Hyundai Heavy Industries and the New Era of U.S.-South Korea Naval Cooperation

The April 2025 visit by U.S. Secretary of the Navy John Phelan to Hyundai Heavy Industries’ Ulsan shipyard marked a pivotal moment in U.S.-South Korea defense collaboration. His inspection of the under-construction Aegis destroyer Dasan Jeong Yak-yong (DDG-996)—part of South Korea’s advanced Sejong the Great-class Batch II program—highlighted a strategic alignment between the two nations to bolster Indo-Pacific naval readiness. For investors, this partnership signals a golden opportunity to capitalize on the rising demand for advanced shipbuilding technology and geopolitical stability in the region.

Aegis Destroyers: The Heart of Indo-Pacific Defense

The Dasan Jeong Yak-yong represents the pinnacle of South Korean naval engineering. With a displacement of 10,000 tons and a hybrid propulsion system combining gas turbines and electric drives, this destroyer can reach speeds exceeding 30 knots while maintaining a 5,500-nautical-mile range. Its combat systems, including the Aegis Baseline 9.C2 and AN/SPY-1D(V) radar, enable simultaneous tracking of hundreds of targets and intercepting ballistic missiles—a critical capability against North Korean threats.

The destroyer’s Korean Vertical Launching System II (KVLS-II) further distinguishes it. With cells capable of accommodating ballistic missiles, cruise missiles, and anti-submarine rockets, the KVLS-II expands South Korea’s strike range and versatility. Analysts estimate that these systems could eventually support hypersonic weapons, positioning Seoul as a leader in next-gen naval armaments.

A Win-Win for U.S. and South Korean Shipbuilders

Secretary Phelan’s visit underscored U.S. reliance on South Korea’s shipbuilding prowess. The Trump administration’s April 2025 executive order to revitalize U.S. shipyards explicitly prioritizes international partnerships, and Hyundai’s collaboration with Huntington Ingalls Industries (HII) exemplifies this strategy.

In April 2025, Hyundai and HII signed an MOU to share hybrid propulsion and modular design technologies. This partnership could accelerate U.S. Navy modernization while reducing costs—a critical factor as Washington seeks to counter China’s naval expansion. For investors, companies like HII and Fairbanks Morse Defense (a propulsion tech partner) stand to benefit from shared innovations and potential U.S. Navy contracts.

The Investment Case: Growth in Shipbuilding and Defense Tech

South Korea’s naval modernization program, budgeted at 3.9 trillion won, is creating a ripple effect across industries. Key investment themes include:

1. Global Shipbuilding Leadership: Hyundai Heavy Industries (KRX:009140) dominates 22% of the global shipbuilding market. Its expertise in Aegis systems and hybrid propulsion positions it to capture U.S. defense contracts, potentially driving a 10-15% rise in naval revenue by 2027.

2. Technological Exports: The KVLS-II system has drawn interest from Poland and Peru, signaling export potential. South Korea’s missile industry—already producing the Hyunmoo series—could see orders double by 2030 if these partnerships materialize.

3. Geopolitical Stability Dividends: With 60% of global trade passing through the Indo-Pacific, navies worldwide are upgrading their fleets. The Aegis destroyer’s multirole capabilities make it a sought-after asset, creating recurring revenue streams for maintenance and upgrades.

Risks and Considerations

Investors should monitor U.S.-South Korea trade tensions and regulatory hurdles. For instance, the U.S. Congress may resist outsourcing naval repairs to South Korea, fearing job losses. Additionally, geopolitical risks—such as North Korean provocations or Sino-U.S. friction—could delay procurement timelines.

Conclusion: A Strategic Bet on Naval Power

The Dasan Jeong Yak-yong is more than a warship; it’s a symbol of U.S.-South Korea strategic synergy. With $2.4 trillion projected to be spent globally on naval defense by 2030, companies like Hyundai Heavy Industries and their U.S. partners are positioned to capture a significant share of this market.

The data backs this thesis: South Korea’s naval exports rose 21% in 2024, while Huntington Ingalls’ backlog hit a record $22 billion in early 2025. For investors, stakes in shipbuilders with advanced tech portfolios—and those benefiting from trans-Pacific partnerships—could yield robust returns as the Indo-Pacific becomes the epicenter of 21st-century naval competition.

In short, the future of naval warfare is being forged in Ulsan—and it’s time to board the ship.