The steel-cutting ceremony at PT PAL's Surabaya shipyard signals more than just another arms deal. Indonesia is betting that mastering submarine construction will vault it into the exclusive club of nations that can design, build, and export advanced naval platforms by the 2040s. Twenty Indonesian welders just spent three months in Cherbourg learning techniques so exacting that French instructors reject welds for microscopic flaws. The Scorpène Evolved variant Indonesia chose represents the cutting edge of conventional submarine tech, featuring a fully lithium-ion battery configuration that triples the underwater endurance of older lead-acid designs. Naval Group's partnership model here differs sharply from typical arms exports. Instead of shipping completed hulls, the French are embedding fifty technical experts inside PT PAL's operations, forming binational work pairs and even learning Bahasa Indonesia to smooth knowledge transfer. The submarines' Platform Management System (PMS) coordinates roughly ten programmable logic controllers scattered throughout each vessel, managing everything from propulsion to diving safety. Indonesia insisted on local production of these digital brains, not just bolting together foreign-made modules. The weapons loadout tells you what Jakarta expects these boats to do. Each submarine carries up to 18 heavyweight torpedoes and SM39 Exocet anti-ship missiles in mixed configurations, with future capability to fire MBDA's SM40 next-generation Exocet still under development. That's enough firepower to threaten surface battle groups or choke key straits. The 80-day mission endurance means an Indonesian Scorpène could patrol from the Malacca Strait to the South China Sea and back without surfacing, gathering signals intelligence the entire journey. PT PAL and Naval Group are already discussing turning Indonesia into a regional production and maintenance hub for other Southeast Asian navies eyeing Scorpènes. If that happens, Indonesia leapfrogs from importer to regional supplier in one generation. The country's existing submarine force consists of aging German and South Korean boats that spend more time pierside than at sea. These two Scorpènes represent the first platforms Indonesia will truly understand from keel to periscope. The lithium-ion battery configuration is the real breakthrough. Traditional lead-acid batteries force diesel submarines to snorkel frequently, exposing their position. Lithium-ion cells pack three times the energy density, letting the boat stay deep and silent for weeks. France's Naval Group had been pitching this variant for years without finding a buyer willing to pay the premium. Indonesia's order validates the technology and will likely trigger copycat purchases across Asia, where nearly every coastal nation is expanding its submarine fleet to counter China's growing undersea dominance.
🌍 world
Indonesia Builds Subs That Could Reshape Pacific Power
Indonesia just kicked off construction of two French-designed Scorpène Evolved submarines at state shipbuilder PT PAL, marking the country's boldest push yet toward naval self-reliance. These aren't your grandfather's diesel boats - they pack lithium-ion batteries for 80-day missions, fire next-gen Exocet missiles, and use the same hardened steel as France's nuclear attack fleet.
My Take
This deal is about Indonesia refusing to pick sides in the Pacific power struggle by building its own cards to play. Jakarta watched Australia ink AUKUS for nuclear subs, saw the Philippines reopen American bases, observed Vietnam quietly expand naval ties with India and Japan. Rather than align with Washington or Beijing, Indonesia is spending $1.3 billion to construct platforms that make it too risky to ignore. Two submarines won't win a war, but they'll make any regional power think twice before assuming Indonesian waters are a free-fire zone. The French are playing the long game brilliantly here. They're not just selling hardware - they're creating dependency on French technical support, French combat systems, French missiles. Twenty years from now, when Indonesia builds its first indigenous submarine design, it'll still need Naval Group's blessing for critical components. Paris gets a foothold in Southeast Asia's fastest-growing defense market while China and America squabble over freedom of navigation patrols. Indonesia gets cutting-edge tech and the prestige of building advanced warships. Everybody wins except the taxpayers who'll fund the inevitable cost overruns.
What Happens Next
The real test comes in 18 months when PT PAL attempts to weld the pressure hull sections without French hands physically guiding every torch pass. Naval Group will declare the transfer successful, Indonesian officials will schedule delivery for 2029, and then the delays will start. Lithium-ion battery integration always takes longer than projected because the thermal management systems require obsessive calibration. By 2028, Jakarta will quietly negotiate a contract extension and Naval Group will dispatch another 30 technicians to Surabaya. Meanwhile, Thailand and the Philippines are watching this partnership closely. If Indonesia successfully builds even one Scorpène, both countries will approach Naval Group about similar deals rather than buying Chinese submarines that come with political strings attached. The Biden or post-Biden administration in Washington will grumble about European defense contractors underpricing American alternatives, but won't block the sales because keeping Southeast Asian navies out of China's orbit matters more than protecting General Dynamics' market share. By 2035, you'll see French-designed submarines operating from Subic Bay to the Andaman Sea, all maintained at Indonesian facilities, creating a de facto anti-Chinese submarine network that nobody officially calls an alliance.
What History Tells Us
Indonesia's submarine ambitions echo Israel's path to military self-reliance in the 1960s and 70s. After France embargoed arms sales following the Six-Day War in 1967, Israel shifted from buying French Mirage jets to developing its own Kfir fighter by reverse-engineering the technology. The transition took 15 years and cost twice the original estimates, but gave Israel the industrial base to eventually produce Merkava tanks and Iron Dome systems domestically. Indonesia is attempting the same leap in submarine technology, though the technical barriers are higher - pressure hulls and combat management systems are exponentially more complex than aircraft frames. South Korea pulled off a similar transformation between 1990 and 2020, progressing from license-building German Type 209 submarines to exporting indigenous KSS-III boats to nations like Poland. Jakarta's 2040 target for indigenous submarine exports mirrors Seoul's 30-year timeline almost exactly.
Market Impact
Naval Group's parent company Thales (HO.PA on Euronext Paris) has been trading around €148 per share, up roughly 12% year-to-date as European defense spending surges. This Indonesian contract, worth approximately $1.3 billion split between Naval Group and PT PAL, represents about 3% of Thales' projected 2026 defense revenue. Expect modest upward pressure on Thales shares when the contract details are formally announced, with defense analysts likely raising price targets by 2-3% to reflect secured order book extending through 2032. The bigger play is in lithium-ion battery suppliers. CATL (300750.SZ in Shenzhen) and Samsung SDI (006400.KS in Seoul) have been aggressively pursuing military contracts as EV (electric vehicle) growth slows. Samsung SDI currently trades around ₩387,000, down 8% from its 2026 peak as automotive demand disappoints. A naval application validates these companies' claims that their batteries can handle extreme conditions - if lithium-ion works in submarines at crush depth, it'll work anywhere. Watch for Samsung SDI and CATL to reference this program in earnings calls to justify premium pricing on industrial battery contracts. Broader defense sector impact tilts bearish for American submarine suppliers. General Dynamics (GD on NYSE), currently around $285 per share, has been pitching Virginia-class technology to Australia and expecting Southeast Asian nations to queue up for American diesel-electric designs. Indonesia choosing French over American tech suggests the State Department's export control restrictions are pricing U.S. contractors out of mid-tier markets. GD shares could face 3-5% downward pressure if Thailand or the Philippines follow Indonesia's lead and opt for European platforms with fewer political conditions attached.