Lockheed Martin, Taiwan Shipbuilder in Likely Deal To Supply Asian Navies

U.S. defense contractor Lockheed Martin is quietly exploring a deal with a Taiwanese shipbuilder to supply naval vessels to Southeast Asian nations, according to a newspaper report out of Taipei this month.

Han Pi-hsiang, CEO of Taiwan's largest private shipbuilder, Jong Shyn, confirmed to the Liberty Times that a memorandum of understanding had been signed with Lockheed Martin, an exploratory deal that could see the American arms manufacturer enter the regional marketplace for small, multi-role warships.

Han told the paper that Jong Shyn, whose shipyards are currently building vessels for Taiwan's coast guard, could "immediately prepare materials and free up production capacity" to fulfill orders from the U.S., according to the November 16 report.

The MOU, which hasn't been made public, is understood to envisage Jong Shyn as the ship platform builder and Lockheed Martin as the systems integrator, supplying core technologies like radars, guns and missiles. Experts say a formal deal would be the first of its kind between American and Taiwanese defense companies, and possibly a first by a U.S. contractor in the Indo-Pacific.

According to the Liberty Times, potential customers in the region include Indonesia, Malaysia and the Philippines, whose navies already operate fleets from a diverse range of Asian and European suppliers. The warships would help the South China Sea littoral states address growing security concerns, it said, alluding to China.

The MOU was agreed after Lockheed Martin sent representatives to Jong Shyn's headquarters in the southern port city of Kaohsiung, with the last visit happening in May, the report said. It said further progress would depend on the outcome of discussions between the U.S. and Southeast Asian governments.

Lockheed Martin, Taiwan's Jong Shyn Ink MOU
Taiwan’s domestically produced Tuo Chiang-class corvettes take part in a combat readiness demonstration off the northern city of Keelung on January 7, 2022. Military News Agency, Taiwan

Jong Shyn is Taiwan's fourth-largest military contractor, according to a study published last month by the Stockholm International Peace Research Institute, while Taipei already has a decades-long relationship with Lockheed Martin, which manufactures the F-16 Fighting Falcon for its air force and is set to supply HIMARS rocket launchers to its army.

Together with Raytheon Technologies, Lockheed Martin also maintains and supplies Taiwan's Patriot surface-to-air missile batteries, as well as its Javelin anti-tank and Stinger air-defense missiles. China sanctioned both American contractors in February in retaliation for the Biden administration green-lighting a $100 million arms package to service Taiwan's Patriot systems.

A joint venture with Jong Shyn could help Lockheed Martin—the world's biggest defense contractor by revenue—depress production costs while working with a comfortable partner, and allow it to tap a "fertile market" in Southeast Asia, said Collin Koh, a research fellow with the S. Rajaratnam School of International Studies at Singapore's Nanyang Technological University.

Such a deal could also address the lack of shipyard capacity in the U.S., where priority is given to ramping up U.S. Navy capabilities by fulfilling orders of large vessels including aircraft carriers and destroyers. These platforms far exceed the present size demands and purchasing power of Southeast Asian navies, which require general-purpose vessels with multifunctional capabilities, Koh told Newsweek.

"These days, modern warships could be built using modular technology. For example, you buy a frigate that could be scaled down during peacetime to perform low-intensity operations like counter illegal, unreported and unregulated fishing or counter smuggling, and then in wartime, you could scale up again with the addition of combat modules," he said.

1 of 2

Jong Shyn was contracted to build the 600-ton Anping-class offshore patrol vessel for Taiwan's Coast Guard Administration. The catamaran design was based on the near-identical 685-ton Tuo Chiang-class corvette being built for the country's navy by Taiwanese shipbuilder Lung Teh.

Taipei wants a dozen of each class for what could be useful additions to its asymmetric arsenal in wartime. In May, the white hull coast guard vessel Anping, the lead ship of its class, fired a Taiwan-made HF-2 anti-ship missile for the first time during a joint exercise with the country's navy.

However, Koh argues the current funding climate among Southeast Asian navies means they're unlikely to place orders in bulk, if at all. Lockheed Martin's systems may also be too advanced or expensive for the region's governments, leaving open the possibility of a third or fourth party joining any consortium led by the U.S. company.

"Lockheed Martin has a long-term presence in Southeast Asia. They would very well be aware of the market, and I believe they do sense that there is a market opportunity," Koh said. "If at any time the market improves or the funding climate improves, then at least you're already in the field."

Jong Shyn has four docks and a record as a trusted manufacturer for the Taiwanese military. An agreement with Lockheed Martin would be a "win-win step" for defense ties between Taipei and Washington said Su Tzu-yun, a research fellow at the Institute for National Defense and Security Research, Taiwan's top military think tank.

"The U.S. has realistic supply chain pressures because of the pandemic and weapons stockpiles given to Ukraine," he told Newsweek. "While the core systems would still be made in the U.S., this cooperation could lower man-hour expenses for Lockheed Martin, and Taiwan has the capacity to do it."

Both researchers said Western arms manufacturers like Lockheed Martin face competition from the likes of South Korea and other "emerging second-tier vendors," especially in Asia. Turning to a Taiwanese shipbuilder would be "a smart move," Su said.

Additionally, Su sees the MOU as a sign of growing mutual confidence between the two capitals and their industries. "Lockheed Martin would never let an untrustworthy country make its warships," he said.

Neither company responded to Newsweek's requests for comment, but Jong Shyn told Taiwanese news site Up Media that no formal contract had been signed with any international manufacturer.