Canada's submarine competition just got a lot more expensive—for the bidders.

Secretary of State Stephen Fuhr returned this week from South Korea, where he toured Hanwha Ocean's shipyard and boarded a KSS-III submarine alongside more than 20 Canadian companies including Irving Shipbuilding, Seaspan Shipyards, and Davie.

The visit capped an intense January that saw both finalists—South Korea's Hanwha Ocean and Germany's ThyssenKrupp Marine Systems (TKMS)—announce a flurry of partnerships with Canadian firms designed to prove their credentials ahead of a 2026 contract decision.

For Canada's most expensive defence procurement ever, the message is clear: both bidders understand that winning requires more than just good submarines. It requires deep, credible, and binding commitments to Canada's defence industrial base.

The Hanwha offensive

Between January 26 and February 6, Hanwha executed what can only be described as a full-court press on Canadian industry and government.

On January 26—days before Fuhr's arrival in Korea—Hanwha announced five major memorandums of understanding with Canadian companies spanning steel, space, artificial intelligence, and advanced sensors.

The centrepiece is a $345 million binding agreement with Algoma Steel, Canada's largest steel producer. The deal includes $275 million to support development of a new structural steel beam mill in Sault Ste. Marie, Ontario, plus $50 million in anticipated steel purchases for submarine construction and long-term maintenance, repair, and overhaul work.

For Algoma, the timing couldn't be better. The company recently announced plans to cut 1,000 jobs—nearly half its workforce—due to U.S. tariffs on Canadian steel exports. The Hanwha deal could save roughly 500 of those positions while establishing stable, long-term demand for Canadian steel in defence applications.

The agreement is contingent on Hanwha winning the Canadian Patrol Submarine Project contract, but represents a level of financial commitment rarely seen in Canadian defence procurement competitions. Hanwha is essentially betting $345 million on its ability to win.

Beyond steel, Hanwha Systems signed a memorandum with Telesat to collaborate on next-generation satellite connectivity solutions for submarines. The partnership includes plans to integrate Telesat's Lightspeed low Earth orbit network into Hanwha's submarine bid, providing secure, high-capacity communications for submerged operations. Hanwha has committed to including "significant, multi-year Telesat Lightspeed services" in its Industrial and Technological Benefits proposal.

A separate MOU with MDA Space focuses on secure LEO communications leveraging MDA's AURORA software-defined satellite platform alongside Hanwha's defence electronics expertise. The partnership also explores cooperation on South Korea's K-LEO defence constellation, creating potential export opportunities for Canadian satellite technology.

In the artificial intelligence domain, Hanwha Ocean and Hanwha Systems entered a three-party agreement with Cohere—one of Canada's leading AI firms, valued at over $7 billion and backed by Nvidia and Oracle. The partnership will develop specialized AI models for submarine operations, shipyard optimization, and smart manufacturing, leveraging Cohere's large language and multimodal model technologies.

Finally, Hanwha Systems signed with PV Labs to jointly develop advanced electro-optical and infrared sensor capabilities, with technology transfer, local system integration, and production planned for Canada.

Consulting firm KPMG analyzed Hanwha's industrial cooperation framework and projected it could generate more than 200,000 person-years of employment in Canada between 2026 and 2040—equivalent to roughly 15,000 jobs annually across multiple sectors.

TKMS strikes back

Germany's TKMS wasn't sitting idle.

On January 29, the German bidder announced a teaming agreement with Seaspan Shipyards to support sovereign submarine sustainment capabilities on Canada's west coast. The partnership leverages Seaspan's existing expertise maintaining Canada's Victoria-class submarines and positions the two companies as an integrated team for lifecycle support on both coasts.

"Sovereign sustainment" has become a key phrase in the competition. Both bidders understand that Canada wants the ability to maintain, repair, and upgrade its submarines domestically rather than relying on foreign shipyards—a lesson learned from the Victoria-class experience, where boats have sometimes spent years overseas for major maintenance.

TKMS has also previously announced partnerships with Quebec manufacturer Marmen, Kongsberg Geospatial (Norwegian-owned, Canadian-based), and—notably—Cohere, the same AI firm Hanwha is courting. Both bidders see Cohere's enterprise AI capabilities as essential to modern submarine operations and are competing to integrate Canadian AI expertise into their respective bids.

The fact that Cohere is partnering with both bidders isn't unusual. The AI firm stands to benefit regardless of who wins, and both submarine designs will require advanced AI for everything from threat detection to maintenance prediction to crew training.

Inside the Korean shipyard

During his week-long visit to South Korea (January 30-February 6), Fuhr and his delegation got an extensive look at what Hanwha is offering.

The Geoje shipyard is massive—five million square metres employing approximately 31,000 workers. It produces roughly 45 vessels annually, from commercial container ships to naval combatants to submarines. The facility is highly automated, with advanced robotics handling much of the heavy welding and assembly work.

Fuhr boarded and toured a completed KSS-III submarine—the exact model Hanwha is proposing for Canada. The KSS-III is a diesel-electric submarine with air-independent propulsion (AIP) that extends submerged endurance to more than three weeks. At 3,600 tons submerged displacement, it's larger than Canada's Victoria-class boats (2,400 tons) and incorporates modern combat systems, advanced sonar, and land-attack cruise missile capability.

The delegation also visited the Republic of Korea Navy Submarine Force Command base, met with senior submarine officers, and inspected training facilities where Royal Canadian Navy sailors could train while Canada's submarines are under construction. This training pipeline is critical—Canada will need qualified submarine crews ready when the first boat arrives.

On February 3, Fuhr also toured Hanwha Aerospace's Changwon facility, where the company manufactures K9 self-propelled howitzers, Redback infantry fighting vehicles, and Chunmoo multiple launch rocket systems. The message was clear: Hanwha sees the submarine program not as a standalone contract but as a gateway to broader defence cooperation between Canada and South Korea.

The technical comparison

While industrial benefits dominate the public discussion, the submarines themselves matter enormously.

Hanwha is offering the KSS-III Batch-II variant, which features:

TKMS is offering its Type 212CD (Common Design), developed jointly with Norway:

Both designs meet Canada's basic requirements for Atlantic, Pacific, and limited Arctic operations. Both feature modern combat systems and can be adapted to Royal Canadian Navy specifications.

The key differentiator isn't capability—both are highly capable submarines. It's delivery timeline and industrial benefits.

The delivery timeline debate

Hanwha promises four submarines delivered by 2035 if a contract is signed in 2026, with the remaining eight delivered at one per year through 2043. Early retirement of the Victoria-class fleet would save an estimated $1 billion in maintenance and support costs.

TKMS says it can deliver the first submarine "well before 2035" but hasn't specified an exact date. The German bid emphasizes NATO interoperability—Norway and Germany are already operating Type 212 variants, creating a common training and logistics pipeline.

Canada's Victoria-class boats begin retiring around 2034-35. Any delay in new submarine delivery creates a capability gap that would leave the Royal Canadian Navy without a submarine force—unacceptable for a G7 nation with three ocean coastlines.

What's really being decided

The Canadian Patrol Submarine Project is about far more than 12 submarines.

It's about whether Canada builds a long-term defence industrial relationship with South Korea or deepens its existing ties with Germany and NATO allies.

It's about whether Canadian steel, satellite, AI, and sensor companies get integrated into a major defence program or watch as another procurement goes offshore.

It's about whether Canada can credibly claim to defend its Arctic sovereignty without a capable submarine force operating under the ice.

And it's about whether Ottawa can actually deliver a major defence program on time and on budget—something Canada's track record suggests is far from guaranteed.

What happens next

With Fuhr's site visits complete—he toured TKMS facilities in Germany in December 2025—Ottawa has everything it needs to make a decision.

Defence Minister David McGuinty and Prime Minister Mark Carney have both visited the Korean shipyard. Senior officials have inspected both submarine designs. The industrial benefits proposals are on the table. The technical evaluations are done.

A contract decision is expected within 2026. First steel cut would follow within 12-18 months. And by the early 2030s, Canadian submariners could be training on their new boats.

For Canada's maritime defence and its defence industrial base, this is the biggest decision in a generation. The winner won't just supply submarines—they'll shape Canadian naval capability, industrial policy, and international partnerships for the next 40 years.