Satellite builders say customers paralyzed by technology, financial stresses
KUALA LUMPUR, Malaysia — Satellite manufacturers said they are being pulled in every direction by customers who want their spacecraft to last longer in orbit, or maybe only half as long, and who hesitate to finalize a purchase because it could be obsolete in a few years.
One of the consequences is a mediocre harvest of commercial geostationary-orbit satellite contracts, they said here Oct. 4-6 at the APSCC conference.
“It’s a bit like the iPhone 6 and iPhone 7 dilemma. Do I buy the 6 or wait until the next generation comes out?” said Arnaud de Rosnay, chief technology officer at Airbus Defence and Space of Europe.
Satellite manufacturers for months have been saying the market is in great shape judging from the number of bid requests and requests for information being issued by fleet operators. But neither 2015 nor 2016 — so far — featured a large crop of confirmed contracts.
“Customers are hesitant before committing capex because of the uncertainty driven by HTS factors,” said Tony Colucci, vice president of Space Systems Loral of Palo Alto, California, referring to high-throughput satellites that can provide far superior bandwidth economics for data-centric applications.
Lockheed Martin cites ‘the Dankberg terabit-satellite effect’
Frank J. Koester, vice president of remote sensing and advanced programs at Lockheed Martin Commercial Space, said one factor weighing on new orders is “the Dankberg effect: Some customers are freaked out by his terabit-per-second satellite.”
ViaSat Inc. Chief Executive Mark D. Dankberg has ordered two terabit-per-second satellites, with a third expect for global coverage, saying they will overwhelm smaller HTS spacecraft an most wide-beam satellites.
Sami Ben Amor, vice president of Thales Alenia Space of Europe, said the lower profitability among some established operators has triggered “a pause in investment due to financial worries and technological change. Video [applications] are still protected, but the rest of the [satellite operations] business is changed.”
Customers want satellites with shorter and longer service lives
To ease concerns about launching a satellite that quickly becomes yesterday’s technology — the iPhone 6 effect — satellite operators have floated the idea that some geostationary-orbit satellites should be built to last only 7-8 years, and not the 15-plus years they are designed for today.
“We are receiving inquiries from a customer saying the technology is improving quickly and that a single technology won’t last 15 years,”: said Hikeyuki Too, general manager of Mitsubishi Electric Co. of Japan, which in recent years has been raising its profile in the commercial market.
“But launch costs will not be cut in half even if the satellite’s lifespan is cut in half,” Oto said. “And there are no quality standards established for this kind of satellite. We could eliminate redundancy [on the satellite] but then you have trouble getting insurance coverage.
“A satellite that lasts only 7-8 years? OK. But if the price isn’t cut in half, then there’s not much sense in that,” Oto said.
Colucci agreed. “There are no such satellites now available that are designed for 7- 8-year operational lives versus 15 years,” he said. “The [manufacturing] infrastructure for satellites with 15-year lives is extensive. At the other end of the spectrum, there are smaller satellites, often with no insurance. We need to find a middle ground, but it takes a lot of R&D investment to develop that.”
Airbus’s de Rosnay said customers today are less certain of what they want than they were a few years ago, and the optimal satellite life duration is an example of the confusion in the market.
“In fact, we are often asked to go beyond 15 years’ orbital life,” de Rosnay said. “That’s the funny thing about this: We design for 15 years but if the satellite can do 18-20 years it’s considered a plus. At the same time, people ask what they can do with a satellite after 7-8 years. So people are looking at different routes. In the end, the only thing that counts is total cost of ownership.”
Several satellite builders, including Airbus, Boeing, Space Systems Loral and Thales Alenia Space, are actively pursuing small-satellite contracts to offset the stagnant geostationary-satellite market.
Melco’s counting on Japan’s export-credit agency
Mitsubishi’s Oto said his company is also counting on Japan’s export-credit agency, the Japan Bank for International Cooperation (JBIC) to improve Mitsubishi’s satellite offer to international customers, particularly in Asia.
The Japanese agency has not been as active in the satellite sector as its counterparts in the United States, Canada, China and France.
“Some Asian customers want financial help from the manufacturer,” Oto said. “JBIC is very interested in providing this kind of support and help for our customers. Some of the proposals we have already submitted include this kind of financial help. JBIC is unique and sometimes the JBIC offer is more attractive than offers from the USA, or Canada or France.”
Export-credit agencies all must follow financial support guidelines laid down by the Organization for Economic Cooperation and Development (OECD). But Oto said JBIC has been able to extend its support beyond the Japanese work share of a given satellite to include non-Japanese manufacturing as a way to increase the value of the low-interest loan, he said.