Maxar’s satellite business looks to gain foothold in defense market
Maxar Technologies, a space company headquartered in Westminster, Colorado, has gained global attention with its high-resolution satellite images of the Ukraine war.
The company also operates a satellite factory in Palo Alto, California, a business that delivered more than 100 large geostationary communications satellites over the past three decades but now faces headwinds from declining orders.
To offset a downturn in commercial satellite sales, Maxar is positioning itself to compete in the national security arena, Chris Johnson, head of Maxar’s satellite manufacturing operations, told SpaceNews.
The company this month scored a big win as a subcontractor to L3Harris Technologies, which won a $700 million contract from the Pentagon’s Space Development Agency to produce 14 satellites to launch in 2025. SDA is building a low Earth orbit constellation of data transport and missile-tracking satellites for DoD. Maxar on Aug. 9 announced it was selected by L3Harris to supply 14 satellite buses.
The geostationary satellite market “is still important but not quite the size that it was before,” he said. “So we are working to transform this business and diversify into other areas.”
Johnson, whose official title is senior vice president and general manager of space, was a long-time Boeing satellite executive before joining Maxar just over a year ago to help the company raise its profile in the U.S. government market.
Just four years ago, Maxar was considering selling or even shutting down its commercial geostationary (GEO) satellite business but instead restructured it to emphasize smaller satellites and government sales. “We are not wavering at this point,” Johnson said. “We’re investing in our people and our processes and facilities and trying to keep a clear focus.”
For decades, the company worked almost exclusively with commercial customers but has won some civil space contracts in recent years from NASA. Several years ago it set a goal to split its sales one-third each between commercial, civil and national security space.
Johnson said key target customers are defense and intelligence agencies pivoting to multi-orbit systems. Future architectures will be a mix of LEO, MEO (medium Earth orbit), GEO and even beyond GEO satellites, he said. “That’s really where we’re headed.”
Maxar’s interest in working with the Space Development Agency came to light in October 2021 when Maxar filed a bid protest over a solicitation SDA had issued in August for the Transport Layer Tranche 1, a procurement of 126 small satellites. Maxar challenged the solicitation on the grounds that the terms unfairly favored certain companies over others. “There was an appearance that we limited competition,” SDA Director Derek Tournear said at the time.
The Government Accountability Office dismissed the protest after SDA agreed to cancel the solicitation and reopen a new one under a different contracting mechanism known as Other Transaction Authority, which requires large defense contractors to team up with commercial players. Maxar ultimately did not win a Transport Layer Tranche 1 award, and those contracts went to Lockheed Martin, Northrop Grumman and York Space Systems.
Johnson said Maxar has moved on from the protest. “We had a lot of really candid discussions with our partners on the government side and our future partners,” he said. “That was kind of a unique moment in time, and I think we’ve moved forward and feel like we have the right capabilities and value.”
KEEPING PRODUCTION LINES GOING
At Maxar’s 80,000-square-meter factory in the San Francisco Bay Area, approximately 2,000 workers are building 15 spacecraft, including six WorldView Legion imaging satellites for Maxar’s Earth observation constellation.
Johnson said a top priority is to complete the six Legion satellites and launch them to orbit as soon as possible to meet growing demands for 30-centimeter-resolution optical imagery. After years of delays, the first two Legions are projected to launch in the fourth quarter of 2022.
The other satellites currently in production are geostationary spacecraft for commercial customers, including four Intelsat communications satellites funded by C-band spectrum proceeds. Fleet operators Intelsat and SES ordered 13 satellites in 2020 from Boeing, Maxar, Northrop Grumman and Thales Alenia Space. These operators have to clear C-band spectrum for cellular 5G networks to qualify for $9.7 billion in incentive payments from the Federal Communications Commission.
The C-band auction created an artificial bump in the commercial satcom market, and these orders will help Maxar keep production lines going until at least 2024, said industry analyst Chris Quilty of the market research firm Quilty Analytics.
In addition to the six Legion and four Intelsat C-band satellites, Maxar is producing a next-generation Intelsat 40E, two Sirius XM radio satellites, the Jupiter 3 comsat for EchoStar’s Hughes Network Systems and a Legion-class geostationary satellite for Ovzon, a Swedish provider of broadband services.
Maxar has a relatively short window to line up new customers before the current backlog is completed, Quilty said.
In the face of a downturn in the GEO satellite market, Maxar has been trying to pivot toward the LEO sector but has suffered setbacks, including a failed bid to build Canadian operator Telesat’s Lightspeed constellation. The business also has been impacted by the trend among satellite operators toward vertical integration. Maxar, for example, used to build imaging satellites for Planet’s SkySat constellation before Planet transitioned to in-house satellite manufacturing.
Quilty said winning SDA contracts could be “game-changing” for the company given that the agency intends to acquire several hundred satellites in increments every two years as it builds out tranches of its Transport Layer and Tracking Layer constellations.
He noted that Maxar scored a handful of NASA contracts over the past few years, helping to increase the company’s government portfolio.
In 2019 Maxar was selected by NASA to build and perform a spaceflight demonstration of the lunar Gateway’s power and propulsion element spacecraft, a key component to NASA’s plans to land astronauts on the moon. Under a 2016 contract, Maxar also developed NASA’s On-Orbit Servicing, Assembly and Manufacturing (OSAM-1) mission that will refuel a satellite in LEO.
Most recently, Maxar delivered the solar electric propulsion chassis for NASA’s Psyche mission to explore an asteroid orbiting between Mars and Jupiter. The mission was projected to launch this year but has been delayed due to software testing issues. Johnson said he could not discuss the specifics of the testing problems and cited NASA’s recent comments that the agency is trying to figure out a new plan for Psyche.
Quilty noted that Maxar’s NASA programs are tailing off, and the company has not signed any new major deals to replace them.
Hiring Johnson to run the space infrastructure business was a clear sign that Maxar is eager to up its game in the government market, Quilty said. Under Johnson’s tenure, Maxar has won some small development programs for government space demonstrations, “orders that they hope they can turn into bigger contracts.”
Quilty said Maxar is better positioned for smaller orders of higher value satellites than for mass-production of lower-cost hardware. Going after high-volume, low-cost production would require a substantial retooling of their operations, “which might not be a smart decision for them,” he said. “Maxar, for better or worse, is considered an old space manufacturing company. Their expertise is in building rugged, survivable hardware.”
The Legion bus is flexible enough to serve any number of government or commercial customers, Quilty said. “Anytime you have a proven heritage bus where you’ve got an existing supply chain, it becomes an attractive platform.”
DEFENSE MARKET MORE STABLE
Austin Moeller, aerospace and defense analyst at the Canaccord Genuity investment bank, estimated that Maxar’s space infrastructure business is on track to generate about $735 million of the company’s projected $1.9 billion in overall revenues for 2022.
Given the uncertainty in the commercial GEO satellite market, the message from Maxar leaders in recent earnings calls is that once the C-band auctions are over, the company will need government orders.
The SDA contract is a significant one, Moeller said. For the Tracking Layer, Maxar will be using a new, modular satellite bus designed for proliferated low Earth orbit constellations. “This is a major step for Maxar,” he said Aug. 9 in a research note. Profit margins on the Tranche 1 production, Moeller said. “will be lower due to the development work required, but the company intends to leverage this clean sheet design to sell into an array of other government and commercial programs going forward.”
Defense and intelligence “just tends to be a more stable market and a lot less bumpy than the commercial comsat market,” Moeller said. “And when you look at the defense budget, the Space Force has the fastest growing budget of any of the service branches.”
“Certainly DoD has deep pockets right now with the Ukraine conflict and wanting to build out a distributed satellite capability in orbit, and the bigger Space Force budget,” he said, so it would be smart for Maxar to start gaining a foothold in that market.
Maxar’s Earth intelligence business has been hugely successful on the government side, having recently won a $3.2 billion deal from the National Reconnaissance Office to supply satellite imagery over the next 10 years, Moeller noted. “So I’m sure they’re trying to mirror that on the satellite manufacturing side.”
A turning point for Maxar’s satellite business came in December 2019 when executives announced a deal to sell and lease back the Palo Alto facility to boost the company’s bottom line. Johnson said the company made a deliberate decision to keep manufacturing satellites but decided it needed to compete more aggressively in the defense and commercial LEO segments.
Johnson said that the plan is to invest in manufacturing capabilities to support commercial, civil and national security space and push commonality across all three segments. “That’s really how you get to speed, and that’s how you get the price points down.”
Maxar is also investing in marketing talent, he said. Selling to defense agencies “takes some different sales chops” than what is required for commercial sales. “What is mission success for a commercial customer might be different than how the U.S. government customer or an international government customer might see it.”
At Maxar’s factory today, “it is kind of standing room only,” said Johnson. At the same time, the company recognizes that it needs to move quickly to secure orders to keep going into the future, he said.
Johnson pointed out that it was more difficult for Maxar to compete for defense and intelligence contracts until it officially became a U.S. corporation about two years ago when the company spun off the Canadian subsidiary MDA. “Those hurdles are now gone,” he said.
The Canadian firm MDA purchased the Palo Alto-based satellite manufacturer Space Systems Loral in 2012 and in 2017 acquired the Westminster-based Earth-imaging firm DigitalGlobe. The combined companies were rebranded Maxar Technologies in 2018, and MDA was sold off in 2020.
The company’s origin goes back to 1957. Western Development Laboratories, a division of Philco, was the first building block of what would eventually become Maxar.
Western Development Laboratories launched its first communications satellite in 1960, The following year, Philco was purchased by Ford Motor Co. The combined Philco-Ford became Space Systems Loral in 1990.
“Our heritage goes back to the beginning of the space age,” said Johnson. “What we need to do as Maxar is to continue to tell that story.”
This article originally appeared in the August 2022 issue of SpaceNews magazine.