Posted on April 28, 2025
WASHINGTON — The U.S. will talk with Japan about the option of employing dual-use shipbuilding — building commercial ships with military applications — Navy Secretary John Phelan told Nikkei Asia.
“We’ve got to look at all options,” to boost joint capacity and to ensure that deterrence works against China, he said.
Phelan, who arrived in Japan on Sunday night, will convey the message to Japanese Defense Minister Gen Nakatani when they meet on Monday.
The Florida businessman-turned-secretary said he hopes shipyard cooperation between the allies will go beyond maintenance, repair and overhaul, which has already begun.
“One of the things I’ve noticed studying the Chinese navy and the Chinese shipbuilding industry is they design their commercial ships with a military application in mind,” he said during an interview at his Pentagon office last week before he embarked on his first overseas trip as secretary, with stops in Hawaii, Japan, South Korea and Guam.
China’s ability to convert commercial ships to military use, “at least on the surface, appears to be pretty quick,” he continued. “I don’t think we’re doing a similar sort of thing and I think it’s very important.”
Considering that the U.S. Navy and the Japanese Maritime Self-Defense Force jointly operate, he suggested the two sides “try to build that into both our commercial and our military shipbuilding.”
Tom Shugart, a leading analyst of the Chinese military and an adjunct senior fellow at the Center for a New American Security think tank, told Nikkei Asia that in China, commercial vessels are required to be built according to certain defense standards.
Phelan will visit Japan Marine United’s Isogo Works, a shipyard in Yokohama, during his stay in Japan.
For example, if Bohai Ferry Company, a Chinese company that engages in roll-on/roll-off passenger transportation, buys a ferry, it has to be built to the standards of the People’s Liberation Army, Shugart said. “It probably means the decks are strong enough to carry tanks, it’s easier to install communications equipment or extra damage control equipment.”
In other words, they may have functions that it would not have had if it was a purely commercial ship, he explained.
Phelan said that in a conflict, commercial ships will be required to support combat ships, as was widely seen in the two world wars. “We need to be thinking along those lines,” he said.
During his stay in Japan, Phelan will visit Japan Marine United’s Isogo Works, a shipyard in Yokohama that engages in the development of new technologies and solutions in shipbuilding.
In South Korea, he will also visit multiple shipyards.
Phelan will pitch to the companies to invest in American shipyards, including in the U.S. West Coast.
Since being sworn in on March 25, Phelan has visited multiple East Coast shipyards. “There wasn’t a lot of room to add capacity” to those shipyards, he said.
“Given what we need to build and where we’re at … I would suspect the West Coast would probably be an area we will definitely consider,” he said.
In December, South Korea’s Hanwha Group acquired Philly Shipyard in a $100 million deal. This month, South Korea’s Hyundai Heavy Industries and U.S. military shipbuilder Huntington Ingalls signed a memorandum of understanding to explore opportunities to increase production in commercial and defense projects.
“I would love to understand ways we could incent Japanese companies to come here and look at potentially investing,” Phelan said.
Last Sunday, Phelan received a text message from President Donald Trump wishing him a happy Easter and expressing dissatisfaction at the condition of U.S. naval vessels. Trump sent a photo of a rusty American warship, telling his Navy chief to stay ahead of the curve.
Phelan said it was a “no brainer” to choose Japan and South Korea as his first foreign destinations considering the centrality of shipbuilding to his mission.
“The Indo-Pacific is the most important area to us,” he said, with “clearly our two most critical allies” who happen to be major shipbuilding nations.
“We need to get going fast,” Phelan said, describing the current junction as a “tipping point.”
If the right set of actions are not taken to shrink the shipbuilding gap with the Chinese, “it gets very, very hard to catch up,” he said.
China is already the world’s largest navy with over 370 ships and submarines, according to the Pentagon’s 2024 China Military Power Report. The U.S. currently has around 295 vessels.
The People’s Liberation Army Navy is on track to deploy a 425-ship fleet by 2030, supported by an industrial base capable of replacing and repairing vessels far faster than U.S. shipyards.
“China’s shipbuilding sector has undergone a striking metamorphosis. Twenty years ago, the country was a peripheral player in the global shipyard business. Today, it dominates the industry,” a Center for Strategic and International Studies (CSIS) report said last month.
China’s market share of shipbuilding has grown from 5% to over 50% in that period. Today, South Korea and Japan account for around 29% and 13%, respectively. The U.S. accounts for 0.1%
At the heart of China’s shipbuilding prowess is the China State Shipbuilding Corporation, the world’s biggest shipbuilding group, which has 84 subsidiaries and employs over 200,000 people. The company built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry has built since the end of World War II.
Matthew Funaiole, a senior fellow in the China Power Project at the CSIS, said the U.S. should not try to match China in shipbuilding.
“The goal should be: how do we build up capacity outside of China? It means building up capacity in Japan, building up capacity in Korea, and then how do we also start building some key capacity in the United States in strategically important areas,” such as icebreakers and liquefied natural gas carriers, in collaboration with Japan and South Korea.
