Why South Korea’s Shipbuilding Diplomacy Could Be a Pivotal Development for KDEF

South Korea is taking a bold swing at an unlikely target: reviving American shipyards.

The plan, nicknamed “Make America Shipbuilding Great Again” (MASGA), is a proposed $150 billion initiative to pour capital, technology, and training into U.S. shipbuilding. [1] For Korea, it’s a way to strengthen ties with Washington, secure more defense contracts, and showcase its world-class shipbuilding know-how. For investors, it may mean opportunities for the Plus Korea Defense Industry Index (KDEF).

Why Shipbuilding? Why Now?

South Korea already sits at the top of the global shipbuilding league. [2] In the first half of 2025, Korean yards claimed 25% of all new global orders [3], focusing on advanced ships like LNG (Liquid Natural Gas) carriers, destroyers, and auxiliaries. With LNG trade volumes projected to grow ~60% by 2040, Korea’s edge in building high-tech, high-value ships is becoming even more valuable. [4]

The U.S., by contrast, has struggled to keep up. Its naval yards are overbooked, while demand for both military and commercial ships continue to rise. MASGA is designed to fix that. One showcase deal: a major investment in Philadelphia’s shipyard, pairing Korean efficiency with American demand. Hanwha has pledged $5 billion to expand and modernize Philadelphia’s shipyard, part of South Korea’s MASGA initiative. The investment will add new docks and facilities, boost output from fewer than two ships to as many as 20 vessels annually and create thousands of U.S. jobs all while bringing Korean digital shipbuilding methods to American soil. [5]

Submarines: Silent Strength

Korea isn’t just a leader in tankers and carriers; it’s making waves under the surface too. The KSS-III submarine, built by Hanwha Ocean and HD Hyundai (both in KDEF as of 9/30/25), is packed with air-independent propulsion, lithium-ion batteries, and vertical launch systems. It can stay submerged for weeks and deploy advanced missiles. These subs are already drawing export interest in Europe and Asia, more proof that Korea is becoming a full-spectrum maritime power. [6][7]

What This Means for KDEF

For investors, the Plus Korea Defense Industry Index (KDEF) may offer a way to tap into these themes. Here’s why MASGA could matter:

• Reliable export revenues. Korea booked $17.3B in defense exports in 2022, ~$13.5B in 2023, and ~$9.5B in 2024 and the Defense Acquisition Program Administration is cautiously eyeing a $23 billion goal this year. [8] The flow continues: Korea Aerospace Industries (held in KDEF as of 9/30/25) recently sealed a $700M FA-50 fighter deal with the Philippines. [9]
• Bigger, stickier contracts. Shipyard partnerships mean not just ship sales, but also modules, integration, and decades of maintenance which means steady revenue.
• Maritime security tailwinds. From LNG logistics to undersea deterrence, global demand for sophisticated vessels keeps rising and Korea is already positioned as the go-to builder.

KDEF, which invests at least 80% of its assets in defense-linked firms and rebalances quarterly, aims to capture exposure to these companies as they potentially secure export contracts, expand in the U.S., and may benefit from rising geopolitical demand.

Strategic Outlook

MASGA isn’t just a catchy slogan - it’s South Korea’s attempt to align its industrial muscle with America’s naval needs. If the initiative takes hold, Korean defense firms could potentially see years of growth fueled by exports, U.S. partnerships, and global maritime demand.

For investors, KDEF seeks to offer investors exposure to that story.

Peruse KDEF’s Holdings here.

[1] Reuters Staff Writers, “Make America Shipbuilding Great Again” package key to reaching trade deal, South Korea Says, Reuters, 7/31/25.

[2] Staff Writer, South Korea Becomes World’s Top Shipbuilder in January, Surpassing China, Marine Insight, 2/8/25.

[3] Maritime Executive Staff, South Korean Shipbuilders Report Strong H1 as Orders Shift From China. The Maritime Executive, 7/29/2025.

[4] Rashad, Marwa & Chow, Emily, Shell Expects 60% Rise In Global LNG Demand by 2040 as Asia Leads Growth, Reuters, 2/25/25.

[5] Ballinger Fletcher, Zita, South Korean Manufacturers Outline Plans To Bolster US Shipbuilding, Defense News, 9/16/25.

[6] Larson, Caleb, KSS-III: It Might Be One Of The Best Submarines On Earth (Not In The US Navy, National Security Journal, 5/30/25.

[7] Min-Kyung, Jung, From tanks to submarines: South Korea deepens defense footprint in Poland, The Korea Herald, 9/8/25.

[8] Min-Kyung, Jung, From ashes of war to arsenal of world: South Korea’s defense industry boom, The Korea Herald, 8/14/25.

[9] Reuters Staff Writers, South Korea’s KAI signs $700 mln aircraft deal with Philippines, Reuters, 6/4/25.