South Korean Shipbuilders Explore Overseas Production Sites to Tackle Manpower Shortage, Yet Face Concerns Over Possible Technology Leakage.
Hyundai Heavy Industries Expands
According to industry sources on Nov. 28, HD Hyundai Heavy Industries is scheduled to begin trial operations of the IMI shipyard, established in collaboration with a local company in Saudi Arabia, starting this month. The IMI aims to be in full operation by the second half of next year. HD Hyundai Heavy Industries is also planning to establish an additional ship engine factory in the vicinity.
HD Hyundai Heavy Industries is also considering leasing the Subic Shipyard in the Philippines. The company has secured a contract to build a total of 10 vessels in the Philippines, including two escort ships, two patrol frigates, and six offshore patrol vessels. The maintenance and upkeep of these vessels will be carried out at the Subic Shipyard.
Overseas Expansion
Hanwha Ocean passed the proposal to establish its U.S. subsidiary, Hanwha Ocean USA Holdings, in a board meeting in September. The U.S. subsidiary will play a role in exploring production bases with a focus on the North American region in the future. Recently, there have been rumors about the potential acquisition by Hanwha Ocean of Philly Shipyard in the United States.
The reason overseas expansion is actively being considered is due to the specific labor shortages prevalent in the shipbuilding industry. The domestic shipbuilding industry is making efforts to expand its workforce to handle a workload spanning the next three to four years, but it continues to grapple with chronic labor shortages and consistently appeals for solutions.
Shipbuilding Workforce Expands
According to the Ministry of Trade, Industry, and Energy, domestic shipbuilding companies hired 14,359 employees by the third quarter of this year, surpassing the initially targeted figure of 14,000. It is noteworthy that 85.9 percent of the new hires are foreign workers and the industry is still facing challenges due to a shortage of skilled workers.
A prominent example of an overseas shipyard success story is Hyundai Vietnam Shipbuilding, a joint venture established in 1996 by Hyundai Mipo Dockyard and the state-run Vietnam Shipbuilding Industry Group (Vinashin). Initially established as a ship repair facility, Hyundai Vietnam Shipbuilding transitioned to shipbuilding after providing its employees with over a decade of skill development. Since 2010, the company has secured contracts for more than 200 vessels, experiencing remarkable growth and establishing itself as the largest shipyard in Southeast Asia. It reported a revenue of 700 billion won (US$540.54 million) last year.
Hyundai Vietnam Shipbuilding’s
The key to success lies in adopting a long-term perspective rather than aiming for short-term operations. Hyundai Vietnam Shipbuilding focused on nurturing local skilled workers over an extended period. Furthermore, Hyundai Mipo Dockyard’s active involvement in process management, design, and allocation for new vessels played a crucial role in minimizing risks and contributing to the success of the venture.
The industry anticipates that the overseas shipyard construction boom will continue for the foreseeable future. Many believe that it is inevitable to consider overseas expansion during prosperous periods to ensure the growth of the South Korean shipbuilding industry in the future. With the ongoing challenges of a low birth rate and an aging population, the labor shortage is expected to deepen, and labor costs are likely to rise. This makes it increasingly challenging to sustain domestic shipyard operations in South Korea.
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Source: Business Korea
