Without Amos-8, IAI angling for government lifeline in telecom satellite manufacturing

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WASHINGTON — Israeli satellite operator Spacecom’s decision to buy its next satellite from U.S. manufacturer Space Systems Loral is  jeopardizing Israel’s domestic comsat manufacturing capability.

Tel Aviv-based Israel Aerospace Industries (IAI) has in the past 16 months lost twice to foreign manufacturers in competitions to build new satellites for Spacecom, its primary comsat customer. Spacecom, after procuring the large multi-payload Amos-6 telecom satellite from IAI in 2012, has since gone to Boeing for Amos-17 and now SSL for Amos-8.

IAI differs from most satellite manufacturers in that it does not have consistent government demand for telecom satellites, usually military in nature, to balance out fluctuations in commercial business. Without government demand to offset an absence of commercial orders, IAI faces the uphill challenge of sustaining its comsat manufacturing capability — a capability IAI ironically keeps because of a desire within Israel to have a domestic satellite manufacturer.

“Since IAI has primarily been a manufacturer for the Israeli government or for Spacecom…they are in a challenging position when the source of that demand either dries up or goes elsewhere,” Carolyn Belle, a senior analyst at Northern Sky Research, told SpaceNews.

The destruction of the IAI-built Amos-6 satellite in a 2016 pre-launch explosion of a SpaceX Falcon 9 stirred the Israeli government to provide greater support for its domestic industrial base, but not enough to tip the scales in favor of IAI in the Amos-8 competition, according to Opher Doron, vice president and general manager of IAI’s Space Division.

Doron said the Israeli government supported IAI’s bid to build Amos-8, but not enough to ensure a competitive offer against other manufacturers. Last year’s crop of just seven commercially-competed comsat orders was the lowest in 15 years, according to analyst firm Euroconsult. Prior to the $112 million order for Amos-8, Spacecom’s Senior Vice President of Sales and Marketing for Europe, North Africa and the Middle East Jacob Keret told SpaceNews that manufacturers voraciously pursuing sales had become more aggressive in their bidding.

NSR doesn’t expect orders to pass 20 a year for the next few years, according to a Satellite 2018 presentation. So far this year satellite operators have ordered at least six geostationary comsats.

Now that Amos-8 will be built outside of Israel, more attention is being paid to preserving Israel’s satellite manufacturing strength, Doron said.

“There is now revaluation of that on the government side based on government’s assessment of the importance of communications satellites and the types of uses the government would like to encourage,” Doron told SpaceNews March 28. “I think that revaluation may well come out for the good.”

Doron declined to say if IAI would shutter its comsat manufacturing line without government intervention to keep it running — an outcome feared in 2012 when it was uncertain Spacecom would pick IAI for Amos-6 — but confirmed it is a critical factor.

“It is heavily dependant on the government coming through, and I think they have had a wake up call that they should have had when Amos-6 blew up,” he said. “Maybe this is the last bell for that.”

He said there is “a reasonable chance there will be some interesting development in the coming weeks” regarding an Israeli government decision to support a multi-year plan for domestically produced communications satellites.

“If the government does decide to come through — as most governments who support the space sector do — and put in a relatively small amount of funding on a multi-year basis, then I think we will together with government find the solutions to build the next communications satellite in Israel and put it in space in the next few years and keep the next ones coming,” he said.

Doron said that “small amount” is around $20 million a year of regular investment. That amount is substantially smaller than the cost of a full geostationary satellite, which typically runs five to fifteen times that amount, but could fund continual work and research and development projects. NSR’s Belle said most satellite manufacturers benefit from steady government work as a source of revenue, employee sustainment, and technology development.

“That source of R&D has has been critical for some manufacturers,” she said. “If you look at what Boeing has done building Wideband Global Satcom satellites for the U.S. government and then transitioning those technologies to the commercial sector, they’ve been very successful.”

Boeing developed digital processing technology for the Wideband Global Satcom program that it has since used in commercial satellites such as Intelsat’s Epic series of high-throughput satellites.

IAI does have consistent Israeli government demand for Earth-observation satellites. Doron said the company is “very busy” with radar and optical satellites, as well as the lunar rover it is building for SpaceIL, a Google Lunar X Prize contender that still plans to launch to the moon late this year on a shared Falcon 9 despite the X Prize deadline ending March 31 without a winner.

Doron said IAI is also in discussions with several geostationary satellite operators in an attempt to win commercial business.

“We are looking at a very specific niche of small, all-electric platforms and sophisticated onboard digital processing as key differentiators for specific users,” he said. “We are investing our own funds in developing these technologies.”

But Belle warned the commercial sector may not offer much assurance given the reluctance of satellite operators to buy new spacecraft.

“In today’s environment there is less demand for geostationary satellites, particularly commercially, and each satellite is competed much more heavily than it was previously. That’s a challenging spot for them to find a path forward,” she said.