HD Hyundai widens Philippine naval pact at Subic shipyard

HD Hyundai Chairman Chung Ki-sun met Philippine Defense Secretary Gilberto Teodoro Jr. on Sept. 8 to expand naval modernization and maintenance operations at its Subic shipyard.

The bilateral meeting occurred in Seoul during the Seoul Defense Dialogue 2026. Both sides agreed to broaden an industrial defense partnership that began a decade ago.

HD Hyundai has secured orders for 12 naval vessels from the Philippine government since 2016. The shipbuilder has completed and delivered six of those warships, according to company disclosures.

The relationship began with a 2016 contract to build two 2,600-ton Jose Rizal-class guided-missile frigates. Subsequent contracts expanded the procurement pipeline to include corvettes and offshore patrol vessels.

Teodoro visited South Korea as Manila reviews defense budgets for two additional guided-missile frigates. Philippine defense officials confirmed plans to acquire more South Korean surface combatants, according to legislative budget filings.

The bilateral talks centered on HD Hyundai Philippines, an operational production shipyard in Subic. The facility began operating last year after a series of refurbishment investments.

HD Korea Shipbuilding and Offshore Engineering leased the Subic site in May 2024 from Cerberus Capital Management. The US private equity firm had acquired the former Hanjin Heavy Industries yard.

The Subic facility recently completed the launch of its first commercial vessel. The ship is a 115,000-ton product carrier designed to transport refined petroleum cargo.

The newly launched commercial tanker will go to its shipowner in 2027, HD Hyundai said. The company intends to scale local production output gradually as yard operations mature.

The shipbuilder and Manila agreed to extend the Subic yard beyond commercial vessel assembly into naval maintenance, repair and overhaul (MRO). The site will also host technical training programs.

Naval MRO comprises routine inspections, hull servicing, sensor calibration and structural overhauls during a warship's operating life. Warships require specialized dock facilities to maintain mission readiness.

Establishing a domestic naval maintenance base addresses a critical operational bottleneck for the Philippine Navy. The service has traditionally sailed combat vessels to foreign shipyards for major depot maintenance.

Subic Bay hosts an active Philippine Navy operating base in close proximity to the commercial yard. The geographic alignment allows naval units to undergo depot repairs without leaving home waters.

Domestic maintenance reduces transit time and operating expenses for Philippine fleet commanders. Warship sustainment accounts for more than 60% of total lifecycle ownership costs, according to naval industry estimates.

The formal announcement did not disclose the contract value, vessel specifications or delivery timetable for the proposed follow-on frigates. Neither party published procurement tender documentation.

The bilateral discussions took place against the backdrop of Manila's revised military modernization program. The Philippine Department of National Defense approved a 10-year capital outlay plan valued at roughly $35 billion.

The modernization program funds naval surface combatants, surveillance craft and coastal radar systems. The procurement initiative seeks to defend exclusive economic zone waters in the South China Sea.

HD Hyundai faces regional competition from European and Asian shipbuilders seeking Philippine naval contracts. Competing shipyards from Japan, the Netherlands and France have submitted bids for regional patrol vessel programs.

Operating an active local shipyard provides South Korean shipbuilders with an advantage during procurement evaluations. Foreign shipbuilders without in-country dock facilities cannot offer domestic maintenance guarantees.

South Korean defense contractors have increasingly adopted local industrial participation models to secure overseas orders. Exporting construction know-how and establishing service hubs creates recurring revenue after vessel delivery.

The company will explore long-term industrial cooperation opportunities beyond commercial and naval shipbuilding, Chung said. The partnership strengthens Philippine maritime defense capabilities and supports local economic development, Teodoro said.

Teodoro also conducted bilateral defense talks with South Korean Defense Minister Ahn Gyu-back during his Seoul visit. Both defense ministries pledged to expand joint maritime security cooperation.

HD Hyundai continues construction work on the remaining six contracted Philippine warships at its shipyard in Ulsan. Scheduled deliveries under those existing naval contracts run through 2028.

The Subic shipyard will prepare maintenance berths and technical workforce teams ahead of the 2027 commercial tanker delivery. The facility plans to begin scheduled depot servicing for Philippine warships thereafter.