ocean, a measure is needed where the two companies consult to achieve both mutual growth and the delivery timeline for military readiness."