Japanese Submarine Costings – Oyashios through to Soryu Mark 2s

The Soryu class (at top) and Oyashio class (middle). Their main weapons are the Harpoon anti-ship missile and the Type 89 (Mk 48 very similar) torpedo.

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It is useful that Japan is publically providing Soryu Budget Estimates (below) as they have deep significance for future costings for Australia’s “Super Soryu” class (possible) future submarine. Becoming familiar with Japanese financial-military-industrial thinking is important.

Note that for most submarines exported worldwide the export price is often twice the price "charged" to the builder's own navy. Hence a US$500 million for German Navy TKMS-HDW 212 when downgraded to 214 may cost US$1 billion to a customer. As Australia may be Japan's first submarine customer necessary Japanese organisational changes and translation of millions of pages of design and "owners" manuals may represent substantial extra costs to Japan and maybe to Australia.

TKMS and DCNS cannot produce such future sub for Australia costings because their SSK submarine solutions are more theoretical than actual (noting Shortfin SSK would, in 2025, be very different from France's not yet launched Barracuda SSN).

Submarine Matters main Japanese source "S" has provided detailed comparitive figures for major parts of the Soryu program in Comments of early January 2016. Some further English translation has been done by Pete.

Japan calculates the price of its Soryu using cost accounting equation (1) GCIP (where GC = selling, general and administrative expenses, I = interest rate, P = profit ratio). As the Japanese Government has requested MHI and KHI to make nil profit in equations (1) MHI and KHI may go into the “red” depending on the circumstances.

Calculate price = overall cost + interest + profit + packaging & transport cost --- (1)

Overall cost = manufacturing cost + manufacturing cost * GC --- (2)

Manufacturing cost = direct material cost + processing cost + direct cost --- (3)

Interest = overall cost * I --- (4)

Profit = overall cost * P --- (5)

First year costs (design cost, jig & tool cost, testing cost, technical collaboration fee) belong to direct cost in equation (2) 

OYASHIO - SORYU TABLE (as at January 18, 2016)

SS No.	Building No.	Pennant No.	MoF approved amount ¥ Billions & FY	LABs, LIBs, AIP	Laid Down	Laun -ched	Commi-ssioned	Built By
5SS Oyashio	8105	SS-590/ TS3608	¥52.2B FY1993	LABs only	Jan 1994	Oct 1996	Mar 1998	KHI
6SS-15SS Oyashios 10 subs	8106 -8115	SS-591-600	¥52.2B per sub FY1994-FY2003	LABs only	Feb 1994		Mar 2008	MHI & KHI
16SS Soryu Mark 1	8116	SS-501	¥60B FY2004	LABs + AIP	Mar 2005	Dec 2007	Mar 2009	MHI
17SS	8117	SS-502	¥58.7B FY2005	LABs + AIP	Mar 2006	Oct 2008	Mar 2010	KHI
18SS	8118	SS-503	¥56.2 FY2006	LABs + AIP	Feb 2007	Oct 2009	Mar 2011	MHI
19SS	8119	SS-504	¥53B FY2007	LABs + AIP	Mar 2008	Nov 2010	Mar 2012	KHI
20SS	8120	SS-505	¥51B FY2008	LABs + AIP	Mar 2009	Oct 2011	Mar 2013	MHI
No 21SS			No 21SS built
22SS	8121	SS-506	¥52.8B FY2010	LABs + AIP	Jan 2011	Oct 2013	Mar 2015	KHI
23SS	8122	SS-507	¥54.6B FY2011	LABs + AIP	Feb 2012	Oct 2014	Mar 2016	MHI
24SS	8123	SS-508	¥54.7B FY2012	LABs + AIP	Mar 2013	Nov 2015	Mar 2017	KHI
25SS	8124	SS-509	¥53.1B FY2013	LABs + AIP	Oct 2013	Nov 2016	Mar 2018	MHI
26SS	8125	SS-510	¥51.7B FY2014	LABs + AIP	?	?	Mar 2019	KHI
27SS Soryu Mark 2	8126	SS-511	¥64.3B FY2015	LIBs only	?	?	Mar 2020	MHI
28SS	8127	SS-512	¥63.6B FY2016	LIBs only	?	?	Mar 2021	KHI
29SS	?	?	1st of New Class	LIBs only	?	?	?	?
Aus1	?	?	Super SoryuAU	LIBs only	?	?	?	?
Aus2 to 12?	?	?	Super SoryuAU	LIBs only	?	?	?	?

Table courtesy of updates provided to Submarine Matters by Japanese sources. LABs = lead-acid batteries, 

AIP = air independent propulsion, LIBs = lithium-ion batteries.  See fuller explanation of this revised January 15, 2016 Table at Submarine Matters' January 15, 2016 article Oyashio - Soryu Table, Future Sub Program, ¥ in, Dragons out.

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In the case of 19SS, build expenses (53 billion yen) consist of government supply (23 billion yen) and build cost [labour?] (30 billion yen). About fifty percent of build cost is parts or material cost. [One billion yen currently = 12 million Australian dollars]

"Execution" (build) expenses tend to decrease every year, which are 60, 58.7, 56.2 and 53 billion yen for 16SS, 17SS, 18SS and 19SS, respectively.

The currently operational Oyashio class are the forerunners of the operational Soryu class. The Oyashios have a very similar internal and external structure to the Soryus. The Oyashio class does not have AIP so it has a shorter hull (at 81.7 meters) than the AIP equipped Soryu Mark Is (84 meters). The Oyashios also lack full rubber (Anechoic tile like) coatings on the outer hull. These differences explain some of the differences in cost between Oyashios and Soryus.

The cost of the Oyashios was 52.2 billion yen (type 5SS, FY1993 Oyashio). The cost rose to 59.8 billion yen for the AIP equipped Soryu Mark 1’s (designated type 16SS, FY2004 Soryu). A reference is “On the current status of foundation of ship building and technology” by Japanese MoD, FY2011 March.

From this comparative data, it can be concluded that the cost of AIP is high. [Pete’s Comment: The operational and safety downsides of AIP for Soryu also worried/worries the Japanese Navy]

 In fact, the total cost of the 4 AIP engines for Soryu 19SS (FY2009 Soryu) was 4 billion yen [about A$50 million upfront + high running costs].

The last of the Soryu Mark 1s (ie. with AIP) will be 26SS (which will cost 52 billion yen).

Turning to future non-AIP Soryus [Mark 2s], specifically 27SS and 28SS, each will cost 64 billion yen. Within that cost there is:

-  an increase of 1.5 billion yen for the introduction of Lithium-ion Batteries (LIBs)

-  possible extra cost for the (possible) introduction of the new snorkel system

-  removal of the AIP engines will save 4 billion yen per submarine.

"If Australia selects the Japanese submarine, the submarine will be very reliable, because there are three prototypes, i.e., 27SS, 28SS and 29SS."

DETAILED COSTINGS FOR 28SS (the 2nd SORYU MARK 2)

In December 2015, the budget for 28SS was announced by the Japanese Ministry of Defense (MoD). MoD requested 71.5 billion yen. Judging from the budget, MoD expected higher performance from the 28SS compared to the preceding 27SS, but Ministry of Finance (MoF) was not impressed with  MoD's expectation. As is correct the MoF approved budget stands and is less, at 63.6 billion yen (excluding some initial year costs).

28SS’s MoD Requested budget [1] was 71,527,717,000 (FY2016-2020) yen

The detailed request is as follows:

1) 118,833 (FY2016),

2) 71,408,884 (FY2017-2020),

3) 6,830,844 (FY2017),

4) 24,290,039 (FY2018),

5) 23,682,417 (FY2019),

6) 16,605,584 (FY2020).

28SS’s MoF Approved budget is 63.6 billion yen [2], cost of first year (FY2016) is excluded.

[So "FY" is First year not what Pete assumed to be Financial Year? Or can FY be First Year or Financial Year?]

See mid January 2016 comments explanation - First Year (FY) are more generally expenses related to the initial investment in order to fulfill the production contracts of Japanese defence equipment. From the viewpoint of proper budget management and reduce corporate risk, First year costs are blanket contract and classified into direct costs. Example: 118,833 (FY2016) in 28SS’s MoD Requested budget.

For references see:

[1] http://www.mod.go.jp/j/yosan/gaisan/h28/gaisanyoukyu.pdf , “Detailed FY2016 Budget Request”, Page 672, Request No (Left column) 47.

[2] http://www.mod.go.jp/e/d_budget/pdf/271016.pdf , “Defense Programs and Budget of Japan - Overview of FY2016 Budget Request”, Page 8/56.

Also note:

http://www.mod.go.jp/j/yosan/gaisan/h27/gaisanyoukyu.pdf , “Detailed FY2015 Budget Request”, Page 626, Request No (Left column) 40, and

http://www.mod.go.jp/e/d_budget/pdf/270414.pdf , “Defense Programs and Budget of Japan - Overview of FY2016 Budget Request”, Page 8/66.

Details from S on batteries, torpedos and snorkels to follow later this week.

Pete