Hanwha Ocean's Canadian 'Failure Marketing'? ... "Blind Nationalism From Start to Finish"

▲ English-version video produced by Hanwha Ocean to appeal to foreigners' emotions

Hanwha Ocean, which was eliminated from Canada's Canadian Patrol Submarine Project (CPSP), has drawn attention with a YouTube video in Korean and English titled "We Sincerely Offer Our Deepest Gratitude," released on July 15. The content states, "Leveraging overwhelming technological capabilities recognized by the world and backed by full government support, we poured in everything, but Hanwha Ocean fell slightly short and failed," and "We will engrave the lessons learned and will not stop taking on challenges." Favorable reviews poured in, calling it "a heartwarming 'failure marketing' that does not hide defeat," and Hanwha Ocean also appears to be satisfied with such responses.

Looking at how Hanwha Ocean competed in the CPSP, Hanwha Ocean's video is hard to understand. In a fierce competition over technology, MRO (maintenance, repair, and overhaul), and specifications, Hanwha responded to political backing and devoted itself to nationalistic marketing. It targeted not only the Canadian public but also the South Korean public, who hold no authority whatsoever in the CPSP decision. Such a case is difficult to find in the global arms market.

The likelihood of victory was low from the start, and warning bells of defeat sounded loudly early on, but Hanwha Ocean was unaware. Either someone at Hanwha Ocean lied to upper management, or they were so incompetent that they missed the warning signs. They should be desperately searching for the root causes of the failure, but no such news is heard. They merely produce and upload sentimental videos... blind nationalism from start to finish. At this rate, K-defense will not last long.

The preferred bidder for the CPSP was announced locally in Canada in the early morning of July 7. Six days prior, on July 1, information originating from Europe circulated among defense industry sources stating that "Germany's TKMS won." Four days before the announcement, on July 3, this reporter obtained concrete information that "an informal notification from Canada arrived at the South Korean government stating that Hanwha Ocean was pushed back." When asked, several high-ranking Hanwha officials responded with, "What are you talking about? Word is that the atmosphere has improved."

Signs confirmed through multiple channels indicate that Hanwha Group's leadership in Seoul was entirely unaware until at least July 3. Even after the weekend and up until July 6, the day before the announcement, news of the defeat was hidden away so tightly that Hanwha Ocean's stock price surged. The bizarre phenomenon of stock prices rising despite losing in the CPSP was like a horror movie. Hanwha Ocean retail investors have been tasting the bitterness of consecutive steep drops since July 7.

Why did Hanwha Group miss information that even this reporter obtained? First, it appears that the South Korean government, upon receiving notification from Canada, did not share the information with Hanwha Ocean. Well, that could happen. The government likely had a lot to clean up to prepare for the fallout from losing the CPSP, into which it had poured significant effort.

Then what was Hanwha Ocean's CPSP project team doing? The answer converges to two possibilities: Either Hanwha Ocean's CPSP project team was completely ignorant of the local situation in Canada, or they knew but lied to headquarters saying, "The atmosphere is improving." The former is incompetence, and the latter is immorality, both of which are intolerable behaviors in a corporation. A sweeping overhaul should follow, yet Hanwha Ocean remains quiet. Amid the silence, it produced a video emphasizing that it "fought well despite losing" and stimulating blind nationalism. Since Hanwha Ocean itself claims to have "fought well despite losing," no overhaul can be expected.

Judging solely by the CPSP evaluation criteria, Hanwha Ocean trailed Germany's TKMS right from the starting line. The CPSP is a project to select a patrol submarine with low noise, reduced radar/sonar cross-section, and enhanced reconnaissance capabilities, whereas Hanwha Ocean's Dosan Ahn Changho-class is a bulky striker packed with SLBMs. The Type 212CD proposed by TKMS is a sleek stealth submarine applying a diamond-shaped hull design to extremely reduce sonar detectability. The balance tilted on the specifications of the submarines alone.

Although Hanwha Ocean raised its voice calling the Type 212CD a paper submarine with no physical presence, Germany is the world's strongest submarine technology powerhouse, having built 1,700 submarines to date. It is also currently building Type 212CD submarines for the Norwegian Navy. Calling the Type 212CD a paper submarine was nothing more than a childish tantrum that convinced no one. While Hanwha Ocean highlighted the fact that the Dosan Ahn Changho submarine sailed across the Pacific to Canada, German U-boat submarines had been roaming the Atlantic like their own front yard since World War II.

What was fatal was MRO, which accounted for 50% of the evaluation score. TKMS touted the fact that if the three NATO nations—Germany, Norway, and Canada—operate the Type 212CD, maintenance would be available whichever of the three countries it stops by. A system where components and spare parts are shared among the three nations was also cited as an unrivaled strength. In contrast, the merit of South Korea and Canada jointly operating the Dosan Ahn Changho-class across the Pacific Ocean is meager at best. Hanwha Ocean embarked on a reckless challenge, and perhaps the only significance that can be found is that it engaged in a genuine head-to-head battle with German submarines.

It was a fight between David and Goliath. It was a structure hard to overturn unless Goliath TKMS let its guard down, and TKMS did not let its guard down. Nevertheless, Hanwha Ocean endlessly sang songs in Canada and South Korea of a "49 to 51 paper-thin chase," a "50 to 50 neck-and-neck race," and a "50.1 to 49.9 reversal." Political power jumped on board as well, stoking blind nationalism. They lost, and fabricated a plausible excuse that "the wall of the NATO alliance was high." The grand finale of this nationalistic journey is the video "We Sincerely Offer Our Deepest Gratitude."

This method of injecting romance and emotion into weapons sales is unprecedented throughout history in the global arms market. It is a uniquely South Korean phenomenon that emerged as K-defense gained popularity following the jackpot deal in Poland. Romantic elements like emotion do not work in the arms market, yet the South Korean defense industry and political power increasingly appear focused on blind nationalism.

CPSP was not the only failure. This year, K-defense has tasted bitterness one after another in projects for Romanian armored vehicles, Polish submarines, Australian frigates, and U.S. Navy trainer jets. Evaluations stating "a fatal chain of defeats for K-defense with 400 trillion won in revenue gone" and "there is no prospect of improvement going forward" are quietly spreading. On top of this, the external situation is worsening day by day. It is a narrow market to begin with where exports to the U.S., Russia, China, Japan, the U.K., France, and Germany are impossible, and defense giants in Europe and Japan are rapidly waking up.

There are many mountains K-defense must cross to survive. It must drastically accelerate the pace of research and development. While the Agency for Defense Development should handle R&D for future cutting-edge technologies, defense companies must pour in their own capital for the remaining R&D to wage a speed battle and keep pace with the global market. Export sales capabilities must also be enhanced to penetrate the ruthlessly cold arms market. This sales war cannot be solved simply by bringing in a few retired generals. It is time to either cultivate regional sales experts for each continent or recruit them from wherever possible. Beyond this, tasks that K-defense needs to resolve are overflowing. Now is not the time to engage in romantic nationalistic games that global defense companies laugh at.

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