How Will the Extended Regulatory Measures Affect Hanwha’s Defense Market Dominance?

[Green Economy News = Reporter Choi Seong]

The Korea Fair Trade Commission on April 28 extended behavioral remedies tied to the merger of three Hanwha defense affiliates for another three years, saying competition in the naval ship and parts market has not recovered sufficiently.

The KFTC said it lengthened the compliance period for the remedies imposed on Hanwha Aerospace, Hanwha Systems and Hanwha Ocean, and left open the possibility of up to a two-year additional extension depending on market developments.

The move reflects the commission’s assessment that the concerns raised when the merger was approved in 2023—specifically risks to competition in ship procurement—have not been resolved.

KFTC analysis found Hanwha Ocean remains the market leader in surface ships and submarines, while the Hanwha affiliates continue to exert strong control over key ship component markets.

The commission noted that core systems such as propulsion and combat management have high technical barriers, making it difficult for rivals to find alternative suppliers. That structural constraint, the KFTC warned, leaves room for price discrimination or the withholding of technical information.

Because the defense sector is closely tied to national security, policymakers must balance supply-chain stability with competition policy. The KFTC said an industry dominated by a single group could undermine that competitive balance.

Major defense primes such as Lockheed Martin and BAE Systems also keep critical technologies within their corporate groups, producing a similar market structure globally. Analysts say this intensifies the policy tension between promoting competition and protecting strategic industrial capabilities in South Korea’s naval defense sector.

Defense experts view the decision as a signal that Korea’s naval-defense industry is entering a period of structural change. While South Korea has built export strength in shipbuilding, observers have long warned that parts and systems remain heavily dependent on a few suppliers. Sustaining global competitiveness will require broader participation in open supply chains.

This is the first time the KFTC has extended behavioral remedies imposed after a merger. The commission said it will continue monitoring market structure and may extend the measures further if competition does not improve.

With the naval-defense market expanding rapidly, the ruling highlights that the domestic industry faces a choice between maintaining entrenched, monopoly-like structures and transitioning to a more competitive ecosystem.