【By Observer Net Columnist Chang Luo Wen】
On October 14, 2025, the Chinese Ministry of Commerce issued an order in the name of the Minister, announcing countermeasures against five U.S. subsidiaries of Hanwha Ocean Co., Ltd.
This news quickly triggered a chain reaction in the international financial market. On the same day, South Korean Hanwha stock prices fell sharply, with the highest drop reaching 9%, then slightly rebounded, closing down 5.8%. At the same trading session, the South Korean benchmark composite index fell by 0.6%.
In this Ministry of Commerce order, there is a sentence that is very thought-provoking: "Hanwha Ocean Co., Ltd. has assisted and supported the U.S. government's related investigations, endangering our country's sovereignty, security, and development interests."
Today, we will carefully explore how this second-largest shipbuilding company in the world got its start, how it built a global production network covering Eastern Europe, the Middle East, East Asia, and the Americas, and what connections it has with the United States.
History of Hanwha Group
It turns out that the name of the Hanwha Group itself is somewhat "not quite right" - "Hua" was actually a deliberate translation "error". The earliest predecessor of Hanwha was the Korea Gunpowder Co., Ltd., established in 1952. "Hanhua" would be more accurate as "Hanhuo", but for commercial reasons, it was renamed Hanwha in 1992 from the Korea Gunpowder Group.
Historical logo of Hanwha Group
Like other Korean conglomerates of that era, Hanwha's rise can be traced back to the Japanese occupation of the Korean Peninsula. The most important senior executive of Hanwha, Kim Jong-hee, was born in 1922, and entered the Gyeonggi Provincial Commercial School in 1937. In 1940, while in his fourth year at the Gyeonggi Commercial School, he was involved in a fight between Japanese and Korean students. In November 1940, he was expelled from the school, and through the arrangement of the chief of the Gangwon Police Station, he transferred to the Gangwon Provincial Commercial School. He stayed at the residence of the Gangwon Police Chief, and the next year, he advanced to the fifth grade, graduating from the Gangwon Commercial School in December 1941.
Due to his not very affluent family background, and the outbreak of the Pacific War, he joined the Korea Gunpowder Co., Ltd. in January 1942, through the introduction of a police officer named Koike who had been transferred from the Gangwon Police Station to the Gyeonggi Police Bureau.
At that time, the Japanese colonizers implemented "one industry, one company" in the Korean Peninsula. The Korea Gunpowder Co., Ltd. at that time was a comprehensive group, combining the Korean Nitrogen Chemical, Korean Gunpowder Manufacturing, Korean Oils, Korean Asano Hikaru Fengshan Factory, and two gunpowder dealers affiliated with the Japanese Empire's Korean Gunpowder Firearms and Korean Gunpowder Sales, monopolizing the manufacturing and distribution of the chemical industry. To show "friendship," they hired Kim Jong-hee, introduced by Koike, as a manager.
After joining, Kim Jong-hee showed interest and talent in the production of explosives. In January 1944, he was promoted to the head of the explosive production department upon the recommendation of Matsunaga Kichirō.
After Japan's surrender and the liberation of Korea, the six executives from the Japanese side, including President Miyamoto Masaharu, Vice President Kimura Tai, Sales Manager Sugimoto Tsutomu, General Manager Ueno Yuko, Purchasing Manager Matsushita Nobuo, and Production Manager Yoshida Baku, decided to appoint Kim Jong-hee as the manager and entrusted him with the full responsibility of handling the handover of the Korea Gunpowder Company. On September 23, all Japanese employees below the level of the president resigned, and on September 24, 1945, Kim Jong-hee took over the 31 gunpowder warehouses south of the 38th parallel.
In 1946, Kim Jong-hee's fate took another turn when he was appointed as the manager of the Korean Explosives Committee Company by the U.S. military government. In February 1952, Kim Jong-hee participated in the government's property disposal, acquiring the Korea Gunpowder Co., Ltd. for 230 million 456,800 won (to be repaid in 10 installments). In October 1952, he invested 50 million won together with his brother Kim Jong-jeok, his brother-in-law Yoo Sam-ryeol, colleagues Kim Deok-sung, Min Young-wan, Hong Yong-yong, and Kwon Heok-jung, and established the Korea Gunpowder Co., Ltd. in Busan.
In April 1956, the first self-produced explosives factory in South Korea, Incheon Explosives Factory, was completed, and Kim Jong-hee was hailed as the "Nobel of South Korea." In 1963, he successively acquired Gwangyang Bearings and Shinhan Bearings, reorganizing them into Korea Bearing Industry (now Hanwha Power). In 1967, Kim Jong-hee was elected as a director of the Korean Industrial Association. He was appointed as the honorary consul general of Greece in South Korea, and the Greek embassy in South Korea is still located in the office building of Hanwha Group's Cheonggyecheon branch.
From 1968 onwards, after completing the initial accumulation, Hanwha exploded, starting the "buy-buy-buy" acquisition model. In 1965, it acquired Korea Chemical Industry, entering the petrochemical field. Later, it acquired Shinhan Bearing Industry. In 1985, it acquired Jungya Group and became a representative leisure enterprise in South Korea; in 1986, it acquired HanYang Distribution, entering the distribution sector. In 1992, the Korea Gunpowder Group was renamed Hanwha Group. In 1998, FAG Hanwha Bearings was established. In 2002, Hanwha acquired Daehan Life Insurance. In 2007, Hanwha acquired Azdel Inc. in the United States, establishing its position as a global automotive parts manufacturer.
During the period around 2008, when Sino-Korean relations developed rapidly, Hanwha Securities established a joint venture company in China. In 2009, the Gyeonghae Technology Valley was established, followed by the completion of Hanwha L&C's Canadian and Czech factories. In 2010, the Gyeonggi Hwaseong Biotech Valley was established. In 2017, the Hanwha Financial Joint Brand LIFEPLUS was launched. In 2021, the "Space Hub" was established, entering the private space development field. In 2022, all defense business was integrated and merged into Hanwha Aerospace. In 2023, Hanwha Robotics was established. In 2024, Hanwha completed the acquisition procedures for the Philadelphia Shipyard in the United States, becoming the first South Korean company to successfully acquire a U.S. shipyard.
The founder of this empire, Kim Jong-hee, passed away at the age of 58 in 1981 due to complications from diabetes and other chronic diseases. Because he did not leave a will, there was a dispute among his family members over the inheritance, and his two sons fought in court for over a decade until 1996.
What did the sanctioned Hanwha Ocean Co., Ltd. do?
The Hanwha Ocean Co., Ltd. that was sanctioned was also formed through acquisitions, and its predecessor was the Daewoo Shipbuilding & Engineering Co., Ltd. It was renamed Hanwha Ocean in 2023.
Daewoo Shipbuilding & Engineering Co., Ltd. was established in October 1973. It is the second-largest shipbuilding company in the world, with annual sales revenue of $10.5 billion, and has a global production network covering Eastern Europe, the Middle East, East Asia, and the Americas. However, it suffered continuous losses from 2012 to 2016, and only turned a profit in 2017 through organizational adjustments and asset sales.
In December 2024, Hanwha Ocean and Hanwha Systems completed the acquisition of the Philadelphia Shipyard in the United States and established Hanwha Philadelphia Shipyard. In November 2024, South Korea obtained a regular maintenance contract for the USNS Yukon, a U.S. Navy replenishment ship. This Yukon is stationed in Asia and has long participated in joint operations with the Japanese Self-Defense Forces, serving as an important support for the U.S. Navy's Indo-Pacific operations.
Following the outbreak of the Russia-Ukraine conflict, South Korean military exports have grown rapidly, rising to the top ten countries in arms exports worldwide. Hanwha Aerospace's stock price has soared.
Market share of the top ten arms exporters globally from 2020 to 2024. South Korea accounts for 2%.
South Korean defense export volume over the past five years
Stock price performance of key South Korean defense companies
As can be seen, Hanwha Ocean, on the surface, is a commercial company providing ship solutions and maritime services, with its main promotion focused on sustainable development and environmental protection. In reality, it bears the strategic task of manufacturing and exporting conventional diesel attack submarines, drilling platforms, and LNG ships in South Korea. Moreover, it is actively and passively transforming into an extension of the U.S. military-industrial complex.
The five U.S.-related subsidiaries of Hanwha Ocean that were sanctioned are Hanwha Shipping, Hanwha Philadelphia Shipyard, Hanwha Ocean USA International, Hanwha Shipping Holdings, and HS USA Holdings.
Among them, Hanwha Shipping LLC (Hanwha Shipping LLC) was established in April 2024, aiming to serve as a platform company for testing the latest shipbuilding technologies and undertaking the company's shipping business. However, the fleet is currently in the process of establishment and delivery, without any actual operation. In February 2025, it just signed an agreement with its parent company Hanwha Ocean, under which Hanwha Ocean will build two of the most advanced zero-emission LNG tankers, to be operated by HS LLC. Each vessel costs 252 million dollars, and it is expected to be launched in 2027-2028.
Hanwha Philly Shipyard Inc. (Hanwha Philly Shipyard Inc.) was established in December 2024, specifically to invest in the Philadelphia Shipyard in the United States, and is a symbolic location of the U.S.-South Korea shipbuilding cooperation project - "MASGA (Make American Shipbuilding Great Again)."
HS USA Holdings Corp, which has a name similar to the well-known South Korean materials company Hyosung Inc. (HS Hyosung USA), is also a holding company, serving as a subsidiary of Hanwha Shipping.
In the United States, large groups usually establish LLCs (limited liability companies) to simplify corporate structures and tax structures, to some extent hiding the identities and intentions of shareholders and investors, and isolating risks.
In 2024, the specialized lobbying company Q CELLS established by Hanwha in the United States spent nearly 4 million U.S. dollars. Its main expenditures, besides defense appropriations and budgets, also included investments in commerce, homeland security, and other areas. It can be said that Hanwha has done very professionally in "adapting to local customs" in the United States.
Evaluation of the Effectiveness of Our Sanctions
The companies affected by the sanctions have little actual business or have just been established, and even Hanwha's spokesperson stated, "We have not participated in the U.S. government's investigation. Due to the fact that most of the sanctioned entities are dormant or newly established, the company's business has not been affected."
Does this mean that our sanctions are just a lot of noise and little substance?
Actually, such sanctions are not aimed at small gains, at least there are several benefits.
Firstly, this sanction strictly limits the entities operating in the United States, and the South Korean Hanwha parent company's normal cooperation with China is not affected (although Hanwha has already completely withdrawn from its Chinese joint ventures). This means that Hanwha North America will be completely excluded from China's supply chain system, from steel to rare earths, from aluminum products to chips, everything must rely entirely on U.S. manufacturing to compete with Chinese manufacturing in terms of price and quality. Not only is the outcome already determined, but it will also once again expose that "making American shipbuilding great again" and "bringing manufacturing back to the United States" are two contradictory things.
Secondly, although South Korea is urgently trying to conduct consultations through the presidential office with China, it seems that the strike against South Korea's pillar enterprises has really hurt the South Korean economy. In reality, the progress of the U.S.-South Korea trade negotiations has not been smooth, and both sides are dissatisfied with the preliminary agreement of a 15% tariff level.
Just before the sanction was announced, South Korea had made a "major progress": previously agreed to invest 350 billion U.S. dollars, which could be fully cash investment. Under these difficult circumstances, having a reason to slow down the takeover of the Philadelphia Shipyard, and using this opportunity to propose new transaction conditions to the United States, for South Korea, may actually be "a pillow for a sleeping person."
Thirdly, the South Korean chaebols are not a solid block. Hyundai Group (HD Hyundai) was originally competing with Hanwha in North America, and was negotiating with a U.S. company operating a dock to build an LNG ship, hoping to win the U.S. government order before Hanwha. Due to Hanwha's previous acquisition of the Philadelphia Dock, and getting President Lee Jae-myung to visit during his trip to the United States, it put Hyundai in a passive position.
Now, with Hanwha being severely punished by China, Hyundai Group should be relieved that it did not take the forefront of "making American shipbuilding great again," because their U.S. partner - Edison Chouest Offshore (ECO) is not only a dock and port operator, but also a military contractor for the U.S. Navy and Coast Guard, responsible for manufacturing military vessels for the U.S. armed forces, providing maintenance services, and building transport ships and icebreakers. If there is another round of sanctions, Hyundai Group is likely to be one of the "lucky users."
Different from Hanwha, which focuses on military exports, aerospace, and domestic energy markets, Hyundai Group's main business is heavy industry, construction, and automobiles. Its investments in China are more diverse and rich, and its heavy industry products are more dependent on the Chinese market. With Hanwha as a model, Hyundai will have to reconsider the profitability of its cooperation with the United States. From this, it can be extended to consumer goods groups that rely more heavily on the Chinese market, such as Samsung and LG, which will have to weigh their own weight when choosing sides.
Finally, the core task of the "Make American Shipbuilding Great Again" plan is to have allies, mainly South Korea and Japan, use their shipbuilding capacity to undertake maintenance tasks and replacement of U.S. naval ships.
In March 2025, Hanwha Ocean announced that it had completed the comprehensive overhaul and maintenance of the U.S. Navy's后勤补给船 "USNS Wally Schirra" at its Gijang Shipyard and delivered it to the U.S. Navy. This was the first time Hanwha Ocean had undertaken and completed a routine maintenance project for a U.S. Navy vessel.
In August 2025, Hanwha Ocean will invest an additional 5 billion U.S. dollars in its Hanwha Philadelphia Shipyard to significantly increase the shipyard's shipbuilding capacity. Hanwha will add two dry docks, three piers, and build a section manufacturing base of about 400,000 square meters, while introducing automation and smart shipyard technology to provide sections and modular supplies for U.S. warships.
From this, it can be seen that the United States is stretching its muscles, preparing to fully absorb South Korea into the military-industrial complex.
Conclusion
Now, South Korean companies are "falling short before they have finished their mission," which can test the real level of U.S. shipbuilding capabilities, preparing more thoroughly for a potential armed conflict that no one wants to see, and also serve as a warning to Japan and other U.S. allies: China's market and U.S. orders cannot be obtained at the same time, and may end up getting neither.
After all, thirty years of river east and thirty years of river west, the days when the U.S. could make allies run into developed countries with scraps of oil are gone, just like the days when guns and warships could bully China.
Moreover, this round of trade disputes between China and the United States, starting with "port fees," is happening at a time when the heads of state of the two countries may hold an APEC summit. In the context of the Trump administration repeatedly practicing the "art of negotiation" by first extorting and then demanding, it is necessary to create some leverage in advance, prepare some ammunition for Sino-U.S. negotiations, and leave enough room. This is our due strategy, because if development is achieved and then someone else takes advantage, isn't it a waste of development?
The "first beam rots first" of Hanwha may eventually become another TACO (Trump Always Chickens Out) moment for Trump.
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