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 shipboard power generation engines domestically and abroad. With the addition of data center orders, expansion is considered inevitable.
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 orders for medium-speed engines 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 U.S. energy infrastructure development company Coban Energy Group. 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.
Orders for AI data center engines 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, engines for data centers are more profitable than those for ships and are expected to contribute to improving HD Hyundai Heavy Industries' performance. The market expects the operating profit margin of HD Hyundai Heavy Industries' Engine Machinery Division to rise from 18% last year to 28% by 2029. Additional profits are also anticipated through linkage with maintenance businesses of affiliate HD Hyundai Marine Solutions. When HD Hyundai Heavy Industries supplies engines for data centers, 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 said, "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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