Japan has voiced lingering concerns after Australia approved South Korean defense conglomerate Hanwha Group’s plan to nearly double its stake in shipbuilder Austal. Tokyo fears the move could complicate efforts to safeguard sensitive Japanese defense technology tied to a flagship bilateral naval program.
Under the decision, Hanwha will raise its holding in Austal from 9.9 percent to 19.9 percent, becoming the company’s largest single shareholder. While Hanwha will remain a minority investor, Japanese officials worry the increased influence could heighten the risk of exposure of confidential design data and intellectual property linked to Japan’s state-of-the-art frigates.
Those concerns are amplified by Austal’s central role in Australia’s future surface fleet. In August, Canberra selected an upgraded version of the Japan Maritime Self-Defense Force’s Mogami-class frigate – known in Tokyo as the “New FFM” or 06FFM – as the Royal Australian Navy’s next-generation general-purpose frigate.
Australia plans to acquire 11 vessels under the program at a cost of about AU$10 billion (US$6.6 billion). The first three ships will be built in Japan by Mitsubishi Heavy Industries, with the remaining eight to be constructed by Austal at its Henderson shipyard near Perth beginning in the next decade. Japanese officials say the scale and duration of the program heighten the stakes for protecting proprietary technology.
South Korea is widely viewed in Tokyo as both a strategic and commercial rival in the global shipbuilding market, fueling skepticism over whether firewalls around sensitive information can be fully enforced. Japanese officials have privately questioned whether technical data related to Japan’s most advanced stealth frigate designs could be indirectly accessed or inferred through Hanwha’s expanded presence at Austal.
Australian Treasurer Jim Chalmers approved Hanwha’s proposal on December 12 after a review by the Foreign Investment Review Board, stressing that the decision came with strict conditions. Those include limits on Hanwha’s access to sensitive information and constraints on any Hanwha-nominated board members. Chalmers said the approval followed “a thorough and robust process” that considered economic, national security, and broader national interest issues.
Despite those assurances, anxiety in Tokyo has not subsided. A Japanese government official, speaking to The Diplomat on condition of anonymity due to the sensitivity of the matter, said concerns remain unavoidable.
“As you might expect, it is hard to deny that there are concerns regarding Hanwha,” the official said. “That said, we believe we have no choice but to move forward together on the assumption that the Australian government’s statements are genuine. This will be a long-term program, and we intend to work closely with Australia.”
Japanese Defense Minister Koizumi Shinjiro addressed the issue publicly at a December 19 news conference. In response to a question from The Diplomat, Koizumi acknowledged Australia’s decision and emphasized the need for close coordination between the two governments. He said Japan and Australia remain in close communication over protecting Japanese technology and intellectual property, adding that “necessary measures will be firmly implemented” in the joint development and production of the frigates.
Media reports in Australia have suggested that additional safeguards may be required. The West Australian has reported that further procedures could be introduced to reinforce intellectual property protection, potentially complicating or delaying aspects of the frigate program – an outcome that would further test Australia-Japan defense cooperation.
Canberra has framed the approval as part of a broader effort to strengthen Australia’s domestic shipbuilding capacity and deepen strategic and industrial ties with South Korea.
Meanwhile, Hanwha’s interest in Austal reflects a broader strategy to expand its footprint in allied defense markets. Australia has become Hanwha’s second-largest overseas defense market after the United States, supported by local production and maintenance facilities. In 2024, Hanwha acquired Philly Shipyard for $100 million, becoming the first South Korean company to establish a shipbuilding base in the United States.
Austal said it respects the treasurer’s decision and noted it was not involved in negotiations between the Australian government and Hanwha. Chief Executive Paddy Gregg said in a statement on December 12 that the company would carefully assess both opportunities and risks should Hanwha seek deeper involvement through partnerships or a board role.
Ultimately, Australia’s decision highlights the increasingly tangled web of alliance politics, industrial policy, and national security in the Indo-Pacific. As Canberra pushes to expand its naval capabilities and diversify defense partnerships, it must balance reassuring Japan that its technology will be protected while convincing South Korea it is a trusted long-term partner. How effectively Australia manages those competing expectations may prove as important as the ships eventually launched from Henderson.