Secures maiden U.S. Navy landing ship contract with options for additional vessels
Pitches massive investment in Philly Shipyard to scale production capacity tenfold
As the United States grapples with chronic warship construction delays and a severe shortage of domestic shipyards, South Korea’s Hanwha Group has successfully moved to capture a foothold in the American defense sector. Following its acquisition of a local shipyard, Hanwha has secured a landmark U.S. Navy warship construction contract, leveraging South Korea's world-class shipbuilding technology to crack a market historically bound by strict domestic-build requirements.
The contract, secured by Hanwha to build Medium Landing Ships (LSM) for the U.S. Navy and Marine Corps, is valued at $269 million (approximately 357.5 billion won). The initial agreement covers the construction of one vessel, with options for up to three additional ships, bringing the potential total to four. Construction is scheduled to commence in the fourth quarter of 2027.
Measuring approximately 100 meters in length, the LSM is designed to transport Marine Corps personnel and equipment to islands and coastal areas. The U.S. military plans to procure a total of 35 such vessels to support the Marine Corps' distributed operations strategy across the Indo-Pacific region.
The actual construction will be carried out by Philly Shipyard, which was jointly acquired by Hanwha Ocean and Hanwha Systems in late 2024. While Hanwha Ocean is transferring advanced production technologies from its Geoje Shipyard to the U.S. site, the contract itself was secured by Hanwha Defense USA, the American defense subsidiary of Hanwha Aerospace.
Shift in U.S. Navy Procurement: Hanwha Wins Competitive Bidding
The U.S. Navy adopted a novel Vessel Construction Manager (VCM) approach for the LSM program. Rather than directly managing contracts and construction schedules for each individual shipyard, the Navy outsourced the process to a specialized maritime firm to curb construction delays and escalating costs.
U.S. ship management firm TOTE Services conducted a competitive bidding process for local shipyards last July. Hanwha Defense USA was selected as a primary builder, recognized for its aggressive pricing competitiveness and favorable contract terms.
"This contract demonstrates how rapidly the VCM approach can move from a request for proposals to contract award," said Jeff Dixon, President of TOTE Services, in the official announcement.
TOTE Services holds a $2.2 billion program management contract with the U.S. Navy and will initially oversee the construction of up to eight vessels. Hanwha's confirmed order accounts for one of these ships.
Other contenders in the LSM program include U.S.-based Bollinger Shipyards and Fincantieri Marine Group, the U.S. subsidiary of Italy's Fincantieri. Bollinger has secured a lead ship construction contract, while Marinette Marin has been tapped for long-lead-time material contracts. TOTE Services is currently in discussions with both companies for additional construction orders.
Philly Shipyard brings relevant experience, having previously executed the National Security Multi-Mission Vessel (NSMV) program for the U.S. Maritime Administration under TOTE Services' management. Out of five total vessels, four have been constructed and delivered, with the final ship slated for delivery in 2027. The shipyard plans to leverage the workforce and supply chain networks established during that project for the upcoming warship contract.
From a $100M Acquisition to a $5B Long-Term Investment Blueprint
Following its acquisition of Philly Shipyard in December 2024 for approximately $100 million, Hanwha unveiled a sweeping $5 billion long-term investment plan last August, which includes the construction of two new docks, three piers, and expanded block assembly facilities.
According to the local daily *The Philadelphia Inquirer*, Hanwha has injected approximately $350 million into the facility since the buyout, upgrading welding and painting infrastructure, training centers, and production equipment. Additional investments approved through the end of 2027 amount to roughly $400 million.
In September, Hanwha agreed to lease an additional 47 acres (approx. 190,000 square meters) near the shipyard. Combined with its existing 110 acres, the total footprint now spans roughly 157 acres, representing a more than 40% expansion in area.
The ultimate vision behind the $5 billion capital injection is ambitious: Hanwha’s long-term production target is to churn out up to 20 vessels annually. Currently, Philly Shipyard builds an average of one ship every eight months. By expanding docks and assembly infrastructure to enable simultaneous multi-vessel production, the company aims to scale capacity across both naval and commercial segments.
Alongside physical expansion, Hanwha is introducing South Korean shipbuilding methodologies to the local yard. This includes implementing the Enterprise Resource Planning (ERP) and production management systems utilized at the Geoje Shipyard, alongside an expansion of automated welding solutions. The strategy focuses on compressing construction timelines by meticulously managing scheduling across every phase—from raw material supply to block fabrication and final assembly.
This race to accelerate capacity is underpinned by a robust backlog of commercial orders. Philly Shipyard has already secured orders for four medium-range product tankers, with options for six additional vessels, alongside plans to build two LNG carriers. The delivery of the first product tanker is targeted for early 2029.
This demanding commercial timeline will run concurrently with the U.S. Navy LSM construction starting in the fourth quarter of 2027. Given current constraints, expanding dock capacity and securing a skilled workforce are imperative. Philly Shipyard’s headcount has already grown from approximately 1,800 prior to Hanwha's acquisition to around 2,300, with long-term plans to scale the workforce beyond 4,000 employees.
While Hanwha has formally secured a single LSM for now, the exercise of options for three additional vessels could expand the order to four. Given the U.S. Navy's broader plan to procure 35 units, substantial follow-on opportunities remain on the table. Ultimately, the scale of Hanwha’s footprint in the U.S. warship market will hinge on how rapidly it can ramp up production capacity at Philly Shipyard.
