HD Hyundai Heavy Industries (329180.KS) is moving to expand its engine plant for the first time in about 20 years, as demand for power-generation engines at data centers surges amid the global artificial intelligence boom. The company is undertaking a large-scale facility buildout to secure a foothold in supplying power to high-margin AI data centers, going beyond its core business of marine engines.
The company recently held an investor presentation and said the current inflow of engine orders had reached a level it could not handle without an expansion, according to shipbuilding industry sources on the 24th. Given that the newest equipment at its existing engine plant was installed in 2008, the move would mark the first new addition in about 20 years.
The expansion responds to growing global demand for AI infrastructure. Goldman Sachs projects that global data center power demand in 2030 will be 170% higher than in 2025. The industry estimates that the sharp rise in power demand could create an annual shortfall of 50 gigawatts through 2031, but the entire power-generation engine industry's supply capacity stands at only around 10 gigawatts a year.
HD Hyundai Heavy Industries likewise concluded that its current production capacity cannot meet the flood of engine orders. The spare capacity the company can divert to land-based power generation is about 0.7 gigawatts a year, but land-based generation demand alone — excluding data centers — has already approached 1 gigawatt.
Orders for data center engines are also rising sharply. The company recently signed a contract with Coban Energy Group, a U.S. energy infrastructure developer, to supply power-generation equipment based on 9.6-megawatt HiMSEN engines. The deal, totaling 1,000 megawatts and 956 billion won ($690 million), will serve as a power source for a local big tech firm's data center.
The company says the volume under this contract can be supplied with existing production capacity, but the challenge lies ahead. Market premiums are expected to peak in 2029 and 2030, so the company needs to draw up a concrete production plan within the year to maximize profitability while securing the capacity to supply engines on time.
The core casting and forging equipment essential for the engine expansion is already held in-house, while large machine tools are being ordered from overseas. The company has also instructed its partner firms to prepare for the expansion. It said the investment was in its "final stages," suggesting that groundwork for the buildout has been completed.
The expansion will center on the highly profitable four-stroke, medium-speed HiMSEN engines. Land-based power plant sales account for only 5% of the company's total, but their profit margin reaches 23%. Meritz Securities said data center engine sales would be recognized starting in 2028, adding that as newly expanded volume comes on line, engines would contribute more to the overall profit portfolio and cyclical margins would stabilize.
Meanwhile, beyond expanding its land-based engine capacity, HD Hyundai plans to seize an early lead in the AI power supply chain by also targeting the floating data center (FDC) market, centered on offshore power ships (powerships) equipped with its HiMSEN engines.
