Emerging interests in Commercial Shipbuilding Value Chain

August 2, 2025
Blogs Updates

Author: Tanmay Goel, Researcher at Nitisara

The estimated global shipbuilding market was valued around USD 145.7 billion in 2024, expected to expand to USD 212.8 billion by 2032, growing at a CAGR of around 4.8%. The decision of whether America competes aggressively, strategically allies itself with its best allies, or some combination of both approaches will have wide-ranging and enduring consequences for global supply chains, rates of shipping internationally, and America’s broader trade relations all around the world.

As of 2023, China’s GDP is approximately $19 trillion. The total trade volume (exports and imports) for 2022 stood at around $6.5 trillion, highlighting China’s pivotal role in global trade in which exports are valued at $3.6 trThe global commercial shipbuilding landscape is undergoing a profound transformation, with emerging interests reshaping value chain dynamics across regions and market segments. Asia-Pacific continues to dominate the industry with an overwhelming 75-82% market share, led by China’s commanding 40% global output and South Korea’s substantial 35% contribution, particularly in mega-ship construction that defines modern maritime commerce 1. While Europe maintains a focused 12-15% share through specialized segments including cruise ships, green technology integration, and naval vessels, North America is experiencing a renaissance with 10-20% market share driven by defense contracts and unprecedented investment in domestic shipyard capacity. Even smaller regions like the Middle East, Africa, and Latin America are capturing emerging opportunities with approximately 6% share through strategic investments in offshore and tanker fleets supporting bulk trade operations. This shifting landscape reflects broader industry trends toward digitalization, automation, and sustainable shipbuilding technologies. The integration of artificial intelligence, robotics, and green propulsion systems is creating new value chain opportunities, while geopolitical factors and supply chain resilience concerns are driving nations to rebuild domestic maritime capabilities. As traditional shipbuilding powerhouses face increasing competition and emerging markets develop specialized expertise, the commercial shipbuilding value chain is evolving into a more diversified, technology-driven ecosystem that prioritizes efficiency, sustainability, and strategic autonomy.

Global shipbuilding market dominance illustrates the challenge facing US maritime trade competitiveness, Source: Author’s own

How has the Shipbuilding Value Chain market evolved?

The global commercial shipbuilding industry has witnessed a dramatic geographical transformation over the past century, marked by the sequential rise and decline of major maritime powers. The United Kingdom dominated global shipbuilding from 1892 when it controlled over 80% of the world’s commercial shipbuilding market, maintaining this supremacy until the mid-20th century. However, Britain’s market share fell dramatically after World War II, with Japan emerging as the new leader by 1956 when it captured 22.1% of the world’s total shipbuilding capacity and reached 39.8% by 1964 2. Japan’s dominance was built on revolutionary manufacturing techniques borrowed from American wartime shipbuilding, including prefabricated welded construction and systematic production methods that allowed them to build ships faster and cheaper than established competitors. South Korea subsequently challenged Japan’s leadership through aggressive government-backed industrialization, with Korean shipbuilders rising to global prominence by the 1980s and 1990s. Today, China has emerged as the undisputed global leader, commanding over 53% of global shipbuilding capacity compared to South Korea’s declining share, while Japan maintains approximately 18% of the market. This shift reflects China’s massive state subsidies estimated at $132 billion between 2010-2018, enabling Chinese shipyards to dominate not only in volume but increasingly in high-value segments traditionally controlled by Korean and Japanese builders.

The situation has been further fueled by widespread subsidies from the Chinese government that have driven ship prices artificially low globally, creating an economic environment benefiting American consumers over the short term by lowering the cost of goods imported into the country but, in the process, it also destroys the long-term viability and competitiveness of U.S. shipyards and their large network of associated industries. The native American trade deficit has been increasing by leaps and bounds, partly because these artificially low shipping rates make foreign imports that much more attractive and affordable and American exports that much less competitive in foreign markets. By direct extension, the U.S. has not only lost valuable industrial capacity and manufacturing jobs but also strategic economic leverage in international network logistics, making its entire supply chain apparatus more vulnerable to outside economic and political influences.

Moreover, the dangerous concentration of global shipbuilding capacity in East Asia, particularly in China, has brought significant chokepoints along the world supply chain that endanger basic American economic interests. Should Chinese-owned or Chinese-built ships be restricted from access by trade friction or geopolitical rivalry, the United States would face severe interruption in the essential supply of goods, from everyday consumer staples to essential industrial inputs required to produce products and construct infrastructure.

Evaluating OEMs, Ship Design and Shipbuilding Ecosystem

The modern shipbuilding industry operates through highly complex Original Equipment Manufacturer (OEM) ecosystems where 70-80% of a ship’s final value is generated through upstream supply chains rather than direct shipyard production 3. OEMs in shipbuilding design and manufacture critical components such as engines, generators, propulsion systems, navigation equipment, and specialized machinery that shipyards integrate into complete vessels. The distinction between OEM (Original Equipment Manufacturing) and ODM (Original Design Manufacturing) is crucial in maritime applications, where OEM products maintain full creative control and specifications while ODM involves modifications to existing designs for specific customer requirements. Intellectual property protection has become increasingly critical as ships grow more technologically complex, with the International Maritime Organization implementing the Ship Construction File Industry Standard to balance design transparency requirements with IP protection for sensitive design documents and structural calculations 4. European shipbuilders, facing competitive pressure from lower-cost Asian competitors, have invested heavily in protecting their advanced technologies and know-how, particularly in high-value segments like LNG carriers, cruise ships, and environmentally friendly vessels. The technology gap between leading shipbuilding nations has narrowed dramatically, with South Korea maintaining only a 0.7-year advantage over China in eco-friendly and high-efficiency ship technologies as of 2023, forcing Korean companies to implement export restrictions on critical shipbuilding technologies.

OEM Supply Chains – SME manufacturers

Shipbuilding supply chains represent some of the most complex engineer-to-order (ETO) manufacturing networks in global industry, requiring precise coordination of thousands of specialized components from multiple tiers of suppliers. The supply chain ecosystem encompasses everything from major propulsion systems and navigation equipment to specialized components like marine valves, cables, brackets, clamps, and drainage systems, with companies distributing products from dozens of manufacturers. First-tier suppliers play critical roles in providing complex project components that are developed specifically for individual vessels, requiring extensive engineering coordination and technical documentation throughout the construction process. The industry faces significant challenges in managing supplier relationships due to high uncertainty levels, long lead times, and the bullwhip effect where global trade variability creates extreme demand fluctuations with little warning 5. Small part manufacturers form the foundation of this ecosystem, providing specialized components like instrument tubing, marine-grade fittings, electrical supplies, and thousands of other parts that must meet stringent maritime safety and environmental standards. Supply chain optimization has become crucial for shipyard competitiveness, with successful yards implementing strategies including product standardization, integrated supplier teams, lowest total cost approaches, and long-term strategic alliances with key component suppliers to manage the complexity of coordinating materials and components across international borders.

What Are the Overall Trade Impacts of Competitively vs. Cooperatively Oriented U.S. Shipbuilding Strategies?

The United States strategically engaged in a subtle dual strategy that includes aggressive competitive measures such as targeted tariffs and retaliatory port charges in combination with promising cooperative efforts to foster better ties with key maritime allies. The newly implemented Section 301 maritime policy regime substantially increases the expense of shipping for ships owned and operated by Chinese that call on American ports, with so-called specialty charges on certain classes of vessels going up to 25% or more, depending on the specific scenario and cargo involved. These dramatic measures are designed specifically to make U.S.-built ships significantly more economically attractive to overseas shipping companies at the same time as encouraging shifting orders for new ships into allied shipyards, particularly those in South Korea and Japan 6.

While such assertive policies would be of great benefit to American shipbuilders and lead America away from its reliance on China’s maritime capabilities, they necessarily increase shipping costs for U.S. importers and exporters across a number of industry sectors. Leading trade associations, including the influential World Shipping Council and other industry giants, have threatened that these drastic fee increases will inflict serious harm on American farmers, manufacturers, and retailers by significantly increasing the fundamental cost of shipping abroad, potentially making American exports less competitive globally and impeding general economic growth. Apart from that, there is a huge threat of Chinese retaliatory economic actions that will even escalate existing trade tensions and lead to global disruption of well-established international supply chains upon which American business has relied for decades.

On the cooperative front, the United States is proactively and deliberately moving towards promising partnership prospects with South Korea and Japan—two countries having a combined shipbuilding potential of more than 40% of overall world shipbuilding capacity and possessing sophisticated technological strength 6. Such cooperative methods can potentially enable the United States to purchase advanced shipbuilding technology, sophisticated manufacturing, and specialized manpower without precluding more efficient American fleet buildup than could be accomplished through exclusive reliance on limited domestic capacity. However, significant regulatory obstacles such as the restrictive Jones Act requirements and ongoing steel tariffs continue to make such cooperative endeavors increasingly difficult at times to produce additional costs and bureaucratic challenges for both military and commercial shipbuilding activities 6.

Comparison of shipping costs before and after implementation of US maritime tariffs on Chinese vessels, Source: Author’s own

How Will the New U.S. Maritime Policies Comprehensively Reshape Global Trade Flows and International Economic Relationships?

America’s shipbuilding industry, once the unrivaled world giant that dominated oceanic construction throughout much of the 20th century, has collapsed in a steep free fall which has left the country in a dangerously reliant position on foreign-built boats to conduct its tremendous share of $2 trillion seaborne commerce annually. This dependence has exposed vulnerabilities throughout American supply chains, particularly as China’s dominance in ship construction has grown exponentially and systematically over the past two decades. In direct response to these abundant concerns, the U.S. government is now implementing increasingly aggressive trade policies—notably substantially higher tariffs, further port access charges, and comprehensive domestic investment incentives—while simultaneously pursuing extremely promising partnerships with priority maritime allies such as South Korea and Japan in an effort to essentially rebuild and modernize its neglected maritime industrial base.

Recent American policies- ranging from tariffs on certain shipbuilding exports to general incentives for the reconstruction of domestic shipbuilding- represent a paradigm shift towards leveraging maritime commerce as an instrument of industrial revival. These sweeping policy reforms are far more than just industrial recovery measures; they are a fundamental reshaping of America’s comprehensive approach to world trade policy and economic security. The strategic choices made at this juncture will ultimately decide whether or not the United States is able to secure its essential supply chains successfully, restore its maritime industrial competitiveness, and maintain its economic lead in an ever more complex age where maritime infrastructure is a key strategic national asset with vast geopolitical implications.

The latest in-depth U.S. maritime policies have already made significant and measurable alterations to established world shipping lanes, as global shipping lines have actively reconfigured their massive fleet compositions and business models in an attempt to avoid escalated U.S. port fees and regulatory complications.Major shipping firms now increasingly favor Chinese-constructed and Chinese-owned vessels for profitable American trades, potentially systematically redirecting massive new ship orders to South Korean and Japanese shipyards, gradually but measurably reducing global economic reliance on Chinese maritime manufacturing in the longer term. Such ambitious policies do, however, entail very substantial new costs and operating risks throughout the whole global shipping sector.

Higher tariffs and bureaucratic fees may in the long run be passed on to U.S. consumers and businesses, necessarily driving up the final worth of imported goods and potentially slowing overall economic progress in a variety of sectors. Intercontinental business associates are responding with alarm and cautionary adjustments: Canada and Germany are vigorously seeking other channels for trade and sounding alarms about potential negative economic consequences, while Australia has issued stern warnings against rising protectionist inclinations spoiling existing international trade relations. The entire U.S. strategy also involves diplomatically phased demands for certain specialist energy cargoes, such as liquefied natural gas (LNG), to be carried in American-flag ships on a phased schedule over a number of years.

This phased process aims to avoid dramatic and abrupt market disruption while astutely channeling long-term investment into home-country shipyards and associated industries. But as the huge difference in the price of ships built in China versus America, being spurred on by an array of economic and policy factors, keeps increasing, global shipping networks can become increasingly splintered and inefficient, and along with this, the very real threat of economic decoupling between major economic blocs and potential weakening of decades of international trade cooperation and integration. In short, the US is taking a masterful strategy that artfully marries competitive pressure and cooperative strategy in its ambitious shipbuilding renaissance campaign, using precision tariffs and sweeping domestic incentives to intentionally divert international trade flows while at the same time engaging trusted allies to restore critical maritime capacity and technological expertise.

Conclusion

In conclusion, America’s multi-pronged plan aims to insure strategic supply chains, restore America’s industrial warship-building capacity, and enhance national economic security but necessarily at much increased operating costs and the inherent risk of rising global trade tensions with potentially dire consequences. The eventual and sustained success of this strategy will hinge importantly on the extent to which the United States can balance these sometimes conflicting strategic imperatives—guaranteeing that far-reaching efforts to expand and modernize its maritime industrial base are not inadvertently self-defeating in eroding its broader trade interests, damaging valuable international economic relationships, or destabilizing the global trading system that has supported decades of economic growth and prosperity for a number of countries.

The views expressed do not represent the company’s position on the matter.

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