Artificial intelligence (AI) data centers have emerged as a powerful new growth engine for the shipbuilding industry, sending related stock prices and exchange-traded fund (ETF) returns soaring. Amid a global shortage of construction slots, even major private Chinese shipbuilders are pivoting toward profitability-focused selective ordering, creating a favorable environment for South Korea’s shipbuilding sector, analysts say.
According to ETF Check data as of the August 10 closing price, major South Korean shipbuilding ETFs all posted double-digit weekly returns. The SOL Shipbuilding TOP3 Plus Leverage ETF led with 23.34%, followed by KODEX Eco-friendly Shipbuilding & Shipping Active at 12.74%, TIGER Shipbuilding TOP10 at 11.73%, and HANARO Fn Shipbuilding & Shipping at 10.60%. Key holdings across these ETFs include HD Hyundai Heavy Industries, Samsung Heavy Industries, Hanwha Ocean, and HD Korea Shipbuilding & Offshore Engineering.
The spotlight on data centers within the shipbuilding industry stems from surging AI demand. As data center needs grow, the realization of Floating Data Centers (FDCs) raises expectations for solving challenges related to large-scale land acquisition, noise, and cooling. The concept parallels Elon Musk’s SpaceX vision of space-based data centers as a future growth frontier.
Samsung Heavy Industries is considered the frontrunner in the FDC space. In April, the company secured Approval in Principle (AIP) from the American Bureau of Shipping (ABS) and also signed basic and detailed design contracts for FDCs with U.S.-based Musterian. Kim Dae-sung, an analyst at DS Investment & Securities, noted, “If full-scale FDC orders begin, portfolio diversification and expanded profitability are expected, leaving ample room for future re-rating.”
The use of marine engines as power sources for data centers has also emerged as a new revenue stream. On August 10, HD Hyundai Heavy Industries announced a supply contract with U.S. energy infrastructure developer Corban Energy Group for power generation equipment based on 9.6MW-class HiMSEN engines. The order value is 956 billion won (approximately $677.0 million). This follows a 627.1 billion won (approximately $444.1 million) contract signed in April with Aperion Energy Group (AEG), bringing cumulative power generation engine orders to 1.58 trillion won (approximately $1.1 billion).
Related affiliates are also expected to benefit. Jang Yeon-seung, an analyst at NH Investment & Securities, explained, “The HiMSEN engine for power generation is HD Hyundai’s proprietary brand, and high profitability is expected in both engine manufacturing and maintenance processes.” Jang added, “Both HD Hyundai Heavy Industries, which handles manufacturing, and HD Hyundai Marine Solution, which manages maintenance, will see higher profitability compared to conventional marine engines.” The analyst further noted, “Power generation engines for data centers require more frequent parts replacement and maintenance than medium-speed marine engines, resulting in stronger long-term benefits,” and added, “Meaningful revenue and profit contributions are expected to begin from 2028.”
Despite these growth drivers, the shipbuilding sector remains undervalued, according to some observers. Han Seung-han, an analyst at SK Securities, diagnosed the situation: “Earnings are trending upward, showing a record-breaking profit cycle, and fundamentals such as order backlogs are stable, yet stock prices have plunged in the short term.” Han added, “With new growth drivers like AI data center engines and FDCs layered on top, current valuations fail to adequately reflect not only stable fundamentals but also additional growth potential.”
Meanwhile, strategic shifts in China’s shipbuilding industry are also creating a favorable environment for South Korean shipbuilders. According to foreign media reports including China’s Xinde Marine News on August 11, Yangzijiang Shipbuilding, China’s largest private shipbuilder, posted record-high first-half results this year. Revenue reached CNY 17.5 billion (approximately $2.6 billion), up 36.2% year-on-year, while net profit rose 28.4% to CNY 5.37 billion (approximately $796.5 million). As of end-June, the order backlog stood at 256 vessels worth $22.4 billion (~31.6 trillion won), with delivery slots secured through 2030. Notably, the gross profit margin for its core shipbuilding division reached 37.1%.
With a stable order backlog, Yangzijiang Shipbuilding is showing signs of shifting toward a profitability-focused strategy. The company set this year’s order target at $4.5 billion (~6.4 trillion won), down 25% from last year’s $6 billion. The plan is to meet the target by focusing on new demand for tankers and petrochemical product carriers. Even China’s largest private shipbuilder is now stepping back from pure volume competition.
South Korea’s shipbuilding industry is already executing a selective order strategy. HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries have each secured more than three years’ worth of order backlogs. These shipbuilders have accumulated experience in executing large-scale projects for high-value vessel types such as liquefied natural gas (LNG) carriers, along with quality control and delivery timeline competitiveness. LNG carriers, which transport liquefied gas at minus 163 degrees Celsius, require advanced technologies including cryogenic cargo holds, insulation design, and long-term operational stability, with a strong track record being essential — creating high barriers to entry. While China has dominated the bulk carrier and container ship markets and has recently been building its LNG carrier construction track record, South Korea is still considered to hold the upper hand in quality and delivery.
South Korea’s shipbuilding industry views China’s shift to selective ordering as both evidence of the global construction slot shortage and a positive factor for pricing competitiveness. When dock space is fully booked, newbuilding prices gain downward rigidity, allowing high contract price levels to be maintained. An official at a South Korean shipbuilder forecast, “If Chinese shipbuilders, who once jumped into order competitions wielding price competitiveness, shift to a selective ordering strategy considering profitability, South Korean shipbuilders with advantages in quality and delivery will have a certain edge in order competition.”
Yang Jong-seo, chief researcher at the Export-Import Bank of Korea’s Overseas Economic Research Institute, analyzed, “China, which has been sweeping the tanker and container ship markets for several years, now has an order backlog exceeding five years based on last year’s production figures, leading to a trend toward selective ordering.” Yang added, “If the current boom continues, newbuilding prices will inevitably rise significantly,” and noted, “When shipyards have full order backlogs, they don’t rush to lower prices, so newbuilding price strength is expected for the time being.”
South Korea’s shipbuilding industry is actively expanding its business scope beyond the traditional commercial vessel cycle. The sector is generating results in new markets including commercial ships and naval vessels, as well as AI data center engines, small modular reactor (SMR)-powered ships, and Floating Data Centers (FDCs). A prime example is HD Hyundai Heavy Industries’ recent 956 billion won (approximately $677.0 million) power generation equipment supply contract with U.S.-based Corban Energy Group — the largest power generation engine supply contract the company has ever secured, demonstrating the growth potential of the data center engine business.