Defense industry eyes Ahn’s stance as Korea’s $6B warship program hangs in the balance

With Rep. Ahn Gyu-back of the Democratic Party named as President Lee Jae Myung’s first defense minister nominee, Korea’s defense industry is watching closely for clues on the future of a major next-generation warship program.

Democratic Party Rep. Ahn Gyu-back speaks to reporters at the Army Welfare Center in Yongsan District, central Seoul, on June 27. [NEWS1]

With Rep. Ahn Gyu-back of the Democratic Party named as President Lee Jae Myung’s first defense minister nominee, Korea’s defense industry is watching closely for clues on the future of a major next-generation warship program.

At the center of industry attention is the Korea Next-Generation Destroyer (KDDX) project, a 7.8 trillion won ($5.78 billion) plan to domestically produce six 6,000-ton mini Aegis destroyers by 2030. The program is currently a battleground for two major shipbuilders: HD Hyundai Heavy Industries and Hanwha Ocean.

The previous Yoon Suk Yeol administration had aimed to designate a contractor for the design and ship construction phase since December 2023. However, even the construction method has yet to be finalized.

Since the defense minister also chairs the Defense Acquisition Program Promotion Committee, Ahn’s views are expected to be pivotal in determining the project's direction.

“I will make decisions based on principles and standards,” said Ahn in a phone call with the JoongAng Ilbo on Monday. “Fair competition will be the foundation for contractor selection.”

Though general in tone, industry insiders interpret the comment as a possible signal to avoid excessive competition between companies and to reconsider the project’s framework from square one.

“It may imply a willingness to reexamine the entire acquisition method,” said an executive from a shipbuilding firm.

A sole-source contract would favor HD Hyundai, which secured the basic design contract for the KDDX. However, in a competitive bidding process, Hanwha Ocean may gain the upper hand due to Hyundai’s penalty — a 1.8-point deduction in bidding scores — for a previous security breach.

Ahn has previously expressed a preference for competitive bidding in the KDDX project.

“If a sole-source contract is used, Hyundai could dominate the entire program, including ships two through six, which would be a major hurdle for Hanwha,” said one industry executive. “Given Ahn’s emphasis on maintaining a balanced defense industry ecosystem, he may be reluctant to favor one side.”

Still, some observers suggest that Ahn’s position may shift if he formally assumes office. With the KDDX program already delayed by more than a year, opting for a sole-source contract may be the only way to accelerate deployment.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY KIM HYO-SEONG [lim.jeongwon@joongang.co.kr]