Only Asia can help America counter China’s shipbuilding prowess

AT THE Ulsan shipyard on the south-eastern coast of South Korea, vessels are assembled like Lego. Hulking cranes stack huge blocks of bent steel, which are then notched together into a seamless whole. HD Hyundai Heavy Industries (HHI), which owns the yard, has perfected this art. As the world’s largest shipyard, Ulsan produces 40-50 modern ships every year, from gas tankers to destroyers. Shipbuilders like HHI are key to a crucial arena of competition between America and China in the Indo-Pacific.

While America’s shipbuilding industry has sunk, China’s has steamed ahead to become the world’s largest. Chinese shipbuilders account for over 50% of all merchant tonnage produced globally, up from 5% in the late 1990s. America’s make just 0.1%. China’s naval shipbuilding capacity is now more than 230 times greater than America’s; its navy has more ships than any other in the world. The size of America’s naval fleet has decreased by half since the end of the cold war. “We thought, ‘Oh, the end of history, we don’t need this anymore,’” says Brent Sadler of the Heritage Foundation, an American think-tank.

America’s allies in East Asia could help counter the Chinese build-up. South Korea and Japan are home to the world’s second- and third-largest shipbuilding industries, accounting respectively for 28% and 15% of global production. Shipyards there have cutting-edge technology. The firms that run them built industrial clusters with robust supply chains: Ulsan is also home to the world’s largest ship engine-maker. Shipyards in South Korea and Japan are “21st-century” enterprises, Mike Waltz, America’s national security adviser, said in September when still a congressman from Florida. “You go to some of ours—it looks like it hasn’t changed since the 1930s.”

Officials around the region are keen to work with America. Doing so is good business for their industries, and potential investments in American shipyards could also be good politics. In recent years America has grown more open to the idea. Last year Joe Biden’s secretary of the navy, Carlos Del Toro, visited the Ulsan yard, along with others in South Korea and Japan. A focus on shipbuilding may be an area of continuity with President Donald Trump’s administration, even with America’s more protectionist turn. On the first call between Mr Trump and South Korea’s president, shipbuilding was a big topic. (Shares of South Korean shipbuilders such as HHI jumped afterwards.)

But to fully unlock the potential, protectionist laws that limit where America builds and repairs its ships need to be revised. The Jones Act has, since the 1920s, mandated that all American domestic maritime cargo travel on ships that are American-built, owned, flagged and operated. Naval procurement rules prevent acquiring warships from overseas (at least without a presidential waiver) and limit the kinds of repairs that can be done at foreign yards. Any changes are politically fraught. How America handles the tension between two competing imperatives—the need to work with allies to counter China, and the desire to protect domestic industries—will help determine the balance of maritime power.

Allied shipbuilding collaboration could take several forms. One is enticing industrial behemoths in South Korea and Japan to help revive American shipyards. Last year Hanwha, another big South Korean conglomerate, bought Philly Shipyard, an ageing facility in Pennsylvania, the first such investment by a South Korean firm. Mr Del Toro hailed the acquisition as “game-changing”. Other Asian shipbuilders are exploring similar moves.

Yet getting outdated American shipyards up to scratch will take “lots of investment and lots of time”, says Jeong Woo-maan of HHI. Without a robust commercial shipbuilding industry, supply chains are undeveloped. Training workers to make advanced modern vessels takes years. “Some people think it will be world war two all over again, with Rosie the Riveter just taking up a wrench,” says Colin Grabow of the Cato Institute, an American think-tank. “But it won’t—these are incredibly specialised skill sets.” America’s decision to block Nippon Steel, a Japanese firm, from acquiring US Steel, an American one, will also make potential investors think twice.

Another option is tapping Asian shipyards for what is known in the trade as “MRO” (maintenance, repair and overhaul). Proponents argue that moving more MRO to friendly nations’ yards could free up American ones to focus on building new ships, and would keep American vessels closer to the theatres where they are deployed. Hanwha and HHI have both signed “master ship repair agreements”, which allow them to bid for American naval jobs. Three Indian shipyards have also inked similar agreements. When Mr Biden visited India in 2023, both countries committed to advancing India as “a hub for the maintenance and repair of forward-deployed US Navy assets”. Such work tends to be limited to non-combatant ships. But Japan has found ways to assuage the security concerns related to sensitive vessels. Japanese workers help maintain American warships deployed to bases in Japan.

Some hope that collaboration on MRO will eventually lead to more direct co-production. America’s entire shipbuilding industry produces two destroyers annually, while HHI can produce two per year at just one of Ulsan’s ten dry docks, Mr Jeong notes. Why not have South Korea build ships for the American navy? In private, some senior American military officials salivate over the prospect.

Despite this, progress has been slow. Vested interests fiercely resist change. Last year Matthew Paxton, president of the Shipbuilders Council of America, claimed that America had enough capacity to build combatant and logistics ships and to meet the navy’s maintenance needs and yet it was “looking abroad for ship maintenance”. “These efforts are driving lay-offs to the very domestic workforce navy leadership says it wants to preserve,” he wrote. After the initial rush of activity, no American navy ship has undergone work in India since July 2023.

Another stumbling block is manpower. American shipyards struggle to attract workers, while the population in both South Korea and Japan is shrinking. Blue-collar industries there already depend on foreign workers, mostly from South-East Asia: roughly 15% of South Korea’s shipbuilding workforce is foreign. Large-scale immigration is politically unpalatable in both countries. More automation can help, but a lack of labour would still limit any attempts to boost production.

Several recent bills introduced in America’s Congress seek to remedy some of the problems in its maritime industry. Earlier this month, two Republican senators from land-locked Utah introduced legislation that would make it possible to build naval ships and their components in the shipyards of treaty allies.

The Shipbuilding and Harbour Infrastructure for Prosperity and Security Act, a bipartisan bill introduced last December that aims to revitalise American shipbuilding, stands a much better chance of passing. “But it is fundamentally a strategy of American renewal—there’s not much about allies and partners,” says Peter Lee of the Asan Institute, a think-tank in South Korea. “It’s not a two-player game, the sooner America wakes up to that, the faster they can address the challenge.” ■