Making ships like chips: US taps Japan, S. Korea to counter Chinese naval dominance

TOKYO/SEOUL – Will ships, like chips, become a major battleground for great power supremacy?

The United States, whose shipbuilding industry now has a virtually non-existent global market share of 0.1 per cent, desperately wants to make up lost ground on China.

The catch: China commands a whopping 53.3 per cent market share, up from below 5 per cent in 2000.

US President Donald Trump told a joint session of Congress in March that he wants to “resurrect the American shipbuilding industry”, including commercial and military shipbuilding, to boost the country’s defence industrial base.

Given its limitations, however, the US is seeking to corral support from its East Asian security allies Japan and South Korea, which are major shipbuilding nations with 13.1 per cent and 29.1 per cent of the global shipbuilding market respectively. They are also already working with the US Navy on the maintenance, repair and overhaul of its vessels.

Indeed, the Pentagon had already begun wooing shipbuilders in South Korea as early as in February 2024, under the administration of then President Joe Biden, when then US Navy Secretary Carlos Del Toro visited South Korean shipyards and urged them to invest in America.

In a strong signal of the intent to rejuvenate the US’ shipbuilding industry with the help of allies under the Trump administration, US Navy Secretary John Phelan visited Tokyo and Seoul from April 27 to 30, his first trip overseas after his appointment in March.

There are parallels between this latest endeavour and US ambitions to curtail Chinese development of high-end semiconductors – and, by extension, artificial intelligence prowess.

The American effort on chips has been backed by its allies, which have, among other things, restricted exports of advanced chips and chipmaking equipment to China in the name of “economic security”.

On the US’ reason for reviving its shipbuilding industry, Dr Bence Nemeth of the Defence Studies Department at King’s College London said: “While shipbuilding capacity does not directly translate to naval power, it remains one of its critical foundations.”

While US naval technology remains more advanced, its qualitative edge is “narrowing quickly” as China pulls ahead in sheer numbers, he told The Straits Times.

Dr Heng Yee Kuang of the University of Tokyo’s Graduate School of Public Policy said the US and its allies are “relearning old lessons from the Ukraine war that ‘quantity has a quality of its own’.”

But unlike the Ukraine war, which is a land battle, a conflict in the Indo-Pacific would be fought in the high seas.

As such, Dr Heng observed: “Rather than boots on the ground, what (the late US diplomat) Richard Armitage once called ‘hulls in the water’ is badly needed in the Indo-Pacific, where China not only has numerical advantages but their warships gain in firepower as well.”

Exploratory talks

Just what form the support from allies will take, however, remains murky.

During Mr Phelan’s trip to Japan and South Korea, he visited shipyards and held exploratory talks with defence officials on shipbuilding cooperation.

As pointed out during his nomination hearing in February, the US Navy’s 287 military ships are far below the country’s statutory requirement of 355 vessels. All major shipbuilding programmes are suffering significant delays.

By contrast, China, home to the world’s largest navy, has more than 370 ships and submarines, and is on track to reach 425 warships by 2030. 

China has not been shy in demonstrating its naval superiority. For example, it has staged blockade drills around Taiwanese waters.

Dr Satoru Nagao, a non-resident fellow at the Washington-based Hudson Institute, told ST that Beijing has demonstrated its ability to choke logistical supply chains.

The US’ lack of numerical advantage, he said, would not only project weakened deterrence by Washington, but also hurt its ability to respond to a conflict in the Indo-Pacific, since warships will be needed to transport everything from anti-missile systems to soldiers to supplies.

China’s numbers also do not take into account how the commercial ships that it builds and owns are of “dual use”.

This means the vessels can be repurposed quickly for military use during wars, as they are built to the standards of the People’s Liberation Army, say researchers from the Centre for Strategic and International Studies in a March report.

“The country’s largest state-owned shipbuilder built more commercial vessels by tonnage in 2024 than the entire US shipbuilding industry has built since the end of World War II,” the American think-tank said.

Indeed, the disparity in the US’ commercial fleet strength is much larger than that of their military fleets: The US has 185 seafaring commercial vessels compared with China’s 5,500.

Japan’s Nikkei newspaper cited Mr Phelan as saying in an exclusive interview ahead of his trip that he would pitch the idea of employing dual-use shipbuilding to Tokyo to boost joint capacity and ensure deterrence against China.

“One of the things I’ve noticed, studying the Chinese navy and the Chinese shipbuilding industry, is they design their commercial ships with a military application in mind,” he was quoted as saying. “I don’t think we’re doing a similar sort of thing.”

However, he clarified in Tokyo on April 29 that it was not intended as a formal pitch, but rather, “something that we needed to be looking at ourselves and thinking about from the commercial shipbuilding side”.

He also noted, without elaborating, “constraints” on what can be done with shipbuilding in Japan.

Japanese Defence Minister Gen Nakatani, too, said that there were “no concrete discussions” on shipbuilding.

He added, however, that Tokyo was receptive “if it contributes to strengthening the defence production and technological base of both countries and improving deterrence and response capabilities of the alliance”.

But over in Seoul, Mr Han Duck-soo, then Acting President of South Korea, and Mr Phelan expressed “deep agreement” to strengthen shipbuilding cooperation between their two countries, both to improve the US Navy’s readiness posture and rebuild the US’ shipbuilding industry.

What next?

The difference in attitudes is unsurprising, given that South Korea has been more aggressive in using its shipbuilding dominance as strategic leverage in its ongoing tariff negotiations with the US.

Japan prefers to keep the issues of trade and security separate.

South Korea has already made its first moves. In December 2024, shipbuilder Hanwha Ocean bought a major US shipyard in Philadelphia for US$100 million (S$129 million), becoming the first South Korean shipbuilder to acquire a US shipyard.

Hanwha Ocean’s head of naval ship global business, Mr Steve S.K. Jeong, was quoted by Reuters in a report on May 5 as saying: “We are looking to modernise facilities, train and equip workers, and bring in our manufacturing process that can build the same ship in, I think, two-thirds the time or less as that of a US shipyard.”

Further, on April 7, HD Hyundai Heavy Industries signed a deal with US military shipbuilder Huntington Ingalls to explore opportunities for the Korean company to work jointly with Huntington on commercial and defence projects.

Yet, experts also noted several obstacles that lie in store as the US seeks the help of its allies to challenge Chinese dominance.

First, China’s shipbuilding supremacy is not accidental: It tops the world in steel production.

But America’s steel industry, like its shipbuilding sector, is fading. An acquisition bid by Japan’s largest steelmaker Nippon Steel to revitalise US Steel has run aground due to opposition from Washington, while talks on Nippon Steel investing in the ailing behemoth – a move agreed on by the two governments in February – have stalled.

Second, there is a chronic shipbuilding labour shortage, especially in South Korea, where the shortfall is estimated at 12,000 workers a year. To plug the gap, the government is tapping migrant labour.

There is also a wide gulf between the shipbuilding capacity of China and that of South Korea and Japan. In 2023, Chinese shipbuilders produced 32.86 million gross tonnage, while South Korean shipbuilders completed 18.3 million gross tonnage and Japan, 9.9 million gross tonnage.

Another challenge is the possibility of China responding to the US’ naval cooperation with its allies with assertive defence posturing, such as sending aircraft or ships around South Korean and Japanese airspace and waters, said Dr James Kim of the Washington-based Korea Economic Institute of America.

It could also exert economic pressure by ramping up trade restrictions, he told ST.

On the other hand, Dr Tosh Minohara of the Kobe-based Research Institute for Indo-Pacific Affairs wondered if it made commercial sense for Japan or South Korea to build merchant ships to the specifications of the military. It would be more productive, he said, for the allies to work together to create next-generation warships – just as how Japan, Britain and Italy are cooperating to build a next-generation fighter jet.

Regardless, Dr Nemeth of King’s College London believes it is probably a stretch to describe the shipbuilding developments as a “ship war”, in the same way as a “chip war”.

While naval capability is at the core of US-China strategic rivalry today, naval competition between great powers is hardly new, having been a core element of geopolitics for centuries, he noted.

He pointed out that despite the US’ more advanced naval technologies, the gulf in shipbuilding capacities is simply too large to be bridged easily. China’s capacity is estimated to be roughly 230 times greater than that of the US. 

“China’s shipbuilding advantage is so large that even with Japanese and South Korean help, it would take the US at least a decade, if not more, to close the numerical gap meaningfully,” he added.