South Korean defense and shipbuilding firms Hanwha System and Hanwha Ocean concluded a $100 million acquisition deal of Philly Shipyard, a shipbuilding company owned by a Norwegian firm.
Philly Shipyard, a US shipbuilder in Philadelphia, Pennsylvania, announced an agreement on June 20th, 2024, with South Korean defense and shipbuilding firms Hanwha System and Hanwha Ocean. Under the agreement, the two South Korean companies will split the $100 million purchase to acquire Philly Shipyard from its current owner Aker ASA, a Norwegian industrial investment company that currently holds approximately 60% of Philly Shipyard’s shares. This acquisition underscores the increasing presence of Asian companies in the global shipbuilding markets and potentially positions the Hanwha Group to be a key player in the US shipbuilding industry in the future.
Following this announcement, Hanwha Group revealed plans to convert Philly Shipyard into a key dry dock facility dedicated to shipbuilding, maintenance, repair, and operations. This transformation allows the Hanwha Group to support demands from the US Navy’s shipbuilding markets, reinforcing the company’s strategic presence in maritime and defense industries. As Hanwha System aims to diversify its portfolio, developing special-purpose ships and leveraging advanced naval technologies to produce autonomous commercial vessels remains at the top of the company’s priority list. Meanwhile, Hanwha Ocean plans to establish an overseas production base for its revenue streams. By capitalizing on Philly Shipyard's renowned strengths in medium-sized tankers and containerships, Hanwha Ocean will be able to enhance its production in these areas.
Established in 1997, the Philly Shipyard specializes in constructing commercial vessels, container vessels, and tankers that comply with the Jones Act, which restricts maritime shipments between US ports to be exclusively transported by vessels built, owned, crewed, and registered in the United States. As a leading US shipbuilder, the Philly Shipyard has delivered over 50% of the country’s petrochemical vessels and containerships and has produced around 50% of all large commercial vessels compliant under the Jones Act since 2003. Beyond its contributions to the commercial sector, the shipyard has been bolstering national security and maritime infrastructure through numerous government projects, including a recent contract to build five National Security Multi-Mission Vessels (NSMVs) for the US Maritime Administration (MARAD).
The rich history between Philadelphia and the US Navy traces back to the 18th century. The city served as the birthplace of the Department of Navy and as a prominent shipbuilding center for private entities and corporate industrial firms for centuries. However, as US shipbuilding markets substantially declined over the years, major shipyards in the city such as the Philadelphia Naval Shipyard—once the backbone of the US Navy during World War I—ceased operations in 1995. Despite a significant downturn in the shipbuilding industry over the decades, the ties between Philadelphia and the US Navy endure, with the Department of Navy maintaining its presence through the Naval Support Activity and the Naval Surface Warfare Center Ship Systems Engineering Station. The Philly Shipyard further contributes to this legacy by operating on parts of the former site of the US Navy Shipyard, ensuring that Pennsylvania remains a critical hub for US maritime and naval activities.
Philly Shipyard also has a long history of collaboration with South Korean companies. From 2005-2017, 22 Philly Shipyard’s commercial vessels received design and procurement support from HD Hyundai Heavy Industries Co., Ltd. (HHI), one of South Korea’s leading shipbuilders. The collaboration was further bolstered in April 2024 after the Philly Shipyard and HHI signed a Memorandum of Understanding (MoU). This agreement not only reaffirmed their commitment to joint efforts but also positively impacted the economy by generating an additional 1,000 jobs for the Philly Shipyard’s facility.
The $100 million acquisition followed a visit by US Secretary of the Navy Carlos del Toro to South Korea in February 2024, during which he toured Hanwha Ocean’s shipyard facility and promoted the new “maritime statecraft” initiative. This initiative encompasses strategic measures to enhance comprehensive US and allied maritime power through various channels, particularly amid “intensifying inter-state competition” with China. Del Toro’s discussion with Hanwha’s executives led to an agreement to attract South Korean investment into integrated commercial and naval shipbuilding sites in the United States. To del Toro, this bilateral collaboration is a critical maneuver to rebuild US maritime capability and underscores the pivotal role of international partnerships in the face of global competition. Over the years, del Toro has spearheaded efforts to rebuild US maritime strength by fostering business collaborations with leading global shipbuilders, such as those in South Korea, employing strategies beyond military expansions.
With its long-standing relationship with the US Navy, Philadelphia plays a crucial role in shaping the future of the US shipbuilding industry. Hanwha Group’s acquisition of Philly Shipyard makes an essential move in its strategy to achieve new growth opportunities and establish a strong international foothold in the US market. The collaboration between Hanwha Systems and Hanwha Ocean lead to significant business synergies, positioning South Korea as a cornerstone in the global marine market. This development will further enhance international trade and business cooperation for Philadelphia, solidifying the city’s status as a major hub in the maritime industry.
Aom Boonphatthanasoonthorn is a Summer 2024 Young Professional at the East-West Center in Washington. She is pursuing a master’s degree in public policy with a national security certificate at the Howard H. Baker Jr. School of Public Policy and Public Affairs at the University of Tennessee, Knoxville