Hanwha Group Vice Chairman Kim Dong-kwan, left, talks with HD Hyundai Executive Vice Chairman Chung Ki-sun before President Yoon Suk Yeol's meeting with Busan residents at Busan Port International Exhibition & Convention Center in this December 2023 photo. Newsis

Expectations are rising that the recent reconciliation between HD Hyundai Heavy Industries (HHI) and Hanwha Ocean could lead the Royal Canadian Navy to place an order with one of them to build 12 submarines, worth 60 billion Canadian dollars ($43 billion), to replace its aging fleet.

The likelihood of one of them winning the order and collaborating with the other to build the submarines has increased further after Japan reportedly decided to withdraw its bid.

Last Thursday, Defense Acquisition Program Administration (DAPA) Minister Seok Jong-gun told lawmakers in a meeting at the National Assembly that the state arms procurement agency will make sure that HD HHI and Hanwha Ocean team up for the Canadian submarine bid.

An illustration of HD Hyundai Heavy Industries' KSS-III CA submarine designed for the Royal Canadian Navy / Courtesy of HD Hyundai

Attributing the recent failure to join the Australian frigate project to the fierce rivalry between the two Korean shipbuilders, the minister also told reporters last Tuesday that he will meet their CEOs on Dec. 17 to ask them to cooperate with each other for the Canadian submarine project.

His remarks came after the two companies stopped their legal battle over HD HHI not being excluded from a project to construct the ROK Navy's next-generation destroyers, even though its employees were found guilty of stealing destroyer design data from Daewoo Shipbuilding & Marine Engineering, now renamed Hanwha Ocean.

Before dropping the lawsuits against each other, HD HHI and Hanwha Ocean had even competed in introducing each of their submarine technologies to Vice Adm. Angus Topshee, the commander of the Royal Canadian Navy, who visited Korea last month to look around their shipyards.

Both shipbuilders cited national interests as the reason for their decisions.

"We hope our decision will boost cooperation among domestic shipbuilders and lead to increased naval vessel exports," HD HHI said.

Hanwha Ocean said that it believes withdrawing the complaint is the right action for serving the national interests, given the necessity of deploying next-generation Aegis destroyers in a timely manner and expanding Korea's defense exports.

Vice Adm. Angus Topshee, fourth from left, the commander of the Royal Canadian Navy, poses with Hanwha Ocean officials at the company's shipyard on Geoje Island, South Gyeongsang Province, Nov. 10. Courtesy of Hanwha Ocean

When the Australian Navy shortlisted Japan's Mitsubishi Heavy Industries and Germany's ThyssenKrupp Marine Systems last month for the 11 billion Australian dollar ($7.25 billion) project to build a new fleet of general-purpose frigates, industry experts pointed out that the legal battle between the Korean shipbuilders led them to expose their weaknesses, despite their ability to supply high-performance warships at lower prices.

"Both Japan and Germany were able to make all-out efforts for the project, responding to Australia's request to develop its western industrial facilities," said Moon Keun-sik, a professor of Hanyang University Graduate School of Public Policy who was formerly a Republic of Korea Navy submarine commander.

The DAPA minister also said that defense companies sometimes need to cooperate with each other, when their competition goes against the national interests.

"The government will contemplate how to help in winning the Canadian submarine project," he said.

On Nov. 21, The Hill Times reported that Japanese companies decided not to take part in the procurement bid for the Royal Canadian Navy's new submarines.

Citing the Japanese Embassy in Ottawa, the Canadian newspaper reported that multiple other sourced informed that Mitsubishi will not be putting forward the Taigei-class submarine as a potential replacement for Canada's fleet of Victoria-class submarines.

As a result, Korea's in-service submarines have been mentioned as faster options to replace the Canadian fleet than those of Germany and Sweden.

"Considering the deadline for delivery and the capability of sailing under the Pacific Ocean to contain China's expansion, it is highly likely that Hanwha Ocean or HD HHI will receive the order," SK Securities analyst Han Seung-han said.