Allied efforts to revive shipbuilding are picking up steam, but they are moving along separate tracks. On October 2, Nikkei Asia reported that Japan’s government fund for revitalizing the industry has begun to spur a wave of private investment. Among the projects, Hakodate Dock, which repairs vessels for the Maritime Self-Defense Force, plans to bring back a dock that has sat out of commission since an earthquake in 1993. The fund, launched in fiscal year 2025, has already approved eight projects and will provide up to 311 billion yen ($1.97 billion) through 2034, with total spending expected to reach around 900 billion yen ($5.69 billion) once private investment is included. South Korea, meanwhile, has taken a more direct route, with its companies pouring money into U.S. shipyards. 

Both efforts come as the U.S. leans on its allies to counter China’s dominance in commercial shipbuilding and to ease the delays and backlogs plaguing the U.S. Navy. Yet for all this momentum, Japan, South Korea, and the U.S. appear to have given little thought to which country should build what, or who controls the key technologies that every shipyard depends on.

Japan’s ambitions to revive its shipbuilding industry come amid a long-running erosion of its share of the global market. Japan was once the largest shipbuilder in the world, but was overtaken by South Korea around 2000 and by China soon after, and now ranks third. This is largely due to expansive Chinese investments and policies, alongside South Korea’s specialization in key vessel classes such as LNG carriers. In response, Tokyo has renewed its attention and investment in the sector, designating it one of 17 strategic industries and partnering with industry on roughly 1 trillion yen ($6.33 billion) in public and private investment. 

However, chronic issues plague the industry and any efforts on Tokyo’s part to alleviate them. Labor remains a major constraint, shipyards are booked three to four years in advance, and Japan won just 5 percent of new orders in 2025. Yet despite these constraints, Japan offers many benefits for the U.S. In 2025, Mitsubishi Heavy Industries completed a major overhaul of a U.S. Navy vessel in Yokohama, and last October the two countries signed a memorandum of cooperation to expand shipbuilding ties.

South Korea occupies a stronger position as the world’s second-largest shipbuilder, but its position largely rests on specialization in LNG carriers, an expensive and technologically advanced vessel class. South Korean shipbuilders now hold roughly 70 percent of the global LNG carrier market. Additionally, South Korean shipyards have mastered production methods that allow them to compete on quality, while Chinese yards leverage mass and dominance in less complex classes, like dry bulk carriers. 

South Korean companies, backed by government financing, have also made active efforts to invest in American shipyards, such as Hanwha’s purchase of Philly Shipyard and its pledge to invest $5 billion there. All of this is part of a $150 billion package that South Korea has touted as “Make American Shipbuilding Great Again.” Although it occupies a stronger position in the global market, South Korea faces similar labor constraints to Japan, as well as the domineering presence of Chinese shipyards, which are increasingly competing for LNG orders as well.

The motivations behind these investments and cooperation agreements are sound. The reliance on Chinese shipbuilding prowess poses significant risks, particularly in light of the woeful state of U.S. commercial shipbuilding, which accounts for only 0.1 percent of the global market. However, these various policies and schemes are siloed off. Even the U.S. Maritime Action Plan largely treats allies as investors in American shipyards rather than as partners with their own strengths. Without a broader coordinating scheme, however rough, there will be major overlap and competition between allies and partners, causing major inefficiencies.

This cooperation need not be perfectly specialized. It is highly unrealistic that South Korean shipyards would be willing to concede their advanced production methods to Japanese yards and risk losing market share. Yet, at the same time, Japan is looking to rejoin the LNG carrier market, a class it hasn’t built since 2019. Imabari Shipbuilding, Kawasaki Heavy Industries, and Namura Shipbuilding aim to resume construction around 2035, possibly with South Korean technology. Some level of redundancy and overlap will occur and may even be necessary, but pouring significant funds into a capability that depends on what another partner already has may prove foolhardy.

Instead, some of these investments could be partially diverted toward the key technologies of the future. Japan has paid the price for failing to do so before, when its specialization in Moss-type LNG carriers allowed South Korea to eclipse it once the market shifted to newer membrane-type designs. Additionally, many subcomponents can serve as dangerous chokepoints. For example, the French firm GTT dominates the membrane containment technology used in most LNG carriers. While the risks are reduced because it is a French company, if a firm like it were held by an adversary like China, the potential for weaponization would be profound. China’s willingness to weaponize chokepoints has been felt most acutely with rare earths. And in at least one case, a key maritime technology is already under Chinese control. WinGD, one of the largest designers of marine engines, is a nominally Swiss company wholly owned by China State Shipbuilding Corporation, and its engines are the most popular choice for LNG carriers currently on order.

The single biggest constraint to any such development will be the massive political capital required to create a framework and get all participants to agree. Yet this need not be perfect, as a framework that eliminates even some redundancies can redirect funds that would otherwise go to waste. It is important to caveat that Japan and South Korea remain commercial competitors, and no framework will change that.

Some production of the same vessel classes in both countries will still be useful, since no ally should rely on a single partner for critical ships. But the best value in industrial policy, especially among allies and partners, lies in recognizing their differences and the areas each should focus on. This is especially true for future technologies, such as ammonia-fueled ships, where South Korean and Chinese yards are already competing for early orders. If allies do not coordinate now, the same overlap seen in LNG carriers is likely to repeat itself in the next generation of ships.