Pentagon’s $1.85 Billion Bet on Foreign Warships Marks Historic Shift in US Naval Strategy
Feasibility study for South Korean and Japanese shipbuilding reveals acute capacity crisis as China outproduces US destroyers sixfold.
The Pentagon has allocated $1.85 billion in its fiscal 2027 budget for a feasibility study on outsourcing advanced warship design and construction to South Korea and Japan—the first time the US would purchase a major surface combatant from a foreign partner since World War II.
The move reflects acute capacity constraints across American shipyards, where 82 percent of ships under construction are behind schedule as of March 2026, according to 19FortyFive. While China produces six to 10 destroyers annually, the United States manages fewer than two—a production gap that has pushed Pentagon strategists toward allied manufacturing as critical infrastructure for great power competition.
82%
293 ships
381 ships
-33%
The Cost-Speed Advantage
The study will examine adopting or co-producing designs like Japan’s Mogami-class and South Korea’s Daegu-class frigates, per South China Morning Post. The economic case is stark: constructing an Arleigh Burke Flight III destroyer takes nine years at $2.5 billion per ship, while South Korea’s comparable KDX-III Batch II costs $565 million and requires roughly five years, according to Asia Times.
“We’ve been directed to take a look at the possibility of having foreign combat ships,” John Phelan, then-Secretary of the Navy, told reporters in April. “If we were to go down that path, we would have to look at ships that we think are producible and could hit the fleet fast. That would tend to lead you more to the Korea[s], Japans of the world than the others, just because of producibility.”
The White House requested $65.8 billion for naval Shipbuilding in fiscal 2027, up from $45.1 billion the previous year, Defense One reported. The $1.85 billion feasibility allocation represents a down payment on what could become a fundamental restructuring of allied defense manufacturing.
| Metric | US (Arleigh Burke) | South Korea (KDX-III) |
|---|---|---|
| Construction time | 9 years | ~5 years |
| Unit cost | $2.5 billion | $565 million |
| Annual production rate | <2 ships | Variable (higher capacity) |
Workforce Collapse and Strategic Dependence
The shipbuilding workforce shrank from 218,000 workers in 1981 to 145,000 in 2023—a 33 percent decline that has created bottlenecks across every major program, data from the National Defense Industrial Association shows. At a House hearing in June 2025, Phelan acknowledged the crisis bluntly: “All of our programs are a mess. I think our best one is six months late and 57% over budget,” according to CNN.
The Navy’s current fleet of 293 ships falls short of both the 2016 target of 355 vessels and the 2023 goal of 381 manned ships plus 134 unmanned systems, per January 2026 Congressional Research Service analysis. Closing that gap through domestic production alone would require quadrupling current output—an impossibility given existing yard capacity and skilled labor constraints.
“For the Navy to meet the challenges it faces in the coming decades, the United States must take advantage of its strong partnerships with naval allies to support a collective revitalization of the allied maritime industrial base.”
— Kenneth Braithwaite, 77th Navy Secretary
Rear Admiral Ben Reynolds, Navy Deputy Assistant Secretary for Budget, framed the allied partnership as industrial necessity rather than strategic choice. “The best answer for us is to get a foreign investment—foreign partnership—that will help us in our shipyards here in the United States,” he said, per USNI News. “If we’ve done well with other industries with foreign partners, we can do it with shipbuilding.”
Political Resistance and Sovereignty Concerns
The proposal faces domestic opposition from shipbuilders and labor advocates who view foreign outsourcing as surrendering strategic autonomy. Matthew Paxton, president of the Shipbuilders Council of America, warned that “if we need more ships or repairs for our national security fleet, the answer is not to outsource our Navy’s shipbuilding to Korea and Japan, kicking American shipyard workers to the curb.”
The February 2026 America’s Maritime Action Plan attempts to balance these concerns by emphasizing that allied investment should rebuild US capacity domestically rather than replace it. The policy document, released by the White House, creates “clear pathways for foreign direct investment” while maintaining that core production capabilities must remain on American soil.
South Korea and Japan’s proximity to China introduces operational risk. In any active conflict scenario, allied shipyards would face potential disruption from Chinese missile strikes or blockade operations—the same yards the US would depend on for wartime production and repair. This geographic concentration creates a strategic dependency that mirrors Cold War concerns about European industrial base exposure to Soviet conventional forces.
A Center for Maritime Strategy report backing allied partnerships, cited by Defense News, argued that integrated allied manufacturing strengthens collective security by distributing production across multiple democratic partners. The report drew parallels to NATO ammunition production during the Ukraine conflict, where European capacity supplemented constrained US output.
What to Watch
Congressional appropriators will scrutinise the $1.85 billion feasibility study when budget reconciliation begins in June, with shipbuilding caucus members likely to demand guarantees that foreign partnerships create domestic jobs rather than displace them. The Navy must deliver preliminary findings by December 2026 under current budget language.
South Korea and Japan’s responses will signal whether allied governments view warship production as strategic leverage or burden-sharing. Tokyo has already expressed interest in joint development programs that preserve technology transfer restrictions, while Seoul seeks expanded military-industrial cooperation as insurance against potential US retrenchment from Asia.
The study’s findings will determine whether the US treats allied shipyards as temporary stopgap or permanent pillar of naval procurement—a choice that carries implications for defence spending, industrial policy, and the geographic distribution of military production across the Pacific alliance structure. With China’s naval expansion showing no signs of slowing, the Pentagon’s willingness to surrender sovereign production capacity marks how severely Washington assesses the current balance of maritime power.