TKMS Continues Quest to Expand Production

Noah Note

As the Canadian Patrol Submarine project continues to heat up, both Hanwha and TKMS continue to find ways to get me to talk about them. With tens of billions at stake and a strategic economic agreement tied into the project, both sides are ramping up their efforts to tackle what will likely be one of the single largest orders of submarines in decades (Aussies cancelled. They don't count).

As the largest submarine exporter globally, it would be disingenuous to say that TKMS's quest to rapidly scale up its submarine production is solely influenced by CPSP. With recent orders secured for Singapore, the ongoing German/Norwegian 212CD order, and the Israeli Dakar-class order, TKMS has seventeen subs currently on its order books, not counting either refits or the domestic production underway in Turkey and soon India, which for us I don't count.

Needless to say, the order book is tight. While the company has not seen as much success this year with losses in Poland and Argentina, and rumors circulating that Egypt is going French, there is still further opportunity available in the Philippines, Morocco, and Greece, all of whom are on the watchlist for potential orders.

So it's no wonder that the company, which was spun off by the wider ThyssenKrupp AG in October, is pushing aggressively to increase its production capacity. In the last two days, we have gotten two separate examples of those efforts.

TKMS reported that another crop of workers has started working at the company's future Wismar facility this week, bringing the total workforce to over four hundred individuals as the company aims for full operations to commence by 2029.

TKMS acquired the former MV Werften yard in Wismar from Genting Hong Kong back in 2022 as it faced insolvency. The yard has had a fairly turbulent history since the 1990s, changing ownership several times over the years including Aker ASA, Bremer Vulkan AG, and Russian Oligarch Vitaly Yusufov.

The company is investing over 200 million euros to bring the Wismar facility up to standard, allowing it to begin construction of both surface vessels and submarines. This addition, plus recent upgrades at TKMS's yard in Kiel, will allow the company to work on upwards of a dozen submarines simultaneously.

But that's not all. Reuters also reported yesterday that TKMS has put in a non-binding bid to acquire German Naval Yards in Kiel. I say Kiel, but what I really mean is literally next door, interconnected, because they used to be one yard.

Each descends from the once-unified Howaldtswerke-Deutsche Werft. Today, German Naval Yards occupies part of the old HDW surface-ship estate, while TKMS controls the submarine-focused facilities. We previously discussed this attempt in detail before, so I highly recommend going and checking out that article for the fun history stuff.

Of course, TKMS isn't the only one going after GNY. Inocea Group, owner of our own Chantier Davie, is also taking a go at it allegedly. However, I think the chance of anyone but TKMS acquiring the yard is slim. The acquisition of GNY would immediately provide capacity at the company's home facility, reunifying the fractured HDW yard separated several decades ago.

Of course, we can't say exactly how such a purchase would affect submarine production. GNY is primarily a surface vessel yard, and I don't believe that TKMS would immediately shift it to start construction of submarines. However, I am not TKMS. I can not say what their plans might include; nevertheless, the inclusion of this additional capacity could allow TKMS to prioritize submarine production in Kiel and Wismar if needed.

Both of these moves showcase a primary concern for TKMS: capacity. Both the company's submarine and surface vessel capacity are being pushed hard by new builds and ongoing refits, including the submarine orders above, the F127 Frigates, and the new Polarstern Icebreaker.

For Canada, the timelines originally given by TKMS have been a cause for concern. TKMS has promised the first sub ready for delivery in 2034 and a second in 2036. After that, the timelines become a bit more open, though my understanding is it would transition to one per year afterwards.

Comparatively, Hanwha/Hyundai is offering the first sub in 2032 with four delivered by 2035. After that, the company would deliver one per year with the final submarine delivered by 2042. That's at least four years ahead of the TKMS timeline.

Of course, no matter what, TKMS can't compete with the monsters that are Hanwha and Hyundai when it comes to production. Hanwha’s yard in Geoje alone covers nearly 4.3 million square meters, including the world's largest 1-million-ton dock and 900-ton Goliath crane.

Hyundai's Ulsan yard is the largest on earth, stretching over 6.2 million square meters. It features the world's largest dry dock (672m×92m for the nerds), one of nearly a dozen. It produces dozens of large vessels per year totaling ~10,000,000 GT annually.

Of course, I'm not gonna give the massive rundown on both yards, not here, however I do want to highlight the scale of the Korean shipbuilding industry. Hanwha is currently undergoing an expansion of its submarine facilities with the goal of being able to work on eight simultaneously by 2028. Hyundai has a similar capacity as far as I know, though both have the ability to scale up further, if that's a surprise, if needed.

However, that is highly unlikely. Unlike the Germans, both Korean yards lack the massive order backlog holding up space. As of now, there is the KSS-II refit Hyundai is going through, the last remaining KSS-III, and the future KSS-IV. As of now, we don't have enough info on the Korean nuclear submarine project to judge where it falls in the timeline and such.

There are no existing export orders on the books, though I think it is likely the Philippines will end up ordering Korean for their two subs—hardly a major concern. This is obviously the biggest advantage the Koreans have here. They not only have significant capacity, but unlike the Germans, don't have the order book.

Of course, as per the RFP, construction timelines are not mentioned. However, it is certainly on decision-makers' minds, at least from me talking around. It is something that is hanging in the background, not a factor officially, but still a major consideration, especially in times like these.

TKMS slowly closing that gap, even if it only brings the timelines down a little bit, goes a long way to eliminate one of the major, if not the most major, complaint in their bid. While they will never match Hanwha, there does come a point where the difference no longer presents a considerable factor.

The current strategy relies itself on the Germans or Norwegians likely giving up one of their own slots to fit our timeline. That is already a concern in itself for just how quickly they can deliver. Anything they can do to provide reassurance, and again potentially shorten the timeline down, even if only two or so years, would be a major benefit to their bid and to winning over some minds who are very much concerned with timelines.

Might not be in the RFP, but defence procurement is also a game of confidence, of hearts and minds. It goes a long way to tackle a major concern that affects that belief.