HD Hyundai's KDDX Dream Derailed?! Lee's Shock Move Stuns Industry

President Lee Jae Myung has thrown a wrench into HD Hyundai's seemingly smooth path towards leading the construction of South Korea's next-generation destroyer, the KDDX. It seems like Lee is pushing for open competition, suggesting the Defense Acquisition Program Administration (DAPA) rethink handing the entire project to HD Hyundai Heavy Industries (HHI) on a silver platter.

HD Hyundai's KDDX Dream Derailed?! Lee's Shock Mov...

The pressure is mounting on DAPA. Defense Minister Ahn Gyu-back is also apparently against a sole-source deal, and that opens the door for Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering (DSME), to get a piece of the ₩7.8 trillion ($5.3 billion) pie. This project is a big deal – six 6,000-ton destroyers slated to be built by 2030. You can understand why everyone's keen to get involved.

Now, Lee didn’t mince words during a recent talk in South Chungcheong Province. He basically told DAPA Minister Lee Yong-chul that it would be "ridiculous" to award a contract to a company that had been penalized for leaking military secrets. He didn’t name names, but everyone knows he was talking about HD HHI. Back in 2012-2015, some of their former employees were caught stealing conceptual destroyer designs from, you guessed it, then-DSME (now Hanwha Ocean). I remember covering that story – it was a real scandal at the time.

The fallout from that industrial espionage earned HD HHI a 1.8-point deduction on government bids, which lasts until the end of 2026. Hanwha Ocean has been predictably vocal, arguing that giving HD HHI a sole-source contract would essentially undermine the very penalties that were imposed. And honestly, they have a point.

So, what's the possible compromise? Word on the street is that DAPA is toying with a "joint design" approach. Basically, both shipbuilders would have to collaborate on designing the KDDX-class destroyers, ostensibly to promote cooperation on international exports. Oddly enough, the two companies had already agreed to cooperate on naval exports despite their very public rivalry at home. It seems like a forced marriage to be sure, but maybe it could work?

The decision on how the contracting will actually happen is apparently coming down the pipe on December 18th, according to sources. HD HHI finished the basic design late last year, and DAPA's original plan was to finalize the detailed design and start building the first vessel last year. But the whole process is now grinding to a halt because of this intense back-and-forth between HD Hyundai and Hanwha. It just goes to show, even in defense, politics and business are always intertwined.