Hanwha Ocean’s shipbuilding base in Geoje, South Gyeongsang Province (Hanwha Ocean)

Hanwha Ocean said Friday it withdrew its police complaint against rival HD Hyundai concerning the bidding process for the 8 trillion won ($5.7 billion) next-generation Korean destroyer (KDDX) project.

In March this year, the shipbuilder filed a complaint requesting an investigation into HD Hyundai executives’ involvement in leaking Hanwha Ocean’s confidential materials related to the KDDX bid, hosted by the Defense Acquisition Program Administration, in 2013. Nine HD Hyundai employees were found guilty of violating the Military Secret Protection Act in 2022 and last year.

“(The decision was made) to ensure timely development of the next-gen Aegis destroyers to secure marine defense capabilities," Hanwha Ocean stated. "And at a time when all eyes are on Korea’s (fast-growing) shipbuilding industry, we believe that it is in the national interest to forgo the complaint and strengthen mutual support and cooperation.”

The company added that considering China’s aggressive investments in the global markets, it is crucial for shipbuilders to build trust and ramp up the domestic industry’s competitiveness.

Following Hanwha Ocean’s announcement, HD Hyundai issued a statement later in the day and noted, “It has been confirmed multiple times that HD Hyundai was selected as the primary contractor for designing the KDDX through fair and legal procedures. Although the withdrawal of the complaint came later than expected, we welcome Hanwha Ocean’s decision.”

“Given the significant delays in the KDDX project, we hope that Hanwha Ocean would also withdraw its defense contractor application so that the KDDX project can go forward in compliance with the law and principles,” it explained.

In a retaliative move, Hanwha Ocean applied for the Ministry of Trade, Industry and Energy’s KDDX contractor designation process this year. Although the Defense Acquisition Program Administration is responsible for the overall project, the industry ministry must officially designate the shipbuilding contractor. Should the ministry select HD Hyundai, the company would be responsible for both designing and constructing the destroyer. However, if Hanwha Ocean were to win, the Defense Acquisition Program Administration would need to open another bid to finalize the ship’s construction contractor.

“Since 2006, the industry ministry has designated the contractor who won the DAPA bidding. In this case, it should be HD Hyundai. Although Hanwha Ocean has not yet withdrawn its application, we think the company, to some extent, gave up its right to participate in the bid after withdrawing the police complaint,” said an industry source on condition of anonymity.

Industry watchers say Hanwha Ocean’s step back came after discussions between Hanwha Group Vice Chairman Kim Dong-kwan and HD Hyundai Executive Vice Chairman Chung Ki-sun, aiming to leverage emerging business opportunities anticipated with the upcoming Donald Trump administration. Trump spoke with South Korean President Yoon Suk Yeol on further boosting cooperation between the US and Korea’s marine and defense industries.