For Japan’s principal satellite manufacturer, Mitsubishi Electric Corp. (Melco), 2011 looks to be the breakthrough year in the commercial market.

Melco’s first non-Japanese commercial satellite — excluding Australia’s Optus C1, for which Melco was prime contractor but which used a Space Systems/Loral frame — was the ST-2 satellite owned jointly by SingTel and Taiwan’s Chunghwa Telecom. Launched in May, ST-2 is now fully operational.

Melco’s biggest commercial satellite win came in March, when the Turkish government awarded it the two-satellite Turksat 4 contract after a long competition with U.S. and European builders.

Melco announced in June that it is expanding its Kamakura Works satellite production facility to cut costs and delivery times as part of a 10-year goal of doubling its satellite revenue to 150 billion yen, or about $1.9 billion, per year. Some 3 billion yen will be invested in the Kamakura facility.

Toru Yunoki, Melco’s deputy general manager for civil and commercial space, discussed Melco’s strategy with Space News staff writer Peter B. de Selding.


Your two-satellite contract win in Turkey surprised some people given the heavy U.S. and European competition. How do you explain it?

We have had ambitions in the commercial satellite telecommunications area for a decade now and we have been looking beyond Japan for customers. In 2000, we were selected as a prime contractor for Australia’s Optus C1 satellite. That marked the start of Melco’s commercial space business. For Optus C1, Melco did all the mission work, but had to use a bus provided by Space Systems/Loral, since our DS 2000 platform did not have ample heritage for commercial customers.

The next commercial program was Superbird C2 in 2005. This spacecraft uses the DS 2000 platform, which is 100 percent Melco made. The ST-2 and the Turksat programs followed.


Have there been any recent motivations that caused a focus on export markets?

Around 2007 and 2008 it became clear to us that the Japanese institutional space budget would not be growing as expected. We realized we could not just stick to our traditional bread-and-butter customer, but needed to make the commercial arena another growth area to work hand in hand with the traditional area to grow our overall space business.


The Turkish government mentioned the Japanese space agency, JAXA, as having a role in the Turksat contract. What is JAXA’s involvement?

Melco will conduct the AIT [assembly, integration and testing] of the two satellites using a JAXA facility. We have our own facilities, but they have space limitations for demonstration purposes. Also, Turkey wants to build up its own space agency, and JAXA can be of great help to them providing advice on this front.


What would you say was the key element in your winning this contract?

Turksat considered it important to have a full turnkey program with engineering transparency. Also, including the use of the JAXA facility was viewed as a very positive sign.


Were you able to offer contract terms that others could not?

Some of the bidders may have imposed restrictions on how they intended to proceed with Turkey, and Melco may have been less restrictive. For example, the customer wanted Turkish participation in the AIT process of the satellites. One or more other bidders may have had difficulty with that. We told the Turkish side that they would have full access in observing the AIT process. They were confident they had ample experience in basic communications satellite design, and the Melco proposal provided them with something for their next step, which was what they were looking for.


Why didn’t you bid for the Thor 7 satellite contract from Telenor of Norway?

That was a question of timing. We were in the middle of making our best and final offer for Turkey. Our teams were dedicated to that, and we felt that we could not compile a competitive proposal for Thor 7 during that period.


What is your power capability on the DS 2000 now, and where do you want it to be?

We can offer between 5 to 6 and around 12 kilowatts of end-of-life power, with the possibility of going to 13 kilowatts. We are targeting to increase the power range to between 15 and 18 kilowatts.


What other near-term advances are you looking at for the DS 2000?

We are focusing on making the payload optimized, or even tailor-made, for unique beams required by the customers, utilizing membrane antenna technology. We take time to discuss with the customer to come up with an optimized coverage, which we find is their primary need.

Longer term, we are looking for a more flexible approach to allow the customer to shift beams to follow demand throughout the satellite’s orbital life and for payload flexibility functions.


Several commercial satellite telecommunications competitions are on the horizon — NBN in Australia for Ka-band, a possible new Palapa in Indonesia, Yahsat of the United Arab Emirates for a Yahsat 1C satellite, among others. Should we expect to see you in the competitive mix?

We certainly hope to compete for many of these. The market still looks pretty robust for regional commercial satellite telecommunications.


Is Melco now ready to compete for contracts from the bigger operators — Intelsat, SES, Eutelsat and the rest?

Melco’s strategic focus at this time is to keep on building on the heritage of the DS 2000 platform. There are now 10 DS 2000 models either in orbit or under construction. We are probably better equipped to do this now with regional customers, each having different needs, especially in Asia.


The supply side of the commercial telecommunications satellite market appears to be growing faster than the demand side — Loral, Orbital Sciences, Astrium, Thales Alenia Space, Boeing, Lockheed Martin, plus new Russian, Indian and Chinese providers in addition to Melco. Is this a worry?

I agree the market will get difficult as you add competitors. But after the ST-2 and Turksat satellites, our reputation will grow. In 10 years’ time you will see us more active in the competition, including bids from the bigger operators you mentioned.

A lot depends on whether opportunities can hit the DS 2000 platform’s competitive sweet spot and associated terms. This year, a major headache for us is the appreciating value of the yen against the U.S. dollar. If this trend continues, it will certainly hurt us in bidding at competitive prices. In general, the competitive environment is harsher, but it’s also true that in many of the regional competitions that we participate in, not every manufacturer bids. In some cases, only two or three manufacturers are involved.

In the meantime, we are expanding our capacity to meet both commercial and governmental production. The expansion planned for 2013 shall segregate governmental programs so that commercial customers can enjoy more ease of access to our facilities.


Do you have help from Japan’s export credit agency?

Yes, but we are looking to stretch it a bit. Melco is working on the issue, and trying to educate them by exposing possible deals and required terms. In the current commercial satellite telecommunications market, we expect export credit agencies will be playing a more important role.


The ST-2 was just recently launched. How is it performing in orbit?

The ST-2 has finished all in-orbit testing and as of July 11, it became fully operational. The performance is at 100 percent and we are very proud of the progress. The delivery of the spacecraft occurred a couple of months earlier than planned, and the customers were pleased.


How has the insurance market reacted to your DS 2000 product?

We have shown insurers everything they need to see. Every technical question gets answered. As a result, they have quoted us very competitive premium rates, comparable with the established manufacturers’ platforms. At this point the insurance underwriters are very comfortable with our DS 2000 platform and its performance.


The U.S. International Traffic in Arms Regulations (ITAR) technology export control regime has been an issue for manufacturers using U.S. satellite parts. Is it for you as well?

At this point we do not see any issues using ITAR-controlled technology or components. As Melco deals with the government of Japan and the government would not like to see any strains in the relationship with the United States, we have learned to live with ITAR restrictions. When we seek business outside of Japan, we only go to customers who can also live with ITAR restrictions.


We have heard about an appetite for Earth observation in this region, but do these governments have the budget for an Earth observation system of their own?

Melco is looking to export observation satellites for disaster prevention and monitoring purposes in this region, and I believe they do have the budget; moreover, the Japanese Official Development Aid is one avenue to help them out in the financing, for example, in qualified areas such as Mongolia and the Mekong Delta. We are talking here about medium-resolution satellites.

Peter B. de Selding was the Paris bureau chief for SpaceNews.