Engines from HD Hyundai Heavy Industries, once used to propel ships, are now creating new demand as power supply sources for artificial intelligence (AI) data centers. With rapidly growing demand for data center engines centered in North America, the company has secured major contracts one after another in the first half of this year alone. As inquiries pour in, the need to expand production capacity is also increasing.
According to relevant industry sources on the 19th, HD Hyundai Heavy Industries' Engine Machinery Division has nearly exhausted all available Ulsan medium-speed engine production slots (capacity) through 2030. Currently, the annual medium-speed engine production capacity of HD Hyundai Heavy Industries' Engine Machinery Division stands at approximately 2.98 gigawatts (GW). Of this, about 1.5 GW is allocated for internal HD Hyundai Group volumes, and 0.5 GW is reserved for shipbuilding companies' demand for marine power generation engines domestically and abroad. With the addition of data center orders, expansion is now considered unavoidable.
Medium-speed engines are designed to operate continuously 24 hours a day based on high output and high efficiency. HD Hyundai Heavy Industries owns its own brand, 'HiMSEN' engines. While these have been primarily used for ships, their applications are expanding as power demand from AI data centers surges recently. This is because they are gaining attention as an alternative to 'on-site power generation,' which produces electricity directly at the data center site without going through the power grid.
Based on this, the cumulative value of medium-speed engine orders for data centers secured by HD Hyundai Heavy Industries in the first half of this year reached approximately 1.58 trillion won. Following a supply contract worth 627.1 billion won with U.S. energy infrastructure development company AEG in April, the company recently also signed a delivery contract worth 956 billion won with Coban Energy Group, another U.S. energy infrastructure developer. These engines are expected to be used as power supply sources for data centers of major local tech companies. HD Hyundai Heavy Industries is competing for orders by offering lower prices than competitors such as Finland's Wärtsilä, which holds the No. 1 global market share.
Data center engine orders are also expected to continue in the second half of this year. This is because gas turbines, considered the most suitable equipment for on-site power generation, are already facing supply shortages. Lead times for major global gas turbine manufacturers have extended to at least five years. Although medium-speed engines have smaller power generation capacity than gas turbines, they offer the advantage of securing required power generation capacity by installing multiple units in parallel.
In particular, data center engines are more profitable than existing ship engines and are expected to contribute to improving HD Hyundai Heavy Industries' performance. The market anticipates that the operating profit margin of HD Hyundai Heavy Industries' Engine Machinery Division will rise from 18% last year to 28% by 2029. Additional profits are also expected through linkage with maintenance businesses of affiliate HD Hyundai Marine Solutions. When HD Hyundai Heavy Industries supplies data center engines, HD Hyundai Marine Solutions handles after-sales services. Another positive factor is that the maintenance cycle for data center power generation engines is shorter than that for ship engines. In fact, while the average maintenance cycle for ship engines is about five years, it is estimated to be around three years for data center power generation engines.
An official at HD Hyundai Heavy Industries stated, "Expansion is indeed necessary," adding, "We have a phased plan to gradually expand production capacity while monitoring market conditions and order situations."
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