Hanwha Ocean loses $28 billion Canadian submarine contract to German competitor

Canada selected Germany's ThyssenKrupp Marine Systems (TKMS) over South Korea's Hanwha Ocean to build up to 12 submarines, with the decision marking a major setback for the Korean shipbuilder in Canada's 60 trillion won project to replace the Royal Canadian Navy's aging fleet.

Objective Facts

Canadian Prime Minister Mark Carney announced on Monday that Thyssenkrupp Marine Systems (TKMS) is the preferred supplier to build as many as 12 submarines for Canada, in a speech at a naval base in Halifax before departing for the NATO summit in Ankara, Turkey. The decision marks a major setback for the Korean shipbuilder in Canada's 60 trillion won project to replace the Royal Canadian Navy's aging fleet of four Victoria-class submarines with 12 new 3,000-ton diesel-electric vessels, with the program also including long-term maintenance, repair and overhaul services. Shares of Hanwha Ocean fell more than 23% on Tuesday morning after Canada picked the German bid over the South Korean shipbuilder's proposal. Hanwha Ocean was designated as the reserve supplier; both Hanwha Ocean and TKMS submitted proposals that met the operational requirements of the Royal Canadian Navy. The choice has far-reaching geostrategic implications, pulling Canada closer into Europe's orbit when the United States is pulling away from NATO; however, Carney said the decision does not signal any diminished Canadian interest in the Indo-Pacific, noting "We're very committed to the Indo-Pacific strategy," and that he had spoken to South Korean President Lee Jae Myung over the weekend.

Deep Dive

Germany's greatest strength in the competition was not necessarily a superior submarine, but its position inside Europe's established defense ecosystem; supported by Norway and backed by decades of supplying submarines to multiple NATO navies, TKMS could offer Canada seamless integration into an alliance network covering logistics, training, maintenance, operational procedures and long-term interoperability. Those considerations mattered—not because Hanwha Ocean lacked technical credibility, but because alliance cohesion ultimately became the decisive criterion. Carney said the decision was "a difficult, close decision between two highly qualified suppliers," noting that "Both the TKMS and Hanwha platforms met the capabilities of the Royal Canadian Navy, and both put forward strong proposals". TKMS offered Canada the 212CD submarine, being developed with Norway, and made a strong case around interoperability, lower delivery and integration risk, Arctic and North Atlantic experience, and the advantages of working with two NATO allies at a moment when Canada is under pressure to translate higher defence spending into real capability. Hanwha Ocean, bidding with HD Hyundai Heavy Industries, offered the KSS-III Batch II, a class already in service with the Korean Navy, and promised the first four boats by 2035 and all 12 by 2043; the Korean shipbuilder pledged more than 70 billion Canadian dollars in trade and investment and more than 25,000 jobs a year in Canada between 2026 and 2044, and sailed a KSS-III submarine to British Columbia in May to demonstrate the boat's range. Ottawa said early on that both models of diesel-electric sub would suit its purposes; Hanwha promised more than $70-billion in trade and investment in Canada and more than 25,000 jobs annually between 2026 and 2044, while German Defence Minister Boris Pistorius said the TKMS bid would add $86-billion to Canada's GDP over the life of the deal and create more than 650,000 job years of employment. The hard-fought competition between TKMS and South Korea's Hanwha Ocean revealed how much Canada's strategic landscape has changed; what might once have been a straightforward, no-contest transatlantic procurement became a serious choice between a European NATO consortium and a major Indo-Pacific defence-industrial power, and the fact that this was not an easy decision is itself significant. For Seoul, the decision was a disappointment after months of high-level campaigning by the government, the Navy and Hanwha Ocean, with President Lee Jae Myung and presidential envoy Kang Hoon-sik backing the campaign. Canada will conclude contracting no later than the end of 2027, with the first four submarines to be delivered ahead of schedule, in 2034.

Regional Perspective

For Seoul, the decision was a disappointment after months of high-level campaigning by the government, the Navy and Hanwha Ocean, with President Lee Jae Myung and presidential envoy Kang Hoon-sik backing the campaign; but officials and industry watchers say the bid still carries significance, as South Korea reached the final stage of one of the world's largest submarine procurement contests against Germany, the country that first taught it how to build submarines. Canada's decision highlights a structural challenge confronting capable defense exporters outside traditional alliance production networks; Korea increasingly finds itself competing against suppliers whose principal advantage lies not in technological superiority but in decades of institutional integration with NATO procurement systems, a competitive landscape fundamentally different from one driven solely by product quality or industrial efficiency. Defense Acquisition Program Administration Minister Lee Yong-chul struck a similar tone Tuesday, saying South Korea had offered a competitive package in terms of submarine performance, delivery timeline and industrial cooperation, but NATO interoperability and long-standing alliance cooperation appeared to have been decisive; Canada cited several strengths in the German offer, including its fuel-cell-based air-independent propulsion system, battery performance, NATO interoperability, crew-sharing arrangements, Norway's decision to yield production slots for earlier delivery, full offset commitments, job creation, and maintenance, repair and overhaul benefits, with Lee arguing that South Korea was not behind Germany in most of those areas and that Seoul's proposed delivery timeline remained faster even when Norway's production adjustment was taken into account. At the NATO summit, Seoul is seeking to turn Europe's growing demand for Korean weapons into something more enduring: a place inside NATO's defense industry ecosystem, spanning supply chains, production networks and military standards; NATO members are rebuilding stockpiles, raising defense spending and searching for reliable suppliers amid Russia's grinding war in Ukraine, with NATO allies in Europe and Canada investing a total of $574 billion in defense in 2025 alone, a 20 percent increase in real terms compared with 2024.

OBJ SPEAKING

Create StoryTimelinesVoter ToolsRegional AnalysisPolicy GuideAll StoriesCommunity PicksUSWorldPoliticsBusinessHealthEntertainmentTechnologyAbout

Hanwha Ocean loses $28 billion Canadian submarine contract to German competitor

Canada selected Germany's ThyssenKrupp Marine Systems (TKMS) over South Korea's Hanwha Ocean to build up to 12 submarines, with the decision marking a major setback for the Korean shipbuilder in Canada's 60 trillion won project to replace the Royal Canadian Navy's aging fleet.

Jul 7, 2026
What's Going On
  • Prime Minister Mark Carney announced on Monday that Thyssenkrupp Marine Systems is the preferred supplier to build as many as 12 submarines for Canada, in a speech at a naval base in Halifax where he stopped en route to the NATO summit in Ankara, Turkey.
  • Germany's TKMS has been selected as the preferred bidder to build Canada's next submarine fleet, edging out Korea's Hanwha Ocean for a contract worth up to 60 billion Canadian dollars over its life cycle, in a decision that keeps Ottawa's undersea capability inside NATO's established submarine partnership.
  • Shares of Hanwha Ocean fell more than 23% on Tuesday morning after Canada picked a German bid to replace its aging submarine fleet over the South Korean shipbuilder's proposal.
  • Hanwha Ocean was designated as the reserve supplier and would participate as an alternative contractor if TKMS encounters difficulties in executing the project; Carney said both Hanwha Ocean and TKMS submitted proposals that met the operational requirements of the Royal Canadian Navy.
  • The choice to negotiate with a German shipbuilding company has far-reaching geostrategic implications, notably pulling Canada closer into Europe's orbit when the United States is pulling away from NATO; some analysts have suggested that the choice of the German-Norwegian bid could be a blow for Canadian ambitions and investment in Asia, with one expert noting "NATO solidarity in the face of Putin's aggression and Trump's unreliability is important. I would argue, however, that Canada's long-term economic and security interests lie in the Indo-Pacific."
Region says: From a Korean perspective, Germany's greatest strength in the competition was not a superior submarine, but its position inside Europe's established defense ecosystem; supported by Norway and backed by decades of supplying submarines to multiple NATO navies, TKMS could offer Canada seamless integration into an alliance network covering logistics, training, maintenance, operational procedures and long-term interoperability. Those considerations mattered—not because Hanwha Ocean lacked technical credibility, but because alliance cohesion ultimately became the decisive criterion. The campaign demonstrated that Korean defense manufacturing has reached the highest level of international competition; a nation that once relied heavily on foreign submarine technology now competes on equal terms with Europe's most established naval constructors, and that achievement should not be overshadowed by a single procurement outcome.
◆ All Sources (9)
Objective Deep Dive

Germany's greatest strength in the competition was not necessarily a superior submarine, but its position inside Europe's established defense ecosystem; supported by Norway and backed by decades of supplying submarines to multiple NATO navies, TKMS could offer Canada seamless integration into an alliance network covering logistics, training, maintenance, operational procedures and long-term interoperability. Those considerations mattered—not because Hanwha Ocean lacked technical credibility, but because alliance cohesion ultimately became the decisive criterion. Carney said the decision was "a difficult, close decision between two highly qualified suppliers," noting that "Both the TKMS and Hanwha platforms met the capabilities of the Royal Canadian Navy, and both put forward strong proposals".

TKMS offered Canada the 212CD submarine, being developed with Norway, and made a strong case around interoperability, lower delivery and integration risk, Arctic and North Atlantic experience, and the advantages of working with two NATO allies at a moment when Canada is under pressure to translate higher defence spending into real capability. Hanwha Ocean, bidding with HD Hyundai Heavy Industries, offered the KSS-III Batch II, a class already in service with the Korean Navy, and promised the first four boats by 2035 and all 12 by 2043; the Korean shipbuilder pledged more than 70 billion Canadian dollars in trade and investment and more than 25,000 jobs a year in Canada between 2026 and 2044, and sailed a KSS-III submarine to British Columbia in May to demonstrate the boat's range. Ottawa said early on that both models of diesel-electric sub would suit its purposes; Hanwha promised more than $70-billion in trade and investment in Canada and more than 25,000 jobs annually between 2026 and 2044, while German Defence Minister Boris Pistorius said the TKMS bid would add $86-billion to Canada's GDP over the life of the deal and create more than 650,000 job years of employment.

The hard-fought competition between TKMS and South Korea's Hanwha Ocean revealed how much Canada's strategic landscape has changed; what might once have been a straightforward, no-contest transatlantic procurement became a serious choice between a European NATO consortium and a major Indo-Pacific defence-industrial power, and the fact that this was not an easy decision is itself significant. For Seoul, the decision was a disappointment after months of high-level campaigning by the government, the Navy and Hanwha Ocean, with President Lee Jae Myung and presidential envoy Kang Hoon-sik backing the campaign. Canada will conclude contracting no later than the end of 2027, with the first four submarines to be delivered ahead of schedule, in 2034.