PHILADELPHIA, PA — After finalizing its $100 million acquisition of Philly Shipyard in December, South Korean conglomerate Hanwha aims to begin building and delivering non-combatant auxiliary vessels to the U.S. Navy within the next decade as part of a 10-year plan to expand military and commercial business at the historic yard.
Hanwha Philly Shipyard will look to increase its annual output from a rate of one to one-and-a-half vessels today, to six-to-10 vessels per year within the next decade, according to CEO David Kim, who said the company plans to spend “multiple times” the $100 million purchase price on infrastructure upgrades in the coming years.
“Ultimately, we do want to build combatant vessels. But we know that there can be different ways of how you get there,” Kim told Inside Defense this week during a tour of the facility. “There’s a whole set of auxiliary support vessels that are very important, that also need to get replaced or added.”
Auxiliary vessels like oilers, tankers and tenders — used by the Navy to fuel, supply, maintain and otherwise support its warships and submarines — share similarities with the commercial ships the yard is accustomed to making, Kim continued. The company is in discussions with the Navy about multiple undisclosed auxiliary shipbuilding programs, he said.
In the future, Hanwha may look to build unmanned vessels, though it is still evaluating how this work might fit into its business model. The company is also interested in performing module fabrication work for warship and submarine programs in collaboration with other shipbuilders.
Under its previous owner, Norwegian investment group Anker ASA, Philly Shipyard primarily built tanker ships, and its current work consists of commercial and non-military government vessels. It has a backlog of seven ships: three National Security Multi-Mission Vessels (NSMVs) for the U.S. Maritime Administration, three commercial liquid natural gas-fueled containerships and a single commercial subsea rock installation vessel.
Productivity improvements
Under the joint ownership of Hanwha Systems and Hanwha Ocean — Hanwha’s defense- and shipbuilding-focused business groups — the yard is in the early stages of a 10-year plan to “revitalize” production via a series of infrastructure upgrades and productivity improvement measures, Kim said.
During the July 16 tour, one of Philly Shipyard’s two drydocks was occupied by NSMV vessel The Lone Star State, which will soon deliver to MARAD’s training academy in Texas.
This drydock — referred to as dock No. 5 — is currently suitable only for finishing work on nearly complete vessels. But the dock and its supporting infrastructure are expected to absorb a substantial modernization investment from Hanwha to prepare it for new vessel construction, Kim said.
To reach production goals, the shipyard must also increase its workforce by roughly 3,000 personnel over the coming decade, Kim said. Presently, a mix of about 1,800 employees and subcontractors are working in the yard, up from the 1,200 personnel present when Hanwha took over seven months ago.
Under Hanwha, the yard is working to scale up a preexisting apprenticeship program that provides a three-year curriculum in shipbuilding trades to prepare students for work in the yard. The program has grown to 120 apprentices this year and is expected to double in size to 240 apprentices by 2027.
Most of the yard’s employees are from the U.S., with many coming from the immediate surrounding area. However, a small group of about 50 South Korean shipbuilders are on rotation at Philly Shipyard to provide training and expertise from Korean yards, which dwarf the U.S. when it comes to commercial shipbuilding capacity.
The expertise from Hanwha’s Geoje yard on the southern end of Korea, which can produce 40 ships per year, will be critical to scaling up production at Philly Shipyard, Kim said.
The demand signal
Under Hanwha’s ownership, Philly Shipyard has become the first South Korean-owned yard on U.S. soil to attempt to enter the domestic military shipbuilding market.
This acquisition, which was encouraged by Navy leadership in both the Biden and Trump administrations, is significant because the handful of existing U.S. shipbuilders are struggling to keep up with the Navy’s demand and South Korea is viewed as a shipbuilding powerhouse with the capital and expertise to lift U.S. production.
According to Kim, Hanwha’s decision to enter the market is part of the company’s “globalization growth strategy,” based in part on the assumption that the U.S. Navy’s demand for warships will be strong for decades to come.
Shipbuilding has received increased national attention since President Trump took office. In the early days of his second term, the president promised a trillion-dollar defense budget, established a White House shipbuilding office and signed an executive order on “restoring America’s maritime dominance” intended to accompany the pending SHIPS for America Act.
However, the demand signal has waned in recent weeks after the administration put most of its fiscal year 2026 shipbuilding funding in the one-time budget reconciliation package and the shipbuilding office was abruptly transferred from the National Security Council to the Office of Management and Budget.
Despite these developments, Hanwha remains confident, Kim said. The company is betting long-term shipbuilding demand will remain strong, given the Pentagon’s stated focus on deterring China and preparing for a potential maritime-centric conflict in the Indo-Pacific.
“We were already talking to the Philly Shipyard at the time before the SHIPS Act came out, before Trump was elected,” Kim said. “We were already seeing this as part of our globalization growth strategy, and it just happened to be that some of these other things came into place that reaffirm what we saw in the opportunity but also provided some additional tailwinds.”
Originally published Inside Defense
