“Red Flags for Both Shipbuilding and MRO”: With Its Shipbuilding Base Hollowed Out, U.S. Taps Allied Production Capacity to Counter China’s Naval Expansion

U.S. Moves to Procure Warships by Leveraging Shipbuilding Capacity of Allies Including South Korea and Japan
Erosion of U.S. Shipbuilding Base Creates Bottlenecks From New Construction to MRO
East Asia Dominates Global Shipbuilding as China Races Ahead

The U.S. Navy is increasingly considering the direct procurement of warships built in allied countries. Its domestic shipyards lack the capacity to keep pace with demand, delaying the delivery of numerous new vessels, while maintenance, repair and overhaul (MRO) bottlenecks affecting the existing fleet have sharply reduced the number of operationally available ships. As China rapidly expands its capacity to build both commercial and naval vessels and widens its lead over the United States, Washington is expected to leverage the production capabilities of allied shipbuilders to address near-term fleet shortfalls while rebuilding its domestic shipbuilding industrial base.

U.S. Strategy to Secure Warships

On Sept. 16 (all dates local), the Nikkei cited multiple U.S. Navy officials as saying that the service is considering procuring frigates built in allied countries such as South Korea and Japan to address its warship shortage. One official said, “We are examining options that could fulfill President Donald Trump’s objective of accelerating vessel deliveries while pursuing long-term investment in U.S. shipyards and technology transfers.” Another official said, “Given the shortage of ships, we may buy several Japanese frigates,” adding, “Japanese ships are excellent.”

The U.S. government has already signaled the possibility of introducing foreign-built vessels. On Aug. 13, U.S. President Donald Trump signed a national security presidential memorandum directing the Navy to expand the so-called “Finnish model,” under which foreign shipbuilders construct vessels at U.S. shipyards and deliver them to the United States, across its procurement programs. The measure covers up to three ship classes: surface combatants capable of conducting anti-submarine warfare, anti-ship warfare and escort missions; consolidation tankers (CONSOL Tankers) for at-sea replenishment; and roll-on/roll-off vessels. However, foreign shipbuilders seeking to deliver vessels constructed overseas must either build a new shipyard in the United States or acquire ownership or a majority stake in an existing U.S. shipyard, while all follow-on vessels after the first two must be constructed at U.S. yards. Additional conditions include hiring and training American workers, transferring construction technologies held by the companies’ home-country shipyards and establishing local supply chains.

South Korea, Japan and Türkiye Emerge as Candidates

The latest guided-missile frigates from South Korea, Japan and Türkiye have emerged as candidates for overseas construction. According to a Sept. 1 report by U.S. naval affairs outlet USNI News, Acting Secretary of the Navy Hung Cao instructed Assistant Secretary William Mahan to complete overseas assessments of three vessel classes—surface combatants, roll-on/roll-off vessels and CONSOL tankers—by Nov. 12. In the surface-combatant category, which forms the centerpiece of the review, the principal candidates reportedly include South Korea’s Chungnam-class guided-missile frigate, also known as the Ulsan-class Batch III; Japan’s export-oriented next-generation frigate based on the Mogami class, known as the New FFM or 06FFM; and Türkiye’s Istanbul-class guided-missile frigate.

The Chungnam class, the South Korean Navy’s latest combat vessel, has a light displacement of 3,600 tons. HD Hyundai Heavy Industries handled the detailed design and construction of the lead ship. SK Oceanplant is constructing the second through fourth vessels, while Hanwha Ocean secured the orders for the fifth and sixth. Japan’s candidate, the New FFM, is a next-generation frigate with a larger hull and enhanced weapons capabilities based on the existing Mogami class, with Mitsubishi Heavy Industries (MHI) serving as the prime contractor. The Japan Maritime Self-Defense Force is pursuing the acquisition of 12 New FFMs, while Australia has also selected the same design for its next-generation general-purpose frigate and signed a contract in April to procure an initial three vessels. Türkiye’s Istanbul class is a guided-missile frigate displacing approximately 3,000 tons, developed under the country’s indigenous warship program, MİLGEM. The lead ship, TCG Istanbul, was built at Istanbul Naval Shipyard and delivered to the Turkish Navy in 2024, while multiple local shipyards are sharing responsibility for constructing the follow-on vessels under the leadership of state-owned defense company STM.

Decline of the U.S. Shipbuilding Industry

The United States’ interest in utilizing allied warship-construction capacity reflects the structural deterioration of its domestic shipbuilding industrial base. According to an analysis released by the U.S. Government Accountability Office (GAO) in April, Navy and Coast Guard shipbuilding programs have consistently fallen short of their original plans over the past two decades, while major programs currently under way face billions of dollars in cost overruns and delivery delays measured in years. The underlying problem is that the productive capacity of the U.S. shipbuilding industry has weakened to the point where it can no longer adequately handle the Navy’s order volume.

The GAO examined seven major shipbuilders constructing combat vessels for the U.S. Navy and found that none could meet the Navy’s current delivery targets. Aging facilities and equipment have substantially eroded productivity. Some shipyards also lack sufficient workspace and have consequently outsourced processes they previously handled in-house, including the production of hull blocks, while skilled workers remain difficult to secure in fields such as welding, piping and electrical work. At some shipyards, workers with fewer than five years of experience account for nearly 57% of the workforce. These problems are directly affecting the size of the U.S. Navy’s fleet. The Congressional Budget Office (CBO) said in April, “Between 2026 and 2030, the Navy’s actual fleet will contain an average of approximately 20 fewer ships per year than it would have if historical construction rates had been maintained,” adding, “A substantial share of that shortfall will consist of destroyers and submarines expected to play critical roles in future conflicts with major powers such as China.”

Table 1. Structural Constraints Facing the U.S. Shipbuilding Industry

MRO Weaknesses Continue to Worsen

Bottlenecks across the MRO ecosystem are equally severe. According to the CBO’s “Maintenance Delays for Conventional Navy Ships” report published last December, Arleigh Burke-class destroyers—the U.S. Navy’s principal surface combatants—are projected to spend an average of more than nine years of their planned 35- to 40-year service lives unavailable for operations because of major maintenance. That is more than twice the approximately four years projected in the Navy’s 2012 class maintenance plan. A succession of problems—including prolonged maintenance caused by aging vessels, delayed pre-maintenance inspections, late contract awards, modernization work, delays in procuring parts and materials, and failures to coordinate maintenance schedules—has accumulated, causing the entire MRO system to falter.

This maintenance backlog is directly reducing the U.S. Navy’s operational availability. When the CBO report was released, only about one-third of the surface fleet was available for deployment. Given that the Navy aims to keep approximately half of its surface ships continuously available for operations, a substantial gap has emerged between the number of vessels it owns and the force it can actually deploy. The shortfall is also pronounced in the submarine fleet. According to the GAO, maintenance delays and waits for work to begin cost U.S. Navy nuclear-powered attack submarines more than 15,000 operational days between 2016 and 2025. During that period, the Navy spent $3.4 billion merely to maintain submarines and crews that could not be deployed on missions.

East Asia’s Shipbuilding Competitiveness

East Asian countries have filled the vacuum left by the decline of the U.S. shipbuilding industry. According to the United Nations Conference on Trade and Development (UNCTAD), shipyards in South Korea, China and Japan accounted for 91% of all vessels completed worldwide last year by gross tonnage (GT). South Korea maintains a large-scale production base centered on high-value-added vessels and possesses the design and construction capabilities required to produce destroyers and frigates simultaneously. Although Japan’s global market share has declined from its former level, it continues to produce warships at a steady pace. MHI and Japan Marine United (JMU) have been constructing the planned fleet of 12 Mogami-class frigates, with the ninth vessel, JS Natori, entering service in May and the tenth, JS Nagara, following in June. Japan’s Ministry of Defense plans to procure another 12 New FFMs, while construction of Taigei-class submarines and Aegis System Equipped Vessels (ASEVs) is also under way.

China has expanded its production base faster than either of the other two countries. According to China’s Ministry of Industry and Information Technology, the country’s shipbuilding output approached 53.69 million deadweight tons (DWT) last year. That represented an 11.4% increase from the previous year and 56.1% of total global output. During the same period, new orders reached 107.82 million DWT, or 69.0% of the global market, while year-end order backlogs stood at 274.42 million DWT, equivalent to 66.8%. China’s capacity to produce large warships has also continued to expand. According to Naval News’ tracking of Chinese naval construction, the Dalian and Jiangnan shipyards built as many as 13 Type 052D-series destroyers last year, seven to eight of which were commissioned before year-end. Construction of six additional 10,000-ton Type 055 large destroyers in the second production batch, which began in 2023, was also completed last year, bringing cumulative output to 14 vessels. In November, China formally commissioned Fujian, its third aircraft carrier, which was built at Jiangnan Shipyard.