Facing increasing geopolitical pressure from the United States on China’s shipbuilding industry, South Korean shipbuilding giant Samsung Heavy Industries is accelerating the adjustment of its global production capacity layout, striving to build a more autonomous and flexible global shipbuilding system and gradually reduce its “outsourcing dependence” on Chinese construction resources.
Building Oil Tankers for Samsung Heavy Industries! HSG Sungdong Shipbuilding Resumes Full-Ship Construction
On July 4, Samsung Heavy Industries signed a “Strategic Business Agreement (MOU) for Building a Mutual Growth and Symbiosis Model” with HSG Sungdong Shipbuilding (formerly Sungdong Shipbuilding) and Kunhwa Company, officially launching the construction of a symbiotic (meaning “mutual dependence and mutual promotion”) cooperation ecosystem with domestic South Korean small and medium-sized shipbuilding partners (subcontractors).
Under the agreement, Samsung Heavy Industries will entrust HSG Sungdong Shipbuilding with the full-ship construction of oil tankers and commission Kunhwa to manufacture large blocks for LNG carriers. Through this measure, local small and medium-sized shipbuilders will secure stable workloads while gaining opportunities to improve their technical capabilities, and Samsung Heavy Industries will establish a symbiotic cooperation model to enhance competitiveness by improving project efficiency.
Samsung Heavy Industries plans to use this agreement as a starting point to establish long-term, sustainable cooperation systems with regional small and medium-sized partners. Industry insiders in South Korea believe this will enhance the overall competitiveness of the country’s shipbuilding industry while contributing to revitalizing the economy of the Gyeongsangnam-do region, where Samsung Heavy Industries’ Geoje Shipyard is located.
Lee Wang-geun, head of Samsung Heavy Industries’ Geoje Shipyard, emphasized: “To achieve symbiosis with small and medium-sized partners, Samsung Heavy Industries will build a cooperative ecosystem, strengthen global order competitiveness, and develop into a growth model representing K-shipbuilding.”
Through this cooperation, HSG Sungdong Shipbuilding is expected to return to the full-ship construction market. After delivering the last ship in its order backlog in 2017, the shipyard has been engaged in block manufacturing and ship repair operations.
It is understood that HSG Sungdong Shipbuilding’s predecessor, Sungdong Shipbuilding, was located in the Gwangdo-myeon Andeong National Industrial Complex in Tongyeong City, Gyeongsangnam-do. It entered the shipbuilding market in 2004, and by 2007, its order backlog ranked eighth globally, making it one of South Korea’s leading mid-sized shipbuilders. However, due to insufficient orders and derivative trading losses following the 2008 international financial crisis, Sungdong Shipbuilding began facing financial difficulties in 2010. In April 2010, it signed a voluntary restructuring agreement with creditors.
Since 2010, Sungdong Shipbuilding has received nearly 4 trillion KRW (approximately $3.74 billion) in capital injections, including 2.5 trillion KRW in loans and 1.5 trillion KRW in debt-to-equity swaps. Among these, its main creditor, the Export-Import Bank of Korea, provided 2.1 trillion KRW in loans and converted 1 trillion KRW in debt into equity.
Since November 2017, Sungdong Shipbuilding has failed to secure any new ship orders. In early March 2018, the South Korean government decided that Sungdong Shipbuilding would apply for court receivership rather than bankruptcy liquidation. The government recommended that the court maintain the shipyard’s operations but shift its business scope to repairs, block assembly, or hull block construction.
In October 2018, Sungdong Shipbuilding was put up for sale, but three consecutive attempts failed. After creditor evaluations, the shipyard applied for corporate rehabilitation in April 2019. In November 2019, Sungdong Shipbuilding launched a fourth sale tender and was eventually sold for 200 billion KRW—far below the industry’s earlier estimate of 310 billion KRW.
In March 2020, Sungdong Shipbuilding was acquired by South Korea’s HSG Heavy Industries and private equity fund (PEF) operator Curious Partners, along with co-operator LK, for 200 billion KRW (approximately $173 million). The share structure was as follows: financial investor (FI) Curious Partners and LK jointly raised 150 billion KRW, while strategic investor (SI) HSG Heavy Industries invested 50 billion KRW.
After being renamed HSG Sungdong Shipbuilding, the company exited the full-ship construction business and shifted to block manufacturing and ship repair operations.
HSG Heavy Industries is a company specializing in the manufacturing and processing of marine components, with over 30 years of experience in marine equipment and offshore engineering. After acquiring Sungdong Shipbuilding & Marine Engineering, it gradually restored normal operations by leveraging industrial chain synergies. By March 2022, financial investors Curious Partners and LK had recouped their 150 billion KRW investment.
Deepening Cooperation with Vietnam: U.S. Sanction Risks Force Samsung Heavy Industries to Adjust Outsourcing Strategy
In recent years, as order performance has grown, capacity shortages at South Korea’s three major shipbuilders, including Samsung Heavy Industries, have become increasingly apparent. Currently, Samsung Heavy Industries supplements its production capacity by outsourcing block manufacturing to Chinese shipyards. Last year, it even signed a subcontract with Zhoushan Pacific Ocean Engineering for four 158,000 DWT Suezmax tankers—marking the first time it outsourced full-ship construction to a Chinese shipyard.
Nevertheless, due to the potential for high-intensity U.S. sanctions against China, South Korea’s shipbuilding industry predicts that Samsung Heavy Industries will accelerate its expansion into regions outside China, such as Southeast Asia.
To curb China’s dominance in shipbuilding, the U.S. Trade Representative (USTR) released a Section 301 plan in February targeting China’s shipping, logistics, and shipbuilding industries, proposing port service fees for operators with Chinese-built vessels in their fleets or those likely to order ships from China.
In mid-April, USTR announced a revised Section 301 proposal. Under the latest plan, for each ship built in a Chinese shipyard—regardless of the owner/operator’s nationality—a fee will be levied per net ton or per unloaded container (whichever is higher). The initial rate is $18 per net ton, rising to $33 by 2028, or $120 per container, increasing to $250 by 2028.
Last month, Samsung Heavy Industries signed an MOU with Vietnam’s PV Ship Mechanical Industry Company (PVSM), a subsidiary of the Vietnam National Industrial and Energy Group, for crude oil carrier cooperation. Under the agreement, the two will jointly build two 157,000 DWT Suezmax crude oil carriers and two 115,000 DWT LR2 product tankers, with formal construction contracts to be signed in November this year and construction to begin in October 2026.
The two parties plan to combine Samsung Heavy Industries’ ship design and technical expertise with the Vietnam National Industrial and Energy Group’s local production facilities to jointly build crude and product tankers. Cooperation will include technology transfer, personnel training, cost reduction, and localized construction plans to promote regional industrial development. Initially, the focus will be on MR tankers, which are in high demand in Asia, before expanding to larger Suezmax tankers.
This cooperation is seen as a turning point for Vietnam’s shipbuilding industry. For years, Vietnam’s state-owned shipbuilding sector has struggled with high debt, project delays, and operational inefficiencies. Partnering with Samsung Heavy Industries, a global leader in shipbuilding, provides an opportunity to absorb advanced technology and experience and restore competitiveness. The Vietnam National Industrial and Energy Group hopes this cooperation will enhance local technical capabilities and strengthen its competitiveness in the global tanker market.
For Samsung Heavy Industries, building four tankers with Vietnam is a key part of its “global operation” strategy to reduce outsourcing dependence on China.
In mid-May, Samsung Heavy Industries Vice President Namgoong Jin-sung led a delegation to Vietnam and met with Vietnam National Industrial and Energy Group Chairman Lê Mạnh Hùng to discuss potential cooperation in advanced shipbuilding. Namgoong stated: “This meeting marks the beginning of Samsung Heavy Industries’ entry into the Vietnamese market and broad cooperation. Establishing a partnership with Vietnam’s core energy enterprise, the Vietnam National Industrial and Energy Group, will provide a solid foundation for future projects.”
He further emphasized: “Samsung Heavy Industries is a world-competitive leader in smart shipbuilding technology, with international project experience in major countries like Russia and China. We are prepared to provide shipbuilding equipment that meets international quality standards and support the Vietnam National Industrial and Energy Group in areas such as ship assembly planning, workforce training, and technology transfer.”
Samsung Heavy Industries proposed sharing smart shipbuilding technology and global quality standards with the Vietnam National Industrial and Energy Group, along with extensive cooperation in technology transfer, workforce training, and quality management consulting. The Vietnamese group stated that its subsidiary, PVSM, is capable of undertaking Samsung Heavy Industries’ follow-up projects.
New Frontline in China-South Korea Shipbuilding Rivalry: Vietnam as a Strategic Hub
South Korean industry insiders say that by diversifying production bases, Samsung Heavy Industries can achieve “low-cost production” to counter rising domestic labor and energy costs in South Korea. Expanding its global production network to Vietnam, beyond South Korea and China, also means Samsung Heavy Industries has found a new solution after its earlier cooperation plans with Russian shipbuilders stalled.
PVSM was formerly known as Dung Quat Shipyard, which delivered an Aframax tanker in 2012 but later declined due to operational issues. In 2013, the Vietnamese government restructured the bankrupt assets of Vinashin (Vietnam Shipbuilding Industry Group) to establish SBIC (Shipbuilding Industry Corporation), with PVSM becoming a subsidiary. In January 2024, SBIC announced it was entering bankruptcy proceedings, marking the failure of Vietnam’s largest shipbuilder to overcome its historical debt crisis. Subsequently, PVSM was placed under the management of the former PetroVietnam (now Vietnam National Industrial and Energy Group).
The Vietnam National Industrial and Energy Group is a state-owned petrochemical enterprise wholly owned by the Vietnamese government. Established in August 2006 and headquartered in Lang Ha Ward, Dong Da District, Hanoi, it is Vietnam’s largest energy company, responsible for managing domestic oil activities and foreign investments. Its main operations include oil and gas exploration, processing, and sales, as well as industrial oil and gas, industrial electricity, petrochemical engineering, and high-quality investment projects. In 2023, its total assets were approximately $45 billion, making it Vietnam’s only non-banking enterprise with assets exceeding 1 quadrillion VND. It plays a pivotal role in Vietnam’s national economic development.
In addition, Samsung Heavy Industries’ competitor HD Korea Shipbuilding & Offshore Engineering has long been operating a shipyard in Vietnam. As early as 1996, HD Hyundai Mipo established HD Hyundai Vietnam Shipyard (Hyundai Vinashin Shipyard; HVS) as a joint venture with Vietnam Shipbuilding Industry Group. In 2011, HD Hyundai Vietnam Shipyard became a shipbuilding subsidiary of HD Hyundai Mipo. The company started with ship repair and conversion businesses and gradually transitioned into a full-scale shipbuilder after securing its first order for a 56,000 DWT bulk carrier in 2008. For a long time, it primarily focused on building bulk carriers. With improvements in construction capabilities, it has now shifted to mainly receiving orders for MR-type tankers and LR2-type tankers. Since entering the newbuilding market in 2008, the company has accumulated over 200 new ship orders.
Looking ahead, HD Hyundai Vietnam Shipyard plans to continue expanding investments in facilities and equipment, improving production efficiency, and steadily increasing capacity. Building on raising its annual shipbuilding capacity from 12 to 15 vessels, it aims to achieve the capability to deliver 20 ships per year by 2025 and ensure an annual production capacity of 23 vessels by 2030. This will support its parent company, HD Hyundai Mipo, in adjusting its product mix and continuously improving profitability. To this end, the company announced an additional investment of $100 million in early June this year.
Currently, HD Hyundai Vietnam Shipyard covers an area of over 992,000 square meters, featuring one 400,000 DWT-class dock and one 100,000 DWT-class dock, along with 1.4 kilometers of shoreline. It employs approximately 5,000 local Vietnamese workers.
It is reported that HD Hyundai Mipo has completed negotiations with the Khanh Hoa Provincial Government in Vietnam, where HD Hyundai Vietnam Shipyard is located, including extending the land-use period for the shipyard. HD Hyundai Mipo will submit an application to Khanh Hoa Province to upgrade HD Hyundai Vietnam Shipyard, shifting its focus from its current main products of bulk carriers and tankers to general-purpose merchant ships. The goal is to transform it into a construction hub centered on general-purpose commercial vessels with overwhelming market share, aiming to cultivate it as a “counterforce to China’s shipbuilding industry.” If HD Hyundai Vietnam Shipyard’s upgrade targeting general-purpose merchant ships continues, HD Hyundai Mipo’s merchant shipbuilding capacity will significantly increase.
The Korean industry notes that the competitive landscape between the “two giants” of Korean shipbuilding in the Vietnamese market is worth watching in the future.
