Japan and South Korea can each build high-quality warships on time and on budget—making them an attractive option for keeping up with China’s shipbuilding sector.

The US Navy is considering outsourcing warship design and production to South Korea and Japan in an attempt to increase output.

This is a step that was long seen as unspeakable in the Pentagon—yet has become a real possibility as US defense planners seek to increase the size of the fleet to counter China’s industrial might.  

How Would Outsourcing Shipbuilding Work?

In its budget request for Fiscal Year 2027, the Navy has proposed allocating $1.85 billion for a feasibility study to determine whether South Korean and Japanese shipyards can accommodate the needs of the Navy.  

Former Navy Secretary John Phelan told reporters at a media roundtable at Sea-Air-Space 2026 in Washington last week that the service is facing an acute labor capacity problem at home and is seeking ways around it. One proposal is to outsource shipbuilding overseas.  

“Everything’s on the table,” Phelan said. “We just need to look at it, understand it, understand the implications behind it, and decide if we think that makes sense or not.” 

South Korea and Japan each have robust commercial and warship shipbuilding capabilities. The feasibility plan will focus on the potential co-production of advanced warship hulls, such as the Japan Maritime Self-Defense Force’s (JMSDF) Mogami-class and South Korean Navy’s Daegu-class frigates.

The ultimate goal is to match China’s remarkable shipbuilding capability. Beijing currently pumps out as many as 10 destroyers per year, a rate of production four times higher than that of the United States.

It is unclear how the outsourcing feasibility study will be affected by Phelan’s abrupt departure from his role as Secretary of the Navy last week. Acting Secretary of the Navy Hung Cao, Phelan’s second-in-command and most likely successor, has not yet made a public comment on the issue.

The Navy Wants to Incentivize Domestic Production, Too

Fears that buying warships from Japan and South Korea could lead to a collapse in US ship manufacturing are unfounded. Any plans for the Navy to outsource shipbuilding overseas will go hand in hand with boosting domestic production, too.

In its budget proposal, the Navy has asked for $65.8 billion for shipbuilding. The funds are intended to build 34 ships (18 warships and 16 support vessels). Overall, the Navy’s goal by the middle of the century is to grow the fleet to about 380 vessels, up from the current 291. 

“America’s shipbuilding industry is a national strategic security asset that strengthens deterrence, enhances global readiness, and keeps the fleet forward. Modernization efforts are creating American jobs, revitalizing communities, and fueling innovation,” the Navy stated in its latest budget request.  

But to achieve that goal, the naval defense industry needs to overcome some structural issues. Today, it is more common for new ships to be late and over cost than not. For example, in November, the Navy decided to cancel the Constellation-class frigate program and replace it with the FF(X) frigate because of repeated delays and cost overruns.

The Navy is looking for ways to incentivize production at home. One approach is to offer bonuses for early deliveries.

“One of the things we are going to do in our contracting is if you beat schedule, you’re going to get a bonus, but you’re going to share it with the workers,” Phelan stated.  

The plan to outsource shipbuilding to South Korea and Japan seems to be an essential part of growing the Navy’s numbers. It remains to be seen whether the Navy believes that is a feasible approach.  

About the Author: Stavros Atlamazoglou

Stavros Atlamazoglouis a seasoned defense journalist specializing in special operationsand a Hellenic Army veteran (national service with the 575th Marine Battalion and Army HQ). He holds a BA from the Johns Hopkins University and an MA from the Johns Hopkins’ School of Advanced International Studies (SAIS). His work has been featured in Business Insider, Sandboxx, and SOFREP. 

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