{"id":2206332,"date":"2024-08-30T21:46:46","date_gmt":"2024-08-30T12:46:46","guid":{"rendered":"https:\/\/koreapro.org\/?p=2206332"},"modified":"2024-09-02T16:10:30","modified_gmt":"2024-09-02T07:10:30","slug":"hanwha-ocean-wins-first-us-navy-maintenance-contract-paving-way-for-expansion","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/08\/hanwha-ocean-wins-first-us-navy-maintenance-contract-paving-way-for-expansion\/","title":{"rendered":"Hanwha Ocean wins first US Navy maintenance contract, paving way for expansion"},"content":{"rendered":"

Hanwha Ocean secured a m<\/span>aintenance, repair and overhaul (MRO) contract<\/span><\/a> with the U.S. Navy on Thursday, becoming the first South Korean shipyard to secure such an agreement. This deal allows Hanwha Ocean to conduct comprehensive maintenance on a 40,000-ton U.S. Navy logistics support vessel at its Geoje Shipyard in South Korea.<\/span><\/p>\n

It presents both opportunities and risks, offering Hanwha Ocean a chance to expand its market presence while also posing challenges related to regulatory compliance, cybersecurity and geopolitical dynamics.<\/span><\/p>\n

STRATEGIC DIVERSIFICATION<\/b><\/p>\n

The MRO contract represents an opportunity for the company to diversify its operations beyond South Korea. Although the current contract is limited to a single vessel, the successful completion of this project could position Hanwha Ocean as a trusted partner for future U.S. Navy contracts.<\/span><\/p>\n

The U.S. Navy frequently requires maintenance and overhaul services for its extensive fleet, and consistent performance could help Hanwha Ocean secure additional projects. It is notable that the U.S. Navy\u2019s MRO market is worth about $15 billion (20 trillion won) per year.<\/span><\/p>\n

If Hanwha Ocean\u2019s MRO work on this logistics support vessel meets or exceeds expectations, the company may gain further opportunities to work on other U.S. naval vessels, potentially becoming the company\u2019s new cash cow.<\/span><\/p>\n

For instance, the U.S. Navy offered BAE Systems a <\/span>$200 million contract<\/span><\/a> in 2020 to drydock and perform nearly 18 months of maintenance and modernization work aboard the amphibious assault ship USS Boxer.<\/span><\/p>\n

However, to capitalize on such opportunities, Hanwha Ocean will need to abide by stringent U.S. regulations and standards.<\/span><\/p>\n

For example, the company will have to adhere to the <\/span>International Traffic in Arms Regulations<\/span><\/a> (ITAR), which controls the export and import of defense-related articles and services to safeguard U.S. national security interests.<\/span><\/p>\n

ITAR also includes restrictions on the sharing of sensitive technologies and information with third parties, which could complicate Hanwha Ocean\u2019s collaboration with other entities.<\/span><\/p>\n

Additionally, the U.S. Department of Defense imposes rigorous cybersecurity standards, particularly under the <\/span>Cybersecurity Maturity Model Certification<\/span><\/a>, which requires contractors to demonstrate adequate protection of <\/span>Controlled Unclassified Information<\/span><\/a>.<\/span><\/p>\n

Hanwha Ocean must also meet stringent quality assurance standards, such as those outlined in the <\/span>Defense Federal Acquisition Regulation Supplement<\/span><\/a>, which mandates compliance with specific manufacturing and quality control processes.<\/span><\/p>\n

Failure to meet these expectations could result in penalties, disqualification from contracts, or damage to Hanwha Ocean\u2019s reputation as a reliable defense partner.<\/span><\/p>\n

\"\"

U.S. Secretary of the Navy Carlos Del Toro visits Hanwha Ocean to inspect a shipbuilding site and the company’s MRO capabilities, Feb. 27, 2024 | Image: Hanwha Ocean<\/a><\/em><\/p><\/div>\n

POTENTIAL TECHNOLOGY TRANSFER<\/b><\/p>\n

The contract with the U.S. Navy opens up opportunities for technology transfer, which could significantly benefit Hanwha Ocean. By engaging in maintenance and repair work for the U.S. Navy, Hanwha Ocean could gain access to cutting-edge technologies and practices, which it could utilize to enhance its own shipbuilding and maintenance capabilities.<\/span><\/p>\n

Hanwha Ocean currently manufactures a range of naval vessels, including <\/span>KDX-I, KDX-II and KDX-III<\/span><\/a> destroyers, which are part of South Korea\u2019s core naval fleet. Additionally, the company is involved in the development and production of various submarines capable of launching ballistic missiles.<\/span><\/p>\n

By working on the comprehensive maintenance of a 40,000-ton U.S. Navy logistics support vessel, Hanwha Ocean can learn from U.S. best practices in areas such as hull designs. This exposure can help Hanwha Ocean enhance its shipbuilding techniques and incorporate innovative technologies into its future projects.<\/span><\/p>\n

For instance, insights gained from working on a logistics support vessel could improve Hanwha Ocean\u2019s ability to design and build more robust and versatile supply ships or auxiliary vessels. Moreover, the exposure to advanced U.S. naval technologies and practices can provide Hanwha Ocean with a <\/span>competitive advantage<\/span><\/a>, not only in fulfilling domestic orders but also in pursuing international contracts in the global defense market.<\/span><\/p>\n

However, technology transfer is often subject to stringent restrictions, particularly when it involves sensitive defense technologies. The U.S. government imposes limitations under export control laws, such as the <\/span>Export Administration Regulations<\/span><\/a>, which govern the transfer of military technology to foreign entities.<\/span><\/p>\n

This means that Hanwha Ocean may face restricted access to cutting-edge technologies used in the U.S. Navy\u2019s logistics support vessels. For instance, the U.S. may limit the sharing of proprietary information related to advanced materials, propulsion systems, or electronic warfare technologies.<\/span><\/p>\n

As a result, while Hanwha Ocean may gain some exposure to U.S. naval practices and standards, the depth and breadth of technology transfer will likely be curtailed.<\/span><\/p>\n

\"\"

USAV Major General Charles P. Gross transits the Arabian Gulf, July 14, 2020 | Image: U.S. Naval Forces Central Command<\/a><\/em><\/p><\/div>\n

Additionally, concerns about intellectual property security could further restrict technology transfer to Hanwha Ocean. South Korea has faced several high-profile incidents of technology and <\/span>information leaks<\/span><\/a>, such as the case in 2020 when former employees of the Agency for Defense Development <\/span>leaked sensitive documents<\/span><\/a> related to unmanned systems and artificial intelligence technologies.<\/span><\/p>\n

Moreover, the theft of over <\/span>one terabyte of sensitive documents<\/span><\/a> from South Korea\u2019s judiciary by North Korean cybercriminals in May highlights the vulnerabilities in South Korea\u2019s cybersecurity framework.\u00a0<\/span><\/p>\n

Additionally, the use of <\/span>weak passwords<\/span><\/a> and reliance on <\/span>personal email accounts<\/span><\/a> by ROK government officials have raised doubts about the country\u2019s ability to protect sensitive information.<\/span><\/p>\n

As a result, the U.S. may be hesitant to share advanced naval technologies with Hanwha Ocean or award it contracts to maintain technologically advanced vessels.<\/span><\/p>\n

LOOKING AHEAD<\/b><\/p>\n

Hanwha Ocean\u2019s contract with the U.S. Navy could serve as a stepping stone for further engagement with the U.S. defense market, opening doors to additional contracts with the U.S. Navy and other partner nations, such as the <\/span>Philippines<\/span><\/a> with which South Korean defense firms have a long-established relationship.<\/span><\/p>\n

This would allow the company to further diversify its revenue base and reduce reliance on domestic demand, which can change depending on political strategies. For instance, South Korean President Yoon Suk-yeol axed the previous Moon Jae-in administration\u2019s <\/span>light aircraft carrier program<\/span><\/a> soon after entering office due to budget concerns and a higher threat perception of North Korea.<\/span><\/p>\n

While the contract offers the company a pathway to technological advancement and market expansion, it also exposes the company to stringent U.S. regulations. It remains to be seen if the company will be able to capitalize on this opportunity.<\/span><\/p>\n

Edited by Alannah Hill<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Defense & Security<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a>Technology & Cyber<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Hanwha Ocean secured a maintenance, repair and overhaul (MRO) contract with the U.S. Navy on Thursday, becoming the first South Korean shipyard to secure such an agreement. This deal allows Hanwha Ocean to conduct comprehensive maintenance on a 40,000-ton U.S. Navy logistics support vessel at its Geoje Shipyard in South Korea. It presents both opportunities […]<\/p>\n","protected":false},"author":10407,"featured_media":2206334,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[24,26,28,29],"class_list":["post-2206332","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-business-economy","tag-defense-security","tag-inter-korean-foreign-relations","tag-technology-cyber"],"yoast_head":"\nHanwha Ocean wins first US Navy maintenance contract, paving way for expansion - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/08\/hanwha-ocean-wins-first-us-navy-maintenance-contract-paving-way-for-expansion\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Hanwha Ocean wins first US Navy maintenance contract, paving way for expansion - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"Hanwha Ocean secured a maintenance, repair and overhaul (MRO) contract with the U.S. Navy on Thursday, becoming the first South Korean shipyard to secure such an agreement. 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