By James J. Wirtz

No one disagrees that the Navy has not had much luck constructing warships this century. It also continues to face significant challenges when building the next small surface combatant, the Future Frigate (FFX). It is becoming increasingly difficult to pack meaningful warfighting capability into a ship that is smaller and cheaper to build and operate than today’s Arleigh Burke-class destroyers. Case in point: the Constellation-class Frigate program was terminated with two vessels under construction as the price per unit began to approximate the cost of a destroyer.¹ Making matters worse, the U.S. industrial base and shipyards lack the wherewithal to build more than a few ships at a time, and even then, only at a measured pace. Those imagining, designing, and building the FFX confront a wicked problem: efforts to balance competing missions, construction costs, and time requirements tend to produce a suboptimal outcome that satisfies none of them.

Instead of hoping for different results from the same approach to force design by balancing competing requirements and ship construction, it is time to return to first principles to ask what unique qualities the FFX brings to the Navy in a future increasingly shaped by artificial intelligence (AI). Today’s effort to update well-known design and operational concepts with more advanced and expensive weapons, propulsion systems, and electronic accoutrements will likely produce disappointing results. What is needed is not a better ship based on traditional thinking, but new thinking about how a frigate can contribute to future combat effectiveness and national security. The U.S. Navy must look toward the future by ending the effort to gussy up old ways and rethink the role of the FFX in an AI world. It is time for the U.S. Navy to build its first ship designed intentionally to exploit the synthetic reality created by AI and operate with Large Unmanned Surface Vessels (LUSV), Extra Large Unmanned Undersea Vehicles (XLUUV), and Medium Unmanned Surface Vessels (MUSV), ships that can exceed frigates in terms of endurance and carrying capacities.

 

FFX and the Art and Science of War

Already, AI is having a profound impact on conflict, especially when it comes to the science of war, that is, the domain of war that can be quantified. In maritime affairs, this manifests in growing platform and weapons autonomy. Range, precision, and lethality are increasing, while cost and the need for human direction are decreasing. When it comes to calculating combat power, the importance of relatively inexpensive and increasingly autonomous weapons in theater and magazine depth is superseding the number of platforms available.² Additionally, AI is creating a new, synthetic reality as it curates and analyzes nearly limitless amounts of data from myriad sensors, while presenting tactically useful information at a pace that would completely overwhelm even the largest staff. Commanders need computer assistance to make sense of the massive amounts of data available to them. Well-implemented AI workflows can provide operators with superhuman situational awareness to identify thousands of targets in real time, allocate available weapons efficiently, and update this synthetic reality faster than opponents can respond.³ The results are staggering: in the first 11 days of the war against Iran, U.S. forces struck more than 5,500 targets, including mobile missiles and drones on land and over 60 ships at sea.⁴ This stands in stark contrast to the fact that no SCUD missiles or their transporter-erector-launchers were destroyed on the ground by Coalition air attack or special operations during the 1991 war against Iraq.⁵

By contrast, the impact of AI on the art of war, which involves making decisions that require self-awareness, is a matter of debate. Some fear the emergence of a “Frankenstein’s Monster” that will lead to a creeping loss of control as humans grow too reliant on its advice when making key political or strategic decisions about the initiation, conduct, or termination of hostilities. Any human-in-the-loop, notes Anthony Becker, “may find their intent edited, eroded, or even eclipsed by the operation of the human-machine system, creating an inexorable pull toward deference to the machine.”⁶ Others envision the emergence of a human-machine team, which is often described as the best way to exploit AI’s ability to analyze and present data and the human ability to act on this synthetic reality.⁷ From this perspective, the synthetic reality created by the AI-enabled science of war will greatly empower humans as they make decisions that only humans can make (the art of war), that is, judgments made by the self-aware and eyes-on, hands-on actions. This human-machine teaming is already emerging in society: AI is replacing entry-level computer programmers, but not electricians, who are being enabled, but not replaced, by machines.⁸ All this suggests that the FFX’s most important role in the future is to gather this human-machine team together locally, allowing the humans aboard to bring the art of war to a micro setting. It is the people on board the FFX, not the weapons it will carry, that constitute the new ship’s unique contribution to national security. After all, precision-guided and increasingly autonomous weapons can arrive from all directions, but in situ human judgment and action are not so easily replaced.

The FFX’s primary function, then, is not as a warship but as a locus of American human-machine integration in a local setting. It brings human senses, judgment, “skin in the game,” and the ability to influence situations where a U.S. presence is desirable for tactical, operational, or strategic reasons. Its organic and distributed sensors feed synthetic reality at a local, regional, or theater-wide level, while the people on board integrate synthetic reality with human judgment and action to address immediate tactical situations. The FFX should be deliberately designed as the first ship built with human-machine integration as a priority. It should empower and protect the humans aboard as they interact with synthetic reality and autonomous weapons. In other words, at a minimum, the FFX should be built to operate with a mix of LUSVs, MUSVs, or XLUUVs depending on mission requirements. The autonomous platforms that accompany the FFX can provide the combat power and flexibility the Navy wants from a new frigate, but only if the Navy accommodates a new operational philosophy.

FFX: The Human Node in the Local Network

So, what would the FFX look like? Following a compelling assessment of how the Navy’s recent forays into shipbuilding came a cropper, Kevin Eyer, provided a bottom-line description of the FFX, which is currently based on the Coast Guard’s Legend-Class National Security Cutter: “The FF(X) should essentially function as a ‘horsed-up’ Coast Guard cutter equipped with a 5” gun, RAM point-defense missiles, and even the Naval Strike Missile, but nothing more sophisticated.” Eyer also suggests that the primary purpose behind the FFX would be to stimulate U.S. naval shipbuilding and that the vessel “will never be a pocket Arleigh Burke-class.” For Eyer, the FFX would augment and eventually replace the existing fleet of Littoral Combat ships, while bolstering the U.S. industrial base. Eyer believes that the new frigate would undertake maritime interdiction, mine countermeasures, and presence missions, although there is no reason why a new “drone frigate” could not undertake anti-submarine warfare and surface strike operations too.⁹

Eyer’s conception of the Future Frigate’s capabilities, missions, and impact on the defense industrial base makes perfect sense; it only requires four minor modifications before his platform can serve as the integrator of the human-machine team. First, one might remove piloted aircraft from the FFX and instead equip it with recoverable reconnaissance and one-way strike unmanned aerial vehicles capable of a mission kill against a similar platform at whatever range is deemed appropriate.

Second, the FFX should incorporate a spiral development philosophy; that is, it should be deliberately built to accommodate future technologies iteratively. Instead of spending months or years waiting for new systems or experimental weapons, FFX designers could settle on an 80-percent solution that would give warfighters access to the ship as quickly as possible for experimentation and training. Nevertheless, ship customers and developers must acknowledge that foundational design choices are generally locked into a minimum viable product – as illustrated by the lasting impact that the Littoral Combat Ship program’s high sprint speed requirement had on so many other elements of the platform. Changing the engine or hull length is not usually possible once a ship is built.¹⁰

Third, the ship should be built to accommodate a separate battle staff and significant command, control, and communication capabilities – capabilities not usually found on frigates. Initially, this battle cell might only require a few personnel. It should not be too hard to keep tabs on a couple of MUSVs built for autonomous operations, or to monitor synthetic reality, or to supply higher-level systems with local data. As more and different types of autonomous vessels are added to the ship’s reconnaissance-strike network, the size of the battle staff will probably increase. A division of responsibility would emerge. The ship’s commander and crew would operate the vessel, and its organic weapons, and supply the sailors needed to undertake hands-on, eyes-on activities, while the battle staff would operate the drone network and interact with higher echelons.

Fourth, to accommodate spiral development involving new types of weapons, and the eventual need for additional personnel, the new frigate should incorporate excess capacity, which means ample space, cooling, electricity, and whatever the best guess is about the additional resources that are likely to be required in the future. In other words, while the FFX would be optimized for drone operations, it would have the capacity to accommodate spiral development, especially new types of organic sensors and weapons. This is not the traditional tradeoff between mission-specific and general-purpose weapons procurement.¹¹ Instead, it constitutes a hybrid approach to force design. Put somewhat differently, because it arrives with excess capacity at the outset, the FFX itself would be more of a general-purpose platform with a drone command center optimized to operate autonomous vessels and utilize theater-level synthetic reality.

All this requires a new way of thinking about what a warship is and what a warship does. Its fighting capability is not centered on its organic capabilities, but on its ability to support and capitalize on synthetic reality and organize its autonomous weapons into a local, or maybe a regional, reconnaissance-strike complex. Instead of a weapons platform, it is the human node in an AI-enabled network that can generate significant combat capability, far more capability than can be carried on any frigate. The LUSVs, MUSVs, or XLUUVs that accompany the new FFX would allow it to punch above its weight; it would have capabilities that cannot be packed into a vessel smaller than the Navy’s Arleigh Burke-class destroyer.

FFX: Spiral Development

Although spiral development generally refers to a process of continuous improvement in a platform’s capabilities, it can also occur across the drone network that accompanies the new FFX. Exactly how this network will operate is currently a matter of conjecture and needs to be worked out by designers and operators. The drones themselves should all be equipped with an intermediate force capability to drive off the curious or disable smaller vessels that approach too closely. Some LUSVs or MUSVs, under the appropriate circumstances, can also be equipped with the ability to self-destruct, especially if they can hold at risk a target that arrives in their immediate vicinity.¹² In any event, one can imagine how this human-machine integration might be used to achieve several important missions.

Maritime Security and Surveillance

The new FFX should enter service with a complement of intelligence, surveillance, and reconnaissance (ISR) MUSVs that would enhance the frigate’s ability to generate situational awareness. Whether or not the ISR drones are made for broad ocean and air surveillance or to respond to queuing provided by synthetic reality, they would solve the Navy’s enduring problem of placing too many eggs in one basket.¹³ Active sensors would no longer signal the position of the FFX for thousands of miles in all directions, allowing it to approach potential targets in electronic silence. It would be desirable if the ISR drones could serve as decoys, mimicking the electronic and acoustic signature of an FFX, an Arleigh Burke-class destroyer, fishing boats, freighters, etc. The ISR drones would provide the Navy with a way to experiment with non-lethal autonomous systems in a variety of settings, paving the way for more lethal payloads.

Counter-Mine Networks

As recent events in the Strait of Hormuz suggest, even the threat of mined waterways and harbors can curtail commercial shipping and greatly restrict maritime operations. This situation is exacerbated by the fact that the counter-mine mission has been a low priority for the U.S. Navy for decades. MUSVs or XLUUVs equipped for the counter-mine mission might be a logical second capability to add to the ISR drone network. There is a real need to experiment with counter-mine capabilities to protect the approaches to U.S. harbors.

ASW Operations

Future ASW operations in the Navy will have to contend increasingly with crewed and autonomous underwater threats. Although the impulse will be to equip the FFX with organic ASW capabilities, force designers should keep the threat at bay and configure autonomous systems to counterattack submarines and subsurface drones that are themselves hunting for targets. Whether these systems can support Carrier Strike Groups or Surface Action Groups on the move remains to be seen; nevertheless, the combination of decoys and hunters creates interesting ASW possibilities in support of carrier operations. ASW MUSVs and XLUUVs should be more capable of patrolling American and allied littorals, searching for crewed and non-crewed subsurface threats. This capability would immediately help to secure Guam, Pearl Harbor, San Diego, and the approaches to the Panama Canal from subsurface drone and submarine attacks.¹⁴

Littoral Strike

While the previous drone networks would immediately enhance the Navy’s tactical capabilities, equipping drones with surface-to-surface strike systems to augment the FFX would bolster a deterrence-by-denial strategy, especially along the First Island Chain archipelago. Placed among coastal traffic and the clutter of the shoreline, the FFX’s reconnaissance-strike complex would provide an immediate sea denial capability to the United States as the remainder of the Joint Force moves toward the area to respond to aggression. Instead of abandoning the area and allies as the long-range battle plays out overhead, the FFX and its drone flotilla can confront the opponent, creating immediate opposition to an attempt at a fait accompli before the Navy can overcome the tyranny of distance and respond accordingly.¹⁵ The FFX would also confront the opponent with the harsh reality of war immediately by responding at the point of aggression; Washington would no longer be faced with the onus of horizontal or vertical escalation after a fait accompli, but would instead be able to defeat an opponent at the point and time of attack by responding in kind. Control of the waters surrounding the archipelago would also help protect allied and U.S. land forces operating long-range strike weapons to influence events along the Asian mainland’s littorals.

Air Defense

Today, the Navy operates two types of surface combatants: a large air-defense cruiser (Ticonderoga-class guided-missile cruisers) and a small air-defense cruiser (Arleigh Burke-class guided-missile destroyers) equipped with the highly capable Aegis system that relies on the SPY-1 radar and a family of Standard Missiles. Unfortunately, the Aegis system will not fit on a vessel much smaller than an Arleigh Burke-class destroyer, so the FFX cannot provide high-end air defenses. An FFX could escort and control LUSVs carrying Standard Missiles that might be fired by Aegis-equipped warships in a local reconnaissance-strike complex, but high-capability air and missile defense is not an option for the new frigate. It was the absence of a significant air defense capability that might have led to the cancellation of the Constellation-class Frigate.

LUSVs accompanying the FFX, however, could be configured to provide relatively low-cost and distributed air defenses against drones, cruise missiles, helicopters, and low-flying aircraft. The Marine Air Defense Integrated System (MADIS) might be adapted for LUSVs to detect and destroy low-altitude drones and piloted aircraft using its organic radar, Stinger missiles, 30mm cannon, and 7.62mm miniguns. MADIS can backstop more capable Aegis-equipped warships by supplying an inexpensive way to defeat drones, cruise missiles, and piloted aircraft, saving high-cost Standard Missiles for more demanding ballistic and cruise missile targets.¹⁶ The FFX and its MADIS-like autonomous system might be a way to provide the Fleet with a cost-effective air defense against the drone threat.

Search and Rescue

Today, if a major surface combatant is lost, the Navy would be hard-pressed to rescue hundreds, or even thousands, of sailors who might find themselves in the water.¹⁷ If assigned to a Carrier Strike Group, the FFX might be equipped with a LUSV “lifeboat” that operates nearby but out of harm’s way. One could place hundreds of inflatable rafts on the vessel so that they can be jettisoned to survivors in the water. It might also be possible to create a system to retrieve sailors in the water and to bring them on board where temporary shelter, food, and medical supplies would be stored. Of course, retrieving injured sailors from the water is easier said than done; nevertheless, necessity is the mother of invention. Warfighters should be realistic about warfare.

Conclusion

Nearly all the drone missions described above are a matter of active consideration or increasingly ambitious experimentation by the Navy. New organizations and personnel designators related to the operation of autonomous platforms are also standing up, providing a way to institutionalize drone operations within the Fleet.¹⁸ Nevertheless, amid all this activity, there is a tendency not to see the forest for the trees: more effort is needed to achieve the human-machine teaming demanded by AI to best exploit the potential of synthetic reality and autonomy. There is a tendency to proceed willy-nilly, without a guiding philosophy and an associated concept of operations that is designed to exploit new opportunities. The Navy will have to do things differently before it can use new technology to its full potential. It remains to be seen if Navy culture will foster the requisite change or impede it.

The FFX is a case in point. Instead of going back to the drawing board to pack more high-end warfighting capability into an ever-smaller package, rethinking what a frigate contributes to the human-machine team allows us to see a small surface combatant in a new light. Instead of a platform for employing weapons, it provides a ringside seat for the humans to influence events, especially when mindful, eyes-on, hands-on actions are needed for success. It is a way to use the science of war to empower the art of war. It is a way to demonstrate that the United States is willing to risk involvement in a sticky situation and engage opponents in a meaningful way. The LUSVs, MUSVs, or XLUUVs that could serve as the primary weapons systems for the FFX will help its crew give as good as they get until the Joint Force Arrives. Even in the age of sail, no one could realistically expect a small surface combatant to do more than that.

James. J. Wirtz is a Professor of National Security Affairs at the Naval Postgraduate School in Monterey, CA. He has written extensively about intelligence, strategy, nuclear and conventional deterrence, and maritime affairs. 

Endnotes

1. As Secretary of the Navy John Phelan noted, “the reason Constellation Class frigate was canceled because, candidly, it didn’t make sense anymore to build it. It was 80% of the cost of a destroyer and 60% of the capability.  You might as well build destroyers,” see Ronald O’Rourke, “Navy Constellation (FFG-62) and FF(X) Class Frigate Programs: Background and Issues for Congress,” R44972 Congressional Research Service January 5, 2026, p. 2. https://www.congress.gov/crs_external_products/R/PDF/R44972/R44972.133.pdf

2. Jeffrey E. Kline, “Impacts of the Robotics Age on Naval Force Design, Effectiveness, and Acquisition,” Naval War College Review, Vol 70, No. 3, Summer 2017: 63-78.

3. James J. Wirtz, “Artificial Intelligence, Synthetic Reality, and Future Warfare,” Political Science Quarterly Advance Publication 12 February 2026. https://doi.org/10.1093/psquar/qqaf159

4. Miriam Sela-Eitam, “US destroyed over 5,000 targets across Iran, including 60 warships, CENTCOM chief says,” The Jerusalem Post, March 11, 2026. https://www.jpost.com/middle-east/iran-news/article-889602

5. Mark E. Kipphut, “Crossbow and Gulf War Counter-SCUD Efforts: Lessons from History,” AU/AWC/RWP126/94-96. Air War College, Maxwell Air Force Base, Alabama, 1996:52 https://apps.dtic.mil/sti/tr/pdf/ADA393984.pdf

6. Anthony Becker, “War Threatens Control of Military AI,” U.S Naval Institute Proceedings, Vol. 151/6/1,468 June 2025.

7. Robert O. Work and Shawn Brimley, “20YY: Preparing for War in the Robotic Age,” Center for New American Security (January 2014): 30.

8. “Unleashing developer productivity with generative AI,” McKinsey & Company, June 27, 2023. https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/unleashing-developer-productivity-with-generative-ai; and “AI Automation Could Replace 300 Million Jobs, Skilled Trades Remain Safe,” Business Honor November 6, 2025. https://businesshonor.com/2025/11/ai-jobs-trades-automation-risk

9. Kevin Eyer, “Three Shipbuilding Failures and A Future” USNI Proceedings, Vol 153/4/1,478, April 2006.

10. Austin Gray and James Wirtz, “Spiral Development as a Strategic Asset,” USNI Proceedings Vol. 151/12/1,474 December 2025.

11. Stephen Peter Rosen, Winning the Next War: Innovation and the Modern Military (Ithaca: Cornell University Press, 1991): 243-249; J. Ding and A. Dafoe, “Engines of power: Electricity, AI, and general-purpose, military transformations.” European Journal of International Security. 2023;8(3):377-394. doi:10.1017/eis.2023.1

12. Collin Fox, “Taking Notes from Narcos: Semisubmersible Unmanned Ships for Great Power Competition,” Center for International Maritime Security (CIMSEC), May 1, 2020, https://cimsec.org/taking-notes-from-narcos-semisubmersible-unmanned-ships-for-great-power-competition/.

13. James J. Wirtz, Jeffrey E. Kline, and James A. Russell, “A Maritime Conversation with America,” Orbis Vol. 66. Iss. 2, Spring 2022: 178-180.

14. The Coast Guard should incorporate these counter-mine and ASW capabilities to protect U.S. littorals.

15. Wirtz, Kline, and Russell: 175-178.

16. MADIS Marine Air Defense Integrated System,” Global Defense News, June 5, 2026. https://www.armyrecognition.com/military-products/army/air-defense-systems/air-defense-vehicles/madis-marine-air-defense-integrated-system

17. James J. Wirtz, “Imagining Maritime Conflict in the Indo-Pacific: Can Analogies Substitute for Strategy?” Defense & Security Analysis 38, no. 3 (2022): 349–68, https://doi.org/10.1080/14751798.2022.2093433.

18. Jodesz Gavilan, “US Navy to Deploy First Medium Unmanned Surface Vessels,” The Defense Post, January 19, 2026. https://thedefensepost.com/2026/01/19/us-navy-usvs/

Featured image: Aircraft from the Carl Vinson Carrier Strike Group (VINCSG) and French Carrier Strike Group (CSG) fly in formation over the Philippine Sea with ships from VINCSG, French CSG, the Japan Maritime Self-Defense Force (JMSDF), and U.S. Military Sealift Command (MSC) during Pacific Steller 2025, Feb. 12. (U.S. Navy photo by Mass Communication Specialist Seaman Apprentice Pablo Chavez)

By Colin Grabow

In a year dominated by sharp partisanship, numerous lawmakers improbably united around the revival of America’s commercial shipbuilding industry. Congressional legislation that would channel billions into shipyard subsidies and new trade restrictions attracted scores of cosponsors. The White House issued an executive order aimed at maritime revitalization, and a trade pact with South Korea includes a pledge to invest $150 billion in U.S. shipyards.

But expectations of a genuine American shipbuilding renaissance should be kept in check. The United States is ill-suited to quickly transform from a virtual non-participant in commercial shipbuilding to a competitive producer of large cargo vessels. More likely is another round of costly subsidies, continued shipbuilding dysfunction, and little progress toward addressing the country’s key maritime challenges. Rather than devote substantial resources to this questionable enterprise, U.S. policymakers should pursue pragmatic solutions that more directly remedy commercial and naval shortcomings.

An Industry in Collapse

No major U.S. industrial sector has underperformed as consistently and predictably as commercial shipbuilding. Over the past decade, U.S. shipyards have accounted for less than three-tenths of one percent of global shipbuilding output. In 2024, they registered just 0.04 percent. Over the past quarter-century, U.S. production of oceangoing cargo ships has averaged less than three per year. A 2025 Government Accountability Office (GAO) report describes the sector as having experienced a “near total collapse.”

There is no mystery as to why. Constructed almost entirely for a captive domestic market, U.S.-built commercial vessels feature prices that bear no semblance to world levels. Three Aloha-class containerships under construction at a U.S. shipyard have a current projected cost of $334.5 million each. The same ships could reportedly be built in China for $55 million. Tankers that can be built for $47 million abroad are estimated to cost at least $220 million in the United States. And prices are spiraling ever higher. In 2013, an Aloha-class containership cost $209 million, and in 2020 the cost of a U.S.-built tanker was estimated at $150 million.

Construction timelines are similarly uncompetitive. The last U.S.-built containership delivered required approximately 40 months from the laying of its keel until its delivery in 2023. A similarly sized containership delivered by a South Korean shipyard that same year took less than six months. Of the last 10 containerships delivered by U.S. shipyards between 2004—2023, the fastest construction time was 19 months.

This subpar performance is not a recent phenomenon. Although U.S. shipyards, blessed with skilled workers and ample supplies of timber, were highly competitive in the country’s early days, they quickly fell behind when the era of wooden ships gave way to those built of iron and powered by steam. Between the Civil War and the early 1920s, U.S.-built ships were repeatedly found to cost 20 percent to over 100 percent more than the similar vessels constructed abroad. And now they cost far higher.

That the depth and long-standing nature of U.S. shipbuilding’s decline is so widely unappreciated is perhaps due to its vast output during World War Two. But citing the conflict as evidence of American commercial shipbuilding prowess misreads history. The country’s shipbuilding performance was driven by wartime exigencies and simplified ship designs for a government customer. Even at the height of production, U.S. yards either still trailed or only briefly matched the efficiency of leading foreign competitors, and never equaled them on cost.

When the war ended and government orders disappeared, domestic shipbuilding quickly reverted to its prewar state: high-cost, low-output, and internationally uncompetitive. World War Two is properly viewed as an anomalous event amidst an enduring decline in domestic shipbuilding.

It is a downfall that beefed-up federal subsidies alone are unlikely to reverse.

The SHIPS for America Act: A Costly Illusion

The centerpiece of today’s shipbuilding revival effort is the proposed SHIPS for America Act, which relies on new subsidies and protectionist measures as its key pillars. Its most ambitious provision would devote billions to the creation of a “Strategic Commercial Fleet” of 250 U.S.-built cargo ships over the next decade. Other key elements include requirements that certain percentages of U.S. energy exports and imports from China be carried on vessels that are U.S.-flagged and built, as well as tax credits, loan support, and direct grants to shipyards.

The act would undoubtedly stimulate the construction of some new ships. Whether it would launch a robust, self-sustaining shipbuilding industry or provide benefits commensurate with its costs, however, is another matter entirely. 

If one wanted to competitively construct large, oceangoing cargo ships, the United States would not be an obvious location for doing so for at least three main reasons.

First, American shipyards struggle to find sufficient labor to meet their current output. Shipbuilding is labor-intensive and requires a stable, highly skilled workforce. Yet Philly Shipyard is reportedly experiencing annual turnover approaching 100 percent, coupled with persistent issues such as drug use. Other yards also report labor difficulties (including quality issues), and worker challenges have been blamed for contributing to the U.S. Navy’s ill-fated Constellation-class frigate program.

Such issues are not limited to the graving docks and fabrication shops. Besides a dearth of production workers, there is also a deficit of naval architects.

Immigration reform or the hiring of foreign workers—for which U.S. shipyards have already demonstrated an appetite—could be one means of deepening the labor pool. Indeed, both Japan and South Korea have extensively utilized foreign workers to address labor shortages in their shipyards. This path, however, appears at odds with White House policy. Raising wages offers another solution, but it would also further increase the cost of U.S.-built ships and siphon welders, electricians, and other skilled tradespeople away from other industries that are contending with their own labor shortages.

Second, U.S. shipbuilding facilities are antiquated. A June 2025 GAO report found that most such infrastructure dates from World War Two, and observers have repeatedly characterized U.S. shipyards as decades behind their international counterparts in terms of technology. Such factors contribute to a yawning productivity gap and are unlikely to be quickly remedied. Notably, a Navy initiative launched in 2018 to modernize its own shipyards is envisioned as a twenty-year project.

Third, U.S. shipyards face inflated input costs. American steel prices—kept artificially high through tariffs—are a particular problem for those seeking to construct ships competitively. The absence of a robust network of domestic suppliers and a maritime industrial ecosystem compounds matters.

This list of challenges is not comprehensive. Others include the difficulty of locating waterfront property near major population centers that is suitable for major industrial facilities. Even if successfully identified, political difficulties may arise. The redevelopment of brownfield sites for shipbuilding involves years of red tape. Expanding capacity at existing shipyards can be nearly impossible due to physical constraints.

Building large commercial cargo ships in the United States at world prices is a formidable challenge, if not an impossible one. And none of this will change simply because Congress writes large checks.

History Shows Subsidy Limitations

Proponents of the subsidy-centered SHIPS for America Act describe it as a bold industrial strategy. But its playbook is familiar in many ways. At best, much of the bill amounts to new twists on past and current approaches that produced uninspired results.

Despite some claims to the contrary, U.S. shipbuilding policy is already infused with government intervention. Congress guarantees U.S. shipyards a captive domestic market through the Jones Act and related coastwise laws that ban foreign-built vessels from domestic commerce. Federal tax benefits, direct grants, and financing are also employed to encourage domestic shipbuilding. State and local governments offer further aid. Philly Shipyard alone has received more than $400 million in public support, in addition to its $1-per-year lease.

The most ambitious federal program was the 1936 introduction of “construction differential subsidies” that covered up to half the cost of U.S.-built ships. The purpose was explicit: Eliminate the price gap between domestic and foreign shipbuilding by covering up to 50 percent of the cost of domestically-built ships. But the measure failed to impel competitiveness, and storm clouds were gathering around the industry even before the subsidies’ withdrawal in 1981. It is a testament to U.S. shipyards’ dependence on such funding that output of 15-20 ships per year under the subsidy regime fell to typically low single digits in the decades since it ceased.

Subsidies and Jones Act-style requirements can temporarily stimulate production but create dangerous dependencies and incentive structures. There is little reason to believe they can close the structural cost gap or lead to internationally viable cargo ship construction. U.S. government interventions alone will not yield such competitive shipbuilding.

Scale Matters

Shipbuilding is an industry where scale, repetition, and specialization are decisive. Yet even if every provision of the SHIPS for America Act were implemented smoothly and fully funded, the resulting ship production would still fall far short of leading international shipbuilders.

The legislation’s Strategic Commercial Fleet envisions an average of 25 ship deliveries per year over 10 years. China, by comparison, delivered an average of 832 commercial ships annually from 2022 to 2024. Japan averaged 259, and South Korea 214. South Korea alone has four shipyards that are each capable of producing at least 40 ships per year.

Though an order of magnitude greater than current output, annual production of 25 ships—spread across multiple shipyards—would remain a rounding error in global terms. U.S. shipbuilding would be too small to reap economies of scale, too fragmented to specialize, and—not least—too sheltered to compete with the world’s most efficient builders.

The Competition Problem

Almost from the country’s founding, U.S. shipyards have been shielded from international competition. Federal subsidies and the ban on foreign-built vessels in domestic trade have created a small, captive market, severely dampening market forces that spur innovation and efficiency abroad. This lack of industry pressure has been repeatedly cited as contributing to the faltering of U.S. shipbuilding. Shipyards which do not face world-class competition and which serve customers who view high capital costs as a useful barrier to market entry should not be expected to attain world-class performance.

The SHIPS for America Act does little to change this. It preserves the Jones Act’s restrictions, expands federal shipyard grants to $100 million annually, and introduces new tax incentives. A further $11 billion over 10 years is devoted to the construction and operation of the Strategic Commercial Fleet. Although competitive bidding will be used to determine which shipyards construct the fleet’s vessels, the pool of competitors will be extremely limited.

Just two yards, Philly Shipyard and NASSCO, have built 79 percent (53 of 67) of U.S. commercial cargo ships delivered from 2000 to the present. NASSCO is already heavily committed to Navy work. Unless new yards are rapidly built or existing ones expanded—no easy task—competition will be minimal, and incentives for efficiency will remain weak.

This structure all but guarantees that U.S. shipyards will remain permanent clients of the federal government, dependent on continuous intervention to stay afloat.

Foreign Investment Offers No Panacea

Despite these myriad challenges, some insist that this time will be different, citing the leveraging of foreign expertise as a dramatic shift in the existing paradigm. The 2024 acquisition of the Philly Shipyard by South Korean shipbuilder Hanwha Ocean, along with its subsequent promises of investment, is often highlighted as an initial sign of this budding renaissance.

But foreign ownership of U.S. shipyards isn’t a novel idea. And, while helpful at the margins, it has never delivered game-changing results.

Philly Shipyard, which has built nearly half of all commercial ships delivered by U.S. shipyards since 2000, offers a case in point. Refurbished in the 1990s at enormous taxpayer expense, the yard was placed under the ownership of Kværner ASA, then Europe’s largest shipbuilding company, with the belief that modern facilities and foreign know-how would transform American shipbuilding. That never happened. Despite foreign training and engineering, the yard still produced containerships that cost five times as much as those built in Asia, and the facility has twice come close to shutting down.

Other examples of foreign ownership and cooperation abound. A Singaporean-owned shipyard in Brownsville, Texas (recently sold to Turkish firm Karpowership) has been plagued by cost overruns and vessels delivered years beyond their originally scheduled dates. Another shipyard in Pascagoula, Mississippi required five years to deliver the last two cargo ships it built while under the ownership of a separate Singapore company. This shipyard won a contract in 2019 to build heavy icebreakers for the U.S. Coast Guard, with delivery of the first vessel scheduled for 2024. Delivery has now been pushed to 2030, and its estimated cost has more than tripled.

NASSCO entered a long-running technology partnership with South Korea’s DSEC in 2006, and Japanese shipbuilders began exporting technologies to U.S. yards in the 1970s. None of these foreign interventions have produced competitive shipbuilding.

This experience isn’t restricted to the United States. Attempts by South Korean shipyards to create competitive subsidiaries in Romania and the Philippines have also proven disappointing. Plainly, there is more to the generation of world-class shipbuilding than foreign management and technology.

National Security Arguments Don’t Hold Up

With a paucity of economic rationales for the SHIPS for America Act—funneling tax dollars to internationally uncompetitive sectors and requiring the use of costly U.S. shipping is hardly conducive to prosperity—its backers have emphasized its alleged national security benefits. In particular, some supporters of the legislation argue that expanded commercial shipbuilding could introduce new efficiencies in the construction of naval vessels. Additionally, proponents contend that domestic construction would reduce dependency on foreign shipyards during times of war or national emergency. But these arguments suffer from significant flaws.

Although commercial and naval shipbuilding share some commonalities, they also diverge in significant ways. As one paper recently noted, there are “major differences in materials, production complexity, regulations, and design philosophies.” In 2006 congressional testimony, the commander of Naval Sea Systems Command stated that “one could argue they are separate industries.”

The fact that major naval shipyards—even with a captive domestic market—have largely abandoned commercial construction reinforces the point. Bath Iron Works, which builds destroyers, has not built a commercial ship since 1984. Ingalls Shipbuilding, another warship builder, has not attempted commercial construction since an ill-fated effort in 1999. Newport News Shipbuilding’s push to fill its orderbook in the post-Cold War 1990s with commercial tankers resulted in a loss of over $320 million.

Fincantieri Marine Group, meanwhile, constructs surface combatants at its shipyard in Marinette, Wisconsin, and commercial vessels at a separate shipyard in Sturgeon Bay.

This shipbuilding bifurcation isn’t uniquely American. Congressional Research Service analyst Ronald O’Rourke has noted that Asian yards engaged in both naval and commercial vessel construction make a concerted effort to separate workers by ship type. Japan’s Mitsubishi Heavy Industries is said to physically and organizationally “air gap” its naval and commercial shipbuilding.

A 2024 RAND Corporation analysis, meanwhile, found that the two types of shipbuilding may be growing increasingly independent in China, with shipyards “focusing either on naval or commercial shipbuilding, but not both.” Notably, South Korean shipbuilding firm Samsung Heavy Industries has eschewed the construction of naval combatants.

To be sure, overlap between commercial and naval shipbuilding does exist, and a scenario can be imagined in which increased commercial output helps spread certain fixed costs and overhead across more vessels. But consider the logic. Spurring commercial shipbuilding via subsidies would mean spending significant sums in the hope of recouping them through new efficiencies—a highly uncertain proposition.

Perhaps of greater concern is the potential impact of subsidy-driven commercial shipbuilding on naval shipyards’ ability to attract workers. Given existing labor pool stresses, there is considerable apprehension that an increased demand for ships could lead to workers being siphoned from existing yards (notably, Philly Shipyard has hired veterans of Gulf Coast yards to meet their labor needs). Labor constraints could lead to lengthened timelines, inflated costs, and intensified bottlenecks at naval shipyards already struggling with delays and overruns.

Such concerns are rooted in past experience. A 1975 GAO report highlights Navy congressional testimony the previous year which stated that increased commercial shipbuilding—boosted by federal subsidies—had led to shortages of skilled labor, contributing to delivery delays and higher costs for Navy ships.

In other words, subsidized construction of large commercial ships may actually weaken military shipbuilding. Similar logic applies to commercial shipbuilding, with workers and investment flowing to larger shipyards at the expense of smaller ones that are better positioned to develop a comparative advantage in the international market. It is not apparent what problem faced by naval shipyards would be solved by either a general increase in commercial output or by adding commercial shipbuilding to naval yards that already struggle to deliver combatant ships on time.

Questions Over the Reality of Wartime Shipbuilding

Other arguments in favor of boosting cargo ship construction are similarly problematic. Notions that commercial shipyards could quickly expand the U.S. merchant fleet in wartime or replace losses, for example, are far from clear. Oceangoing ships cannot be quickly conjured. Even leading foreign shipyards require 9-12 months to construct relatively less-complex tankers (as measured from construction initiation, vice the placement of orders). Additionally, U.S.-built cargo ships are highly reliant on imported parts and components (e.g., engines from South Korea and propellers from China), leaving them vulnerable to possible wartime interdiction.

Unless a conflict lasts for years, it is highly questionable whether domestic shipbuilding would play a significant role in determining its outcome. This isn’t theoretical. Of the hundreds of ships ordered by the U.S. government following its entry into World War I in April 1917, only a small number were delivered prior to the signing of an armistice in November of the following year.

Possessing a domestic commercial shipbuilding capacity is not without merit. But perhaps of greater importance is access to a large, modern fleet when hostilities commence.

Shipping industry veterans have pointed out that, rather than engaging in new construction, the United States could more expeditiously augment its merchant fleet by buying ships on the open market. With over 56,000 ships of at least 1,000 gross tons in the global fleet, including nearly 7,500 tankers and more than 6,700 containerships, there is considerable choice.

The United States could also expand existing subsidy programs that provide guaranteed access to U.S.-flagged vessels in times of war or national emergency, or establish a more liberalized second registry to expand the pool of merchant ships. The right of angary, employed by the United States in World War I, also bears consideration in the sealift calculus.

A More Purposeful Approach is Needed

None of this is to deny that the United States faces pressing maritime challenges. Navy shipbuilding is beset by lengthy delays and cost overruns. Burdened by high costs, the U.S. merchant fleet has continued its long-term decline, and coastal shipping has largely withered to those trades where alternative transportation modes do not exist. A shortage of mariners raises questions about the country’s ability to meet its sealift and economic needs.

At best, subsidized cargo ship construction is a highly inefficient means of addressing these concerns. Instead, more straightforward means should be employed to address the country’s economic and national security requirements. Possible policy measures include:

Ensure continuous production: U.S. shipyards often cite the lack of a consistent “demand signal” from Washington as a key contributor to their struggles. Such claims are not without justification. A lack of insight into future demand increases the difficulty of planning and investment to meet military shipbuilding needs. Instead of a cyclical feast-or-famine approach, the United States should aim for steadier, more predictable production.

Japan offers one possible model for such an approach. According to CRS analyst Ronald O’Rourke, the country builds one submarine per year, regardless of the overall defense environment. If more submarines are needed, the force can be expanded by extending the lifespans of existing vessels. Conversely, retirements can be used to trim the fleet when needed. Regardless, the approach ensures steady demand, more efficient construction, and the retention of skills, equipment, and technology necessary to build such vessels.

Leverage allied shipyards: Although the United States is fortunate to count some of the world’s most capable shipbuilders among its key allies, its ability to leverage these shipyards is greatly hampered by laws that restrict the construction and repair of military vessels overseas. If these laws were revised, as advocated by a growing number of experts, the path could be cleared to construct either large modules or entire vessels in highly skilled allied yards.

Domestic construction has value, but there comes a point at which it is surpassed by the benefits of utilizing allied shipyards that offer far shorter building times and dramatically lower costs. For numerous programs, including non-combatant vessels such as fleet oilers and icebreakers that have seen substantial delays and cost increases, the national security scales have almost certainly tipped in favor of allied construction.

Forgoing these capabilities in the hope that a massive and unprecedented turnaround in U.S. shipbuilding can be quickly engineered is highly risky, possibly leaving the military unable to obtain the vessels it needs at reasonable costs and within reasonable timelines to meet national security requirements.

Reform or repeal U.S. coastwise laws: There has long been clear evidence that U.S. coastwise laws place a significant economic burden on strategic industries such as steel and energy. But these laws also fail the country on more direct national security grounds. Forcing Americans to pay inflated prices for new vessels has not proven conducive to the development of a large, modern fleet or a robust shipbuilding industry.

At the very least, such laws should be reformed to allow the use of vessels constructed in allied countries. Dramatically reducing such capital costs would promote an expanded and modernized fleet, with accompanying economic and national security benefits—including additional employment opportunities for U.S. shipyards engaged in repair and maintenance work due to increased coastal commerce.

A bolder approach would be to scrap the law entirely and meet national security needs through targeted subsidies that promote the expansive employment of U.S. vessels and mariners.

Conclusion: An Industrial Strategy Without Industry

That lawmakers are finally paying serious attention to the country’s maritime troubles is a welcome and long-overdue development. For decades, policy failures in this domain have been treated as niche concerns rather than real threats to U.S. economic and national security. But the sudden enthusiasm for resurrecting large-scale commercial shipbuilding risks directing this new focus toward the least productive path.

The United States is nowhere close to becoming a competitive builder of large oceangoing cargo vessels, either under current conditions or under any plausible combination of subsidies or mandates. The structural barriers are overwhelming, including outdated shipyards, exceptionally high input and labor costs, and a workforce too small to sustain such an industry. The national security payoff is equally uncertain. Expanding commercial production is not an obvious solution to the issues that plague naval shipbuilding, nor is it an efficient method of bolstering the U.S.-flag merchant fleet.

What U.S. maritime policy needs instead is a clear-eyed assessment of its discrete problems and targeted strategies to address each one. Sealift shortfalls, mariner shortages, and the high cost of domestic water transport all stem from different causes and require different remedies, not a politically attractive but strategically hollow push to build more large ships. Innovation, regulatory modernization, smarter procurement, and a willingness to revisit long-standing assumptions would do far more to strengthen the maritime sector than another round of recycled industrial policy.

The time, resources, and political attention now focused on a commercial shipbuilding revival would be far better spent confronting the root causes of maritime dysfunction. A serious maritime strategy demands honesty about present conditions, not nostalgia for an industrial past. If lawmakers truly want to restore American maritime strength, they must craft solutions that reflect today’s challenges and realities.

Colin Grabow is an associate director at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.

Featured Image: A Chinese shipyard. (Photo via Hudong-Zhonghua Shipbuilding)

By Brent D. Sadler

Introduction

Riding a wave of success during his Asia tour, President Donald Trump triumphantly announced the U.S. would be working with South Korea to build nuclear submarines.¹ To those familiar with the AUKUS (Australia-U.K.-U.S.) deal, this may seem a repeat of that effort to build nuclear submarines with Australia. By all accounts, this is not what is at hand.

South Korea’s growing investment in American shipbuilding could foster the development of ships capable of using next generation small modular nuclear reactors (SMNR), to include their use on modified South Korean submarines appropriate to their operational needs. This likewise has applicability to Japan, who should be included should the effort proceed.

Given the unique naval needs of South Korea and Japan, their decades of experience in building conventional submarines, and the U.S. need for allies in reviving its maritime industry – this deal could be very opportune. That said, it will not be AUKUS and to succeed it must also contribute to a revival of America’s shipbuilding to best serve America’s national interests. 

South Korea’s National Security Situation

South Korea’s capital, Seoul, is within range of hundreds of North Korean artillery pieces. For them danger is always near, and has focused their military to the threat ever since the armistice paused the Korean War.² Adding to the dangers, the North has in recent years accelerated development of its own nuclear-armed submarine-launched ballistic missile – the Pukguksong series that began testing in 2015 and now has six iterations.³ Given this at-sea nuclear threat, as in the Cold War, there will be a necessity of locating and keeping track of North Korean submarines with nuclear-armed SLBMs, like the SSB 841 Hero Kim Kun Ok launched in September 2023.⁴

Beyond the North Korean threat, China has also encroached into its waters and strong-armed the South. Most notably, the Chinese Communist Party was the hand behind political interference and public agitation in 2017 over the placement of the THAAD missile defense system.⁵ Keeping its economy free of coercion will require a Navy able to keep the People’s Liberation Army Navy (PLAN) in check in the East China Sea and Yellow Sea. Should war break out in Asia over the fate of Taiwan, critical shipping routes through the South China Sea and potentially across the North Pacific will need to be guarded. 

Unlike the Australian strategic challenges that drive them to pursue a nuclear submarine in the AUKUS initiative, South Korea’s maritime threats are closer to home. This operational situation prioritizes stealth and on-station endurance with the ability to conduct high-speed sprints without needing to come near to the surface to recharge submarine batteries. These operational requirements inform South Korea’s submarine program, today led by production of its 3,600 ton KSS-III Batch-2 submarine with 10 vertical launch cells and torpedo tubes built by shipbuilder Hanwha.⁶ SMNRs offer a way to enhance the lethality on a potentially modified South Korean submarine like a future batch of the KSS-III.

A Brief History of SMNRs Backfitted on Conventional Submarines

Twice in the recent past have navies attempted to extend the undersea endurance of existing conventional submarines with small modular nuclear reactors. The first was in the mid-1980s, when the Soviet Navy installed a 600kWh VAU-6 600 nuclear power plant on a project 651 (Juliett-class) diesel submarine and greatly extended its range.⁷ The implications of this development were never felt in the West, as the Cold War was coming to a rapid end by the time this was completed.

The idea of greatly increasing the tactical capabilities of existing conventionally-powered submarines has surfaced again. For the past several years, experts looking over satellite images of China’s sole naval nuclear shipyard at Huludao have noticed the expansion of production lines and what appeared as components of a new class of nuclear-powered warship. The answer would be clear in September 2024 following months of speculation that a new larger Yuan-class conventional submarine was being readied for sea with a new type of propulsion.⁸ That month, reports of its pier side sinking drew a subsequent U.S. Department of War response that confirmed it was a variant being fitted out with an auxiliary nuclear power plant. And so the Soviet idea was reborn with Chinese characteristics.

Given China’s large and modern conventionally powered submarine fleet, its use of SMNRs to complement air independent propulsion would have severe ramifications for the U.S. and its allies. Already fairly stealthy, the latest Yuan-class Chinese submarine would see its endurance greatly extended and survivability improved with the ability to sprint at high speeds to evade hostile contacts without having to come to the surface to recharge its batteries soon afterwards. Moreover, the limited nuclear construction capacity at Huludao could be augmented by numerous conventional submarine shipyards, with SMNRs being produced and backfitted on Yuan-class submarines in shipyards like Wuchang and Jiangnan.

Shared Allied Interest in SMNRs

As news broke of President Trump’s announcement on building nuclear submarines with South Korea, Japan also got interested.⁹ Japan is no stranger to maritime nuclear propulsion with its own Mutsu launched in 1969 and retired in 1992.¹⁰ This ship was a flawed attempt at exploring the commercial potential of nuclear power, with unacceptable radiation leakage dooming the ship. Recently, there have been calls by Japanese politicians to pursue developing a nuclear submarine – a call first triggered by the AUKUS initiative in 2021 and now with a potential U.S.-South Korean project.

Like South Korea, Japan too has a robust, successful, and longstanding conventional submarine program. The latest addition to the Japanese Maritime Self Defense Forces (JMSDF) is the 3,000 ton Taigei-class.¹¹ However, Japan’s operational needs are more extended than South Korea’s, given its expansive archipelago that stretches deep into the Pacific Ocean and critical shipping lanes threatened by Russia, China, and North Korea. This threat is in part why Japan began a military modernization during the later Cold War to protect its shipping lanes 1,000 miles from Japan – a mission that lives on today. As such, the added endurance and survivability offered by SMNRs as an augmented power source for existing conventional submarines would be welcome.

Additionally, both Japan and South Korea are today the only viable rivals to China’s shipbuilding colossus. As such, both are looking to invest in the U.S. as a means of expanding market share, which could be amplified by harnessing the potential of SMNRs to cleanly power the next generation of commercial ships and revolutionize the maritime industry. However, only the U.S. has the experience (thanks to its naval nuclear program) and capacity (based on existing nuclear research and development) to bring this new nuclear technology quickly to market with confidence.

Recent developments have the hallmarks of a potential consortium of investors forming to bring SMNRs to sea and soon. Already two South Korean shipbuilders have invested in the U.S. and Japan has signaled investments are coming. What especially stands out is the investments since December 2024 in Philadelphia Shipyard by South Korean shipbuilder Hanwha. The proverbial canary in the coal mine is how well Hanwha will be able to turn a profit in the long term when taking orders for commercial ships at its new American shipyard.

Newer to the scene is Hyundai, another South Korean shipbuilder, who has joined into a partnership with American naval ship and submarine builder Huntington Ingalls Industries (HII).¹² The scope of this new partnership is relatively undefined as of November 2025, but signals an intent to deeply integrate into domestic American naval shipbuilding. The most explicit expression of this is a commitment of $150 billion by the South Korean government to back investment in American shipbuilding.¹³ On the other hand, Japan has only recently signaled its intent to move into the American market, with $4 billion of government backing to $2.5 billion of private investment.¹⁴ Focusing some of this foreign investment in what could be a market-setting technology can leverage the shipbuilding capacities and expertise of allies, while mitigating the risks in getting SMNRs to sea.

Proliferation and Compromised Supply Chain Concerns

In the case of both Japan and South Korea, there are grounds for concern regarding the potential for compromised maritime industrial supply chains and information security. Less of a concern is the threat of proliferation of weapons-grade nuclear material in the SMNRs under development. This is due to the use of lower enriched nuclear fuel (approximately 5% compared to weapons grade above 90%) and the fuel assemblies that complicate the separation and refinement of the fuel to weapons grade.

Nonetheless, memories of Brazil’s past attempts to develop a nuclear submarine as pretext for a nuclear weapons program are informative and cautionary.¹⁵ Putting a check on such possibilities are counter-proliferation protocols enshrined in the so-called “123 agreement” named for the section 123 of the 1954 Atomic Energy Act. These agreements are conditional by the U.S. prior to entering into any agreed transfer of nuclear technology or materials. Both Japan and South Korea have active 123 Agreements.¹⁶

Regarding maritime supply chains, however, both Japan and South Korea conduct significant shipbuilding related activity in China.¹⁷ This is primarily in the prefabrication of sections or modules and supply of components like pumps or solenoids that are then assembled outside China. Should either nation enter into a new SMNR developmental project and associated shipbuilding endeavor with the U.S., exposure to associated Chinese supply chains must be addressed, especially as it relates to military use in South Korean and Japanese submarines.

Finally, tight information security, such as done with Naval Nuclear Propulsion Information (NNPI) addressed for AUKUS, will be a necessity. A complicating factor for allies will be the dual-use applicability of SMNRs and how to ensure associated high information security for both military and commercial programs. Thankfully, the U.S. has current information-sharing agreements with both Japan and South Korea that includes industrial security. In 2025, memorandums of understanding signed with both South Korea and Japan make clear an intent to bolster supply chains as the three nations progress and work together in reviving America’s maritime industry.¹⁸ However, statements of intent are not enough to ensure the sensitive next-generation nuclear power technology behind SMNRs remains an American comparative advantage.

The Optimum Pathway for American Maritime SMNR

Developing SMNRs and then putting them to sea on commercial and backfitted allied conventional submarines will be a multifaceted task. First, the technology needs to be perfected in a way that makes it compatible for use in commercial shipping and scaled for use as an alternative power source for today’s conventional submarines built in Japan and South Korea. Second, trust in sharing sensitive nuclear technologies for SMNR will be needed, to include their safe operation and maintenance. Third, an industrial plan will need to be implemented for building SMNRs that can be installed on commercial ships and on allied conventionally powered submarines. To preserve American investment in developing next generation SMNR and foster an American comparative advantage in the global maritime market space, construction and installation should be initially confined to occur at U.S. shipyards. Much of this can be accomplished taking a similar approach used for the AUKUS optimum pathway and as advocated in an earlier Heritage Foundation report.¹⁹

Almost two years after its September 2021 announcement, the Australian government, in concert with U.K. and the U.S., announced the “optimum pathway” to deliver a domestic nuclear submarine capability.²⁰ This plan addresses developing domestic nuclear industrial competencies, training a cadre of nuclear-certified shipyard workers to sustain this nuclear fleet, and begin the nuclear training of the crew of these future boats. Unlike AUKUS, development of overseas SMNR construction would not be a goal. Nonetheless, bringing a SMNR forward with allies like South Korea and Japan will require a similarly multifaceted approach to ensure it is viable and safe.

Recommendations

The U.S. and its allies should form a private-public consortium to inform and oversee development of a naval SMNR. There are several designs all progressing to working prototypes with initial criticality (first time nuclear fission) tests before the end of the decade.²¹ This consortium would be critical in accelerating the testing and maturity of viable designs currently being planned at the federal nuclear test labs in Idaho (i.e. INL). Given the commercial and potential military use, the effort should be led by U.S. Department of Energy with technical support from Naval Reactors (design), Coast Guard (regulatory), and Maritime Administration (commercial use).

Putting an operational SMNR on a commercial ship or submarine is likely at least seven years away. Waiting until that time to develop the demand for commercial shipping would guarantee its failure or worse, cede dominance of this capability to hostile competitor China. As such, orders for new commercial ships (i.e. ultra large container ships, LNG carriers, etc.) today should be of designs that are forward-compatible for installation of SMNRs.²² This would also guarantee those ships meet stringent International Maritime Organization (IMO) carbon requirements while removing uncertainty that has delayed ship orders over which green energy will be embraced by the market. As the second and third largest shipbuilders, Japan and South Korea are best placed to ensure uptake of this new technology. Moreover, information security amongst members of this consortium will be paramount, especially as variants of the SMNR are installed on allied submarines. For AUKUS, this was an early achievement given the bedrock of the Five Eyes intelligence sharing program.²³ A similarly structured approach, but narrowly focused on SMNR use, would be warranted with allies Japan and South Korea.

Today there is one U.S. shipyard owned by a South Korean shipbuilder. Philadelphia Shipyard, owned by Hanwha since December 2024, is a natural choice to base this new endeavor and future SMNR installations. Already Hanwha is continuing the U.S. Maritime Administration’s (MARAD) third of five National Security Multi-mission Vessel (NSMV) and making a $5 billion capital investment to upgrade the shipyard for orders of 10 new medium-range tankers and bulk carriers.²⁴ Doing nuclear shipyard work here will require added investments to attract future SMNR builders to locate fabrication and installation facilities nearby. In the meantime, future upgrades should be done with an eye to nuclear certification of the yard.

This shipyard should not be the only place where this type of commercial nuclear maritime installation will occur. Given the national security aspects of backfitting SMNRs on submarines, shipyards with history in naval shipbuilding make the most sense. In this case, the expertise of HII and its budding partnership with Hyundai makes a natural fit for backfitting operations of SMNRs. Caution is warranted in this case, as the U.S. submarine industrial base is tardy in growing its capacity to meet U.S. orders for nuclear submarines.²⁵

As such, HII and Hyundai, to include Japanese submarine builders Kawasaki and Mitsubishi Heavy Industries, with American submarine shipbuilders HII and Electric Boat, should look to set up facilities favorable to shipyards not involved in building American or AUKUS nuclear submarines. A logical choice is the former naval nuclear shipyard at Mare Island, which has dry docks, warehouses, and pier space ready to be upgraded to the purpose. Moreover, there is ongoing Navy and Coast Guard maintenance being done on cutters and naval logistic ships, providing ample workload to justify the investment until SMNRs become operational.

Designing, building, and installing SMNRs on commercial ships and allied submarines is one thing, operating them is another. For AUKUS, this was addressed by embedding Australian sailors on U.S. and U.K. nuclear submarines and sending Australian shipyard workers to American shipyards to learn the nuclear trades. It is too early to know if this will succeed, but the goal is to create the institutional culture and expertise to securely maintain and safely operate nuclear-powered ships. Unlike AUKUS, this new SMNR endeavor will have a commercial aspect which will mean the U.S. Maritime Administration and its Merchant Marine Academy at Kings Point will need to resurrect its defunct nuclear training program. This program was begun to crew and conduct associated shipyard nuclear work for the first and only U.S. nuclear powered commercial ship in 1964 – the Savannah, subsequently retired in 1972. The U.S. Coast Guard, the lead agency for regulating maritime credentials in the U.S., too must revisit its certification programs to include standards for crew and shipyard workers on SMNR-powered commercial ships. Given that allies will be involved, associated programs will have to be opened for their training and certification. 

Initial Steps

There will be a lot of work ahead should the President’s words prove prophetic, and a new national endeavor is launched with allies to build nuclear-powered commercial ships and backfit allied conventional submarines. When AUKUS was announced an 18-month assessment and planning phase was begun before actual work was undertaken. A similar planning effort will be critical, though need not be as long as 18 months. Given this, a potential optimum pathway for SMNRs should take the following steps.

Establish a White House-Led Planning Cell. The President of the United States should formally invite both Japan and South Korea to send delegates to a planning cell to formulate a pathway to developing and operating SMNRs for commercial shipping and backfitting their conventionally powered submarines. The primary goal of this group is to produce an agreed regulatory framework, credentialing program, and industrial plan with associated investment strategy. This in total would represent the optimum pathway for this endeavor.

Reestablish Civilian Nuclear Training and Credentialing Programs. The Secretary of Transportation should direct the Maritime Administrator to re-establish the nuclear program at the Merchant Marine Academy and seek funding from Congress. This should be accomplished within two years to ensure adequately credentialed crew and shipyard workers ready when the first SMNR installed and operated by early 2030s. Additionally, the Maritime Administrator must further direct these programs be open to participating allies, staff, and students to ensure a coherency amongst participants and assist in rapidly standing up an SMNR-powered commercial fleet. Lastly, the U.S. Coast Guard must conduct a review and as needed update to its credentialing and regulatory standards appropriate for operating SMNRs at sea and associated shipyards and port operations.

Create an SMNR Information Sharing Framework. The U.S. Chief of Naval Operations should direct the development and approval of a dedicated information sharing classification and handling standard that can be agreed to by all participant nations. This would be similar but distinct from Naval Nuclear Propulsion Information that Australia was allowed to gain access to as part of AUKUS. The goal is to prevent unauthorized access to sensitive design and operational details regarding SMNR in both commercial and military uses.

Designate and Certify American Shipyards for SMNR Work. The Secretary of Energy should seek and act on the recommendation of Naval Reactors and the Maritime Administration to designate shipyards for work on maritime SMNRs. Initially two shipyards should be named – one focusing on the commercial uses and a second suitable for naval installation on conventional submarines.

Establish SMNR Support Facilities in Participant Nations. The Secretary of State, with the advice of Submarine Forces Pacific and the Maritime Administrator, should update existing nuclear agreements and establish support facilities overseas. Initially, the only participants to consider should be major shipbuilders and treaty allies South Korea and Japan. As such, commercial and military facilities should be established in both countries to support future SMNR operations. For the time being, all major refueling and maintenance should be conducted in the U.S. Importantly, both Japan and South Korea (re-negotiated in January 2025) already have “123 Agreements” with the U.S. for peaceful nuclear cooperation.

Conclusion

President Trump’s comments may have preempted and even accelerated what has been a slowly developing effort – joint development and operation of at-sea SMNRs. Done right, advanced SMNR technology will offer an avenue to develop a new American maritime industrial comparative advantage while rapidly making allied conventional submarines many times more lethal against competitors.

Captain Brent Sadler (Ret.) joined the Heritage Foundation as a Senior Research Fellow in 2020 after a 26-year naval career in nuclear submarines and as a foreign area officer. He has extensive operational experience in the Western Pacific, having served at Seventh Fleet, Indo-Pacific Command, as Defense Attache in Malaysia, and as an Olmsted Scholar in Tokyo, Japan.

References

[1] Paul McLeary and Phelim Kine, “Trump Will Arm South Korea with a Nuclear Submarine,” POLITICO, October 29, 2025, https://www.politico.com/news/2025/10/29/trump-south-korea-nuclear-submarine-00629402 (accessed November 9, 2025).

[2] Terence Roehrig, “South Korea: The Challenges of a Maritime Nation,” NBR, December 23, 2019, https://www.nbr.org/publication/south-korea-the-challenges-of-a-maritime-nation/ (accessed November 9, 2025).

[3] Sam-man Chong, “The Implications of North Korean SLBM for KSS-III Submarines,” Korea Institute for Maritime Strategy, January 27, 2024, pg. 2-3, https://drive.google.com/file/d/1dYb2_ui_BaLe4rC8VhuDmeMuI309OBJH/view?pli=1 (accessed November 9, 2025).

[4] Josh Smith and Soo-Hyang Choi, “North Korea Unveils First Tactical Nuclear-Armed Submarine,” Reuters, September 8, 2023, https://www.reuters.com/world/asia-pacific/north-korea-launches-new-tactical-nuclear-attack-submarine-kcna-2023-09-07/ (accessed November 9, 2025).

[5] Ethan Meick and Nargiza Salidjanova, “China’s Response to U.S.-South Korea Missile Defense System Deployment and Its Implications,” July 26, 2017, pg. 7-10, https://www.uscc.gov/sites/default/files/Research/Report_China%27s%20Response%20to%20THAAD%20Deployment%20and%20its%20Implications.pdf (accessed November 9, 2025).

[6] Chen Chuanren, “South Korea Launches First KSS-III Batch 2 Submarine,” Asia Military Review, October 28, 2025, https://www.asianmilitaryreview.com/2025/10/south-korea-launches-first-kss-iii-batch-2-submarine-foc/ (accessed November 9, 2025).

[7] “VAU-6 Auxiliary Nuclear Power Plant (ANPP) Dollezhal eggs – Submarines,” Global Security, https://www.globalsecurity.org/military/world/russia/reactor-vau-6.htm (accessed November 9, 2025).

[8] Brent Sadler, “China’s Great Submarine Sinking: What We Know and Why It Matters,” National Security Journal, October 9, 2024, https://nationalsecurityjournal.org/chinas-great-submarine-sinking-what-we-know-and-why-it-matters/ (accessed November 9, 2025).

[9] “Japan Eyes Nuclear Subs After U.S. Gives OK to S. Korea,” Asahi Shimbun, November 7, 2025, https://www.asahi.com/ajw/articles/16143129 (accessed November 9, 2025).

[10] Kaoru Ohno, “Nuclear Powered Ship Mutsu Designated as Special ‘Ship Hertiage’,” Japan Atomic Industrial Forum Inc., https://www.jaif.or.jp/en/news/4725 (accessed November 9, 2025).

[11] Kosuke Takahashi, “Japan Launches Sixth Taigei-class Submarine,” Naval News, October 14, 2025, https://www.navalnews.com/naval-news/2025/10/japan-launches-sixth-taigei-class-submarine-for-jmsdf/ (accessed November 9, 2025).

[12] “Huntington Ingalls, HD Hyundai Sign MOA to Expand US-Korea Shipbuilding Cooperation,” WorkBoat, October 27, 2025, https://www.workboat.com/huntington-ingalls-hd-hyundai-partner-to-expand-u-s-korea-shipbuilding-cooperation (accessed November 9, 2025).

[13] Chris Panella, “White House says South Korean shipbuilding giants are going to pour billions into reviving America’s shipbuilding industry,” Business Insider, October 29, 2025, https://www.businessinsider.com/trump-south-korean-shipbuilders-will-invest-billions-into-us-industry-2025-10 (accessed November 9, 2025).

[14] “Report: Japan and U.S. to Sign Memorandum on Shipbuilding Cooperation,” The Maritime Executive, October 26, 2025, https://maritime-executive.com/article/report-japan-and-u-s-to-sign-memorandum-on-shipbuilding-cooperation (accessed November 9, 2025).

[15] Michael Barletta, “The Military Nuclear Program in Brazil,” Center for International Security and Arms Control, August 1997, pg. 6, https://www.files.ethz.ch/isn/22239/14_Military_Program_Brazil.pdf (accessed November 19, 2025).

Carlo Patti, “Origins and Evolution of the Brazilian Nuclear Program (1947-2011),” Nuclear Proliferation International History Project, November 15, 2012, https://www.wilsoncenter.org/publication/origins-and-evolution-the-brazilian-nuclear-program-1947-2011 (accessed November 19, 2025).

Shane Ward, “The Strategic Rationale for Brazil’s Nuclear Submarine Does Not Hold Water,” Georgetown Security Studies Review, https://gssr.georgetown.edu/the-forum/topics/defense/the-strategic-rationale-for-brazils-nuclear-submarine-does-not-hold-water/ (accessed November 19, 2025).

[16] “123 Agreements for Peaceful Cooperation,” U.S. Department of Energy, July 11, 2025, https://www.energy.gov/nnsa/123-agreements-peaceful-cooperation (accessed November 11, 2025).

[17] Kawasaki Heavy Industries (KHI) has significant operations in China across various business segments, including shipbuilding, robotics, hydraulic equipment, and environmental systems, primarily through joint ventures and local subsidiaries: https://global.kawasaki.com/en/corp/sustainability/creation/rd.html (accessed November 11, 2025).

Mitsubishi Heavy Industries (MHI) does not have wholly-owned shipyards building complete vessels in China, but it has several joint ventures, licensing agreements, and service operations in the country related to marine machinery, engines, and engineering services: https://www.mhi.com/group/mhimsb/company (accessed November 11, 2025).

Hanwha Shipbuilding has operations in China, specifically a shipyard in Shandong province that builds ship components for final assembly in South Korea. These components are critical to the company’s production and supply chain: https://www.hanwhaocean.com/en/whoweare/gn/aff/ (accessed November 11, 2025).

[18] “Fact Sheet: President Donald J. Trump Drives Forward Billions in Investment from Japan,” The White House, October 28, 2025, https://www.whitehouse.gov/fact-sheets/2025/10/28195/ (accessed November 11, 2025).

“Memorandum of Understanding Between the Government of the United States of America and the Government of the Republic of Korea regarding the U.S.-ROK Technolgy Prosperity Deal,” The White House, October 29, 2025, https://www.whitehouse.gov/articles/2025/10/u-s-korea-technology-prosperity-deal/ (accessed November 11, 2025).

[19] Brent D. Sadler, “AUKUS: U.S. Navy Nuclear-Powered Forward Presence Key to Australian Nuclear Submarine and China Deterrence,” The Heritage Foundation, October 27, 2021, pg. 7-9, https://www.heritage.org/sites/default/files/2021-10/BG3662.pdf

[20] “Pathway to Australia’s Nuclear-Powered Submarine Capability,” Australian Submarine Agency, March 14, 2023, https://www.asa.gov.au/sites/default/files/documents/2024-10/Nuclear_Powered_Capability_Fact_Sheet_0.pdf (accessed November 9, 2025).

[21] “Advanced Small Modular Reactors (SMRs), U.S. Department of Energy, https://www.energy.gov/ne/advanced-small-modular-reactors-smrs (accessed November 9, 2025).

[22] Brent D. Sadler and Peter St. Onge, “Regaining U.S. Maritime Power Requires a Revolution in Shipping,” The Heritage Foundation, May 15, 2023, pg. 18-20, https://www.heritage.org/sites/default/files/2023-05/SR272.pdf (accessed November 9, 2025).

[23] Adam Broinowski, “AUKUS Pillar 2,” Parliament of Australia, August 15, 2024, https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/Research/FlagPost/2024/August/AUKUS_Pillar_2 (accessed November 9, 2025).

[24] “Hanwha Announces $5 Billion Philly shipyard Investment as Part of South Korea’s Commitment to US Shipbuilding Growth,” Hanwha, August 25, 2025, https://www.hanwha.com/newsroom/news/press-releases/hanwha-announces-5-billion-philly-shipyard-investment-as-part-of-south-koreas-commitment-to-us-shipbuilding-growth.do (accessed November 9, 2025).

[25] “U.S. Navy Shipbuilding Is Consistently Over Budget and Delayed Despite Billions Invested in Industry,” GAO, April 8, 2025, https://www.gao.gov/blog/u.s.-navy-shipbuilding-consistently-over-budget-and-delayed-despite-billions-invested-industry (accessed November 9, 2025).

Featured Image: The JMSDF submarine Taigei (SS-513) (JMSDF photo).