AMI’s longevity in the naval marketplace (going on 40 years now) is a result of our constant focus on delivering not just news of what’s happening, but what the news means for our clients in the market. “Hot News” contains much more than news—we answer questions about how the news translates into business decisions. We truly believe we are differentiated in the naval market through our work as analysts and advisors, not just reporters.
Recent developments in the submarine market are a case in point. Much has been made of Australia’s shifting away from France to the UK and US to build and operate nuclear submarines in the “AUKUS” partnership. From a political perspective, the impact of AUKUS has been immediate, both in signaling Australia’s growing concern over Chinese naval capability and solidifying its naval partnerships and relationships that have consistently supported Australian naval and broader security objectives for decades.
What has been missing from the commentary on AUKUS is informed perspectives on what that decision means in operational and naval market terms. From AMI’s perspective, Australia’s initial decision to choose the “French option” for new submarines was quite a surprise, as it seemed to overlook the hidden costs of moving away from an established US and (less so UK) connected “tail” of training, maintenance, ship design and operational practice that has shaped the Royal Australian Navy (RAN) since World War II. Subsequent Australian commentary on the expense and limitations of the French conventional submarine design echoed these concerns. Australia’s future submarine acquisition program on a UK and US partnership through AUKUS will enable the country to leverage existing relationships, partnerships, and investments, reducing both the expense and timeline for its new nuclear submarine acquisitions.
From a market perspective, the RAN choosing a nuclear submarine solution represents a tremendous opportunity for many companies. Developing and expanding local industry to support an operational nuclear submarine force will be a decades-long investment of time and money. Adding nuclear hulls to an existing conventional submarine force will also tax the RAN as well as Australian industry—increasing demand for the already limited asset of navy engineering expertise to operate this type of submarine. Australian industry and government will be looking for help. We may see an expanded version of the Air Warfare Destroyer (AWD) Alliance that built the Hobart class, incorporating the sometimes-painful lessons learned from that experience.
The other story “missed” in the excitement about AUKUS is its impact on the Asia-Pacific naval balance. With new nuclear submarines for Australia at least a decade away (if not longer), the near-term impact on the region’s naval picture will be negligible. The real story on current regional efforts to improve submarine capabilities to counter China lies further northward, in Japan, South Korea, and Taiwan.
As AMI noted in the December 2021 Hot News Modernization Editorial, the global submarine balance (as measured in number of hulls) continues to shift to the Asia-Pacific region. Of the 526 submarines identified by the Existing Ships Database (ESDB) as in active service, 240 (45%) are in the Asia-Pacific. Of the 202 subs worldwide commissioned since 2002, 98 (48%) are in the Asia-Pacific. A quick look at the Worldwide Naval Projections Report (WNPR) for submarine programs building now shows that Asia-Pacific countries plan to acquire almost 90 new hulls in the next two decades, with Japan, South Korea, and Taiwan accounting for 22 of those (25%). So, in the near term (measured as the next decade), the regional balance of submarine forces will not be changing with AUKUS.