South Korea-Japan Defense Competition over the U.S. Navy's Next-Generation Frigate Program and South Korea's Response

Executive Summary

Against the backdrop of the structural decline of its domestic shipbuilding base, the U.S. Navy is considering allied warship designs as potential candidates, including an improved version of Japan's Mogami-class, South Korea's Chungnam-class, and Turkey's Istanbul-class. This discussion is intertwined with South Korea's 'Make American Shipbuilding Great Again' (MASGA) initiative and legislative attempts in the U.S. Congress to create exceptions to the Jones Act, though the relevant bill remains pending in a House committee. With legislative procedures, budget allocation, and political coordination still ahead, a scenario where South Korea and Japan share partial gains, rather than a single winner being selected, is assessed as the most probable outcome. Considering its experience with the failed bid for Canada's submarine contract, South Korea needs to manage multiple tracks simultaneously—including MRO cooperation, tracking legislative trends concerning Jones Act exceptions, and linking efforts to investment in the U.S.—rather than relying solely on the Chungnam-class project. At the industry level, an approach that manages negotiating leverage by concurrently updating data on production capabilities and engaging in lobbying activities with the U.S. Congress is also required.

I. Analysis of the Current Situation

U.S. Navy's Next-Generation Frigate Program and Intensifying ROK-Japan Defense Competition

1. Background and Developments

The structural decline of the U.S. Navy's shipbuilding capacity is a long-standing problem. The U.S. shipbuilding industry, the world's largest immediately after World War II, maintained its status as a major shipbuilding power until 1975. By the end of the 20th century, it entered a phase of rapid decline despite government efforts to rebuild it [10]. By law, U.S. Navy warships must be built in the United States. However, exceptions are made for maintenance, repair, and overhaul (MRO). Consequently, a system is already in place where allied shipyards in the Philippines, Japan, and South Korea handle MRO for U.S. 7th Fleet vessels [9].

Against this backdrop, the U.S. Navy's consideration of adopting allied frigate designs marks a new phase. On September 1, USNI News reported that the White House and the Navy had identified three allied designs under review: an improved version of Japan's Mogami-class (the new FFM, or 06FFM), South Korea's Chungnam-class, and Turkey's Istanbul-class [1]. This extends beyond simple ship procurement and is part of a broader trend of the U.S. Navy seeking to compensate for the limitations of its domestic shipbuilding base with allied capabilities.

On the South Korean side, this discussion is proceeding in conjunction with the 'Make American Shipbuilding Great Again' (MASGA) initiative. An EAI commentary states, "The term MASGA emerged from the deliberations of the South Korean delegation during negotiations to lower tariff rates under a potential second Trump administration" [3]. Discussions on U.S.-ROK shipbuilding cooperation had been raised even before the tariff negotiations. However, it is noted that tangible outcomes have not met expectations, despite the frequency of media coverage [3]. Even during the Biden administration, in February 2024, then-Secretary of the Navy Carlos Del Toro personally visited HD Hyundai Heavy Industries' Ulsan shipyard and Hanwha Ocean's Geoje shipyard to inspect their production facilities and shipbuilding capabilities [3].

2. Current Situation

The South Korean shipbuilding industry's move to target the U.S. Navy market is linked to its failed bid for Canada's submarine contract. On July 9, Yonhap News reported that after experiencing a setback in the Canadian submarine project, major South Korean shipbuilders are turning their attention to the U.S. Navy market, noting Washington's interest in South Korea's naval shipbuilding capabilities. This trend has also raised expectations that it could provide momentum for the MASGA initiative [4].

Related legislative movements are also being detected in the U.S. Congress. On August 1, Representative Ed Case (D-HI) and Representative James Moylan (R-GU) jointly introduced the 'Merchant Marine Allies Partnership Act.' The bill includes provisions to exempt U.S. vessels modified in allied shipyards, such as those in South Korea and Japan, from a 50% import tariff and to permit allied-built ships to operate in U.S. coastal trade [3]. As the Jones Act of 1920 mandates that vessels in U.S. coastal trade be built, owned, and operated by U.S. citizens, this bill is an attempt to grant an exception to this regulation for allied nations [3]. The bill is currently pending in the House Committee on Transportation and Infrastructure [3].

Japan is also expanding its defense cooperation with the U.S. on a separate track. Onomichi Dockyard is pursuing a plan to build small uncrewed surface vessels developed by the U.S. startup Bulwark Dynamics and supply them to the Japan Self-Defense Forces and the U.S. military. This is presented as part of a trend where mid-sized commercial shipbuilders are entering the defense sector with dual-use technologies [7]. However, this is a separate development in the small and medium-sized vessel sector, distinct from the main frigate contract.

3. Key Actors and Interests

The U.S. Navy and the White House seek to compensate for the structural limitations of the domestic shipbuilding base by adopting allied designs. While legally maintaining the principle of domestic construction for U.S. Navy warships, they appear to be considering the possibility of adopting foreign designs specifically for the new frigates [1]. This is linked to the urgency of responding to China's naval buildup. The recent deployment of China's 054A-class guided-missile frigates is cited as a factor raising alarm in Japan and Taiwan, as well as in the United States [11].

In South Korea, the shipbuilding industry and the government largely share common interests. For South Korea, which possesses world-class shipbuilding capabilities but urgently needs cooperation with the U.S. on diplomatic issues such as the North Korean nuclear problem and relations with China, U.S.-ROK shipbuilding cooperation is seen as "an important first step for the comprehensive ROK-U.S. alliance" [3]. Following their failed bid for the Canadian submarine contract, HD Hyundai Heavy Industries and Hanwha Ocean are exploring the U.S. Navy market as an alternative path forward [4]. At the government level, the energy sector was selected as the first project under the '$200 billion strategic investment in the U.S.' plan, based on the principle of 'commercial viability.' How defense and shipbuilding cooperation will be linked to this investment package has not yet been specified [15].

Japan, promoting its improved Mogami-class frigate, aims to prove its defense industry's export competitiveness in the U.S. market. In its budget request for fiscal year 2027, Japan's Ministry of Defense is also pursuing the domestic development of technologies to counter China, such as drone-based quantum sensors [13]. However, the SCMP points out that Japan's military buildup against China is facing personnel, budgetary, and political constraints. This suggests that these factors could also constrain the export capacity of Japan's defense industry [14].

Turkey is listed as a third competitor with its Istanbul-class frigate [1], but media coverage to date has been limited compared to that of South Korea and Japan.

4. Key Issues

The first issue is the U.S. Navy's final selection criteria. The key question is to what extent political investment packages like MASGA, beyond simple price competitiveness, will influence the final contract decision. South Korea appears to be pursuing a strategy of linking its shipbuilding investment in the U.S. with the frigate bid as a single negotiating package [3][4].

The second issue is the constraints imposed by U.S. domestic law. Whether the Merchant Marine Allies Partnership Act, which would grant an exception to the Jones Act, is actually enacted is a variable that will determine the scope of U.S. shipbuilding cooperation with both Japan and South Korea [3]. The bill is currently pending in a House committee, and its passage timeline and final content are uncertain.

The third issue is the procurement risk suggested by the Canadian submarine case. The fact that the South Korean shipbuilding industry has already experienced a major setback in a defense bid for an allied country [4] means that the possibility of political factors overriding technical and price competitiveness in this frigate project cannot be ruled out.

The fourth issue is whether the ROK-Japan competition will escalate into a bilateral conflict or proceed as separate, individual negotiations with the United States. Reporting to date depicts a parallel competition between the two countries for a single client, the U.S. Navy, and there is no evidence that the situation has escalated into direct friction between South Korea and Japan [1].

The final outcome of this project has not yet been announced. Considering separate reports that the U.S. Navy's decision on its next-generation fighter jet program is imminent [16], it is necessary to monitor the frigate project with the possibility of concrete progress in the coming weeks or months.

II. In-Depth Analysis of the Issue

U.S. Navy's Next-Generation Frigate Program and Intensifying ROK-Japan Defense Competition: An In-Depth Analysis

1. Analysis of Root Causes

The fundamental reason the U.S. Navy is considering adopting allied warship designs is the structural collapse of the U.S. shipbuilding industrial base. The U.S. shipbuilding industry, the world's largest at the end of World War II, remained a major power until 1975. By the end of the 20th century, it had declined rapidly despite government attempts at revitalization [10]. The core of the problem is that this decline is not a temporary economic downturn. It is the result of a simultaneous loss of skilled labor, parts supply chains, and design capabilities over several decades.

Commentary within the United States frames this issue as a failure of protectionist policies. It is pointed out that industrial recovery is impossible by shielding domestic shipyards from foreign competition [10]. The assessment is that while the Jones Act regime has mandated U.S. construction of vessels for coastal trade for over half a century, the result has been a loss of competitiveness rather than industrial protection. If this diagnosis is correct, the U.S. Navy's review of allied designs is less a signal of a policy shift and more an unavoidable choice resulting from the exhaustion of domestic alternatives.

The security variable of China's naval buildup adds another layer to this situation. Although China's recently unveiled improved 054A-class frigate is seen as a gradual improvement rather than a technological leap, it is serving as a factor that heightens alarm in Taiwan and Japan and raises the level of the U.S. response [11]. From the U.S. Navy's perspective, the speed of vessel acquisition has itself become a strategic variable. This is the context in which adopting proven allied designs has emerged as an alternative amid accumulating construction delays at domestic shipyards.

2. Structural Context

Security Structure: The U.S.-China Maritime Power Transition

This competitive dynamic is situated within the larger framework of the U.S.-China maritime hegemony contest. An EAI commentary points out that historically, maritime hegemons have responded to the naval buildup of challenger states by realigning their alliances. A prime example is the late 19th century, when Great Britain, facing simultaneous naval buildups by the United States, Germany, and Japan, adjusted its sphere of influence with the U.S. following the Venezuelan crisis and redeployed its naval forces in Asia through the Anglo-Japanese Alliance [6]. From this perspective, the U.S. Navy's review of allied designs can be read not as a simple procurement issue, but as part of an alliance realignment effort in the Pacific.

At the same time, the United States is also focusing on strengthening its dominance in the Western Hemisphere. The National Security Strategy, released in November 2025, clarified the priority of the Western Hemisphere. The deployment of the Gerald R. Ford carrier strike group to the Caribbean and military operations against the Maduro regime are examples of its implementation [6]. This implies a reduction in naval deployments across Europe and the Middle East. While the demand for deterring China throughout the Asia-Pacific remains, available resources must be distributed across multiple theaters. This resource constraint is the fundamental driver increasing the need to utilize allied shipbuilding capabilities.

Economic and Legal Structure: The Jones Act and Legislative Delays

Legal barriers within the United States remain formidable. By law, U.S. Navy warships must be built domestically, and the Jones Act mandates that vessels in coastal trade be built, owned, and operated by U.S. citizens [9][3]. For this reason, allied shipyards have so far only cooperated with the U.S. Navy in the area of MRO (maintenance, repair, and overhaul). A system is already established in which shipyards in the Philippines, Japan, and South Korea handle overhauls for U.S. 7th Fleet vessels [9].

Legislative attempts to break this framework are underway, but progress is slow. The Merchant Marine Allies Partnership Act, introduced by Representatives Ed Case and James Moylan, includes tariff exemptions for vessels modified in allied shipyards and permission for them to operate in coastal trade, but it is currently pending in the House Committee on Transportation and Infrastructure [3]. Extending a legal exception to newly built warships would require a separate legislative process and political momentum. In other words, a significant time lag exists between the U.S. Navy's policy interest and the actual reform of the legal and institutional framework.

Industrial Structure: A Negotiating Framework Linked to U.S. Investment

On the South Korean side, this issue is being treated as part of a broader negotiation on investment in the U.S., going beyond a pure defense contract competition. The term MASGA itself "emerged from the deliberations of the South Korean delegation during negotiations to lower tariff rates under a potential second Trump administration" [3]. This implies that shipbuilding cooperation began as a quid pro quo in tariff negotiations. However, an EAI commentary assesses that "it is true that tangible results from U.S.-ROK shipbuilding cooperation have not met expectations, despite the frequency of media coverage" [3]. The gap between political symbolism and the conclusion of actual contracts has long been a characteristic of this issue.

The actual flow of funds for strategic investment in the U.S. is also worth noting. The government's selection of a Texas gas-fired combined cycle power plant project as the first initiative under its $200 billion U.S. investment plan was driven by the principle of 'commercial viability' [15]. The energy sector was chosen first because it was judged to have a high probability of recouping the investment. Whether the shipbuilding sector can meet the same standard is a separate question. Warship construction differs in nature from energy infrastructure investment, as it involves a heavy initial capital investment burden and a long payback period.

3. Comparison with Historical Precedents and Similar Cases

Great Britain's alliance realignment in the late 19th century serves as a useful reference point for understanding the current issue. At the time, Britain even adjusted its relations with France, with which it had been on the brink of war over the Fashoda Incident, through the Entente Cordiale of 1904. This was ultimately a strategic choice to counter the German Navy [6]. It is a precedent of a hegemonic power reaching a pragmatic compromise with a country with which it had a history of competition and conflict when faced with resource constraints. This shows a logical structure similar to the current dynamic, where the United States is having South Korea and Japan compete while ultimately seeking to leverage the capabilities of both.

The process of establishing the MRO system for allied warships also serves as a reference case. In response to the decline of its domestic shipbuilding base, the U.S. Navy has already established maintenance and repair hubs in the Philippines, Japan, and South Korea [9]. This was a path that first increased reliance on allies in an area with fewer legal restrictions than new construction. The current review of frigate designs can be seen as the next step: an attempt to expand reliance on allies into the new construction sector, where legal barriers are higher. The existence of this phased path of opening, from MRO to new construction, serves as a benchmark for gauging the pace of future developments.

South Korea's failed bid for the Canadian submarine project offers insights as a case of competitive failure within the same industry. According to Yonhap News, this failure prompted the South Korean shipbuilding industry to turn its attention to the U.S. Navy market [4]. The pattern of a setback in one market becoming a driver for targeting another is a phenomenon repeatedly observed in the defense export industry. Japan is also pursuing a similar diversification strategy. Examples include Onomichi Dockyard collaborating with a U.S. startup to produce uncrewed vessels, targeting both Japanese and U.S. demand simultaneously [7], and Japanese defense procurement officials visiting Israel to explore strategic deals [12]. This confirms a common industrial strategy in both countries to reduce dependence on any single national market.

4. Key Variables Shaping Future Developments

First, the pace of legislative action in the U.S. Congress is crucial. Whether the Merchant Marine Allies Partnership Act can pass the House committee stage and proceed to a full floor vote will determine the legal foundation for this issue [3]. Unless the Jones Act exception is expanded, there will be limits to adopting allied designs for actual contracts.

Second is the prioritization within the U.S. defense budget. With resources being allocated to strengthening dominance in the Western Hemisphere [6], the amount of funding secured for vessel acquisition in the Asia-Pacific will determine the actual scale of procurement. If budget allocation is delayed, the design review itself could end up as merely a political gesture.

Third is the progress of investment negotiations with the U.S. Since MASGA originated as a product of tariff negotiations [3], it is important how the shipbuilding sector is structured to meet the 'commercial viability' standard during the future investment implementation process [15]. Given the precedent of the energy sector being selected as the first project, shipbuilding cooperation will need to be supported by a separate logic of profitability to translate into actual investment.

Fourth is the pace of China's naval buildup. If gradual but continuous force enhancement, like with the 054A-class frigates, continues [11], the U.S. Navy's urgency to acquire warships will increase, potentially accelerating the decision to adopt allied designs. Conversely, if the threat perception diminishes, there is a possibility of reverting to the principle of prioritizing the domestic shipbuilding base.

Fifth is Japan's competitive strategy. Apart from the technical maturity of the improved Mogami-class, the terms on which Japan structures its defense cooperation with the U.S. will directly affect South Korea's position. Japan's moves to enhance its negotiating power by simultaneously pursuing cooperation with third countries like Israel [12] suggest the need for a similar diversification strategy for South Korea as well.