[Satellite News 09-11-09] In the ‘Satellite Manufacturers Adapting to Changing Requirements’ panel at Euroconsult’s World Satellite Business Week, industry leaders admitted some of the biggest issues facing satellite manufacturers was keeping control of the supply chain in difficult economic times, with some of these companies potentially feeling the pinch. “The thing that concerns me is the supply chain. Over 50 percent of our components and subsystems are sourced through the supply chain. It is paramount you continue to monitor that. Any break in that chain can impact that cost,” said Marshall Byrd, VP & general manager, Lockheed Martin Commercial Space Systems  (LMCSS).
    “The question is what is going to happen to the suppliers. I don’t see a problem on the supply side. I think it is manageable,” added John Celli, president and COO, Space Systems/Loral (SS/L).
    The other main issues discussed at the panel was whether prices for satellites would have to go up to help manufacturers improve margins, and also whether the economic crisis would have an impact on the number of orders for new satellites.
    In terms of the pricing issue, “The prices of satellites have gone up but that is related to economics, so the cost of fuel, transportation etc,” said Celli.
Evert Dudok, CEO, EADS Astrium Satellites, said prices had to go up otherwise satellite manufacturers could find themselves in financial trouble. He said, “I think satellite prices will go up in the long-run. We cannot expect our shareholders to stay in the business with the margins we have today. There will be changes over time.”
    Stephen O’Neill, president, Boeing Satellite Systems International (BSSI) said the Sea Launch situation should act as a warning for those trying to squeeze manufacturers in terms of price. “We have to learn lessons from Sea Launch. If we continue to accept onerous conditions on the satellite manufacturing side, you could see a satellite manufacturer go bankrupt,” he said.
    Garrett Pierce, CFO, Orbital Sciences, echoed these sentiments. He said, “We are suffering from margins less than what our shareholders would appreciate. We would like to see our margins go up.”
    Despite tough market conditions, there should still be a strong demand for new satellites. Reynald Seznec, president and CEO, Thales Alenia Space, said, “I do think this renewal cycle is pretty solid. We think there are 26 satellites this year, but less next year. We think the financing will not be available to some operators. We think there will be delays in some projects. We might see some more shared satellites and hosted payloads. This will probably help smooth they cycle. I am optimistic that these delaying cycles will smooth the peak. The institutional market is pretty solid in Europe, not booming, but solid. That could have an impact if there is a downturn in the commercial market.”
    Dudok also does not expect the economic situation to severely impact satellite manufacturers. “We are seeing about 20 replacement satellites per year. We don’t see any downturn right now,” he said.
    Changes in ITAR regulations were also discussed. Seznec believes that any impending changes may not have a huge impact on the competitive landscape. He said, “If ITAR changes, this will impact all of us in the same way. It does not change the competitive positioning of the different players.”
Access to space was also an issued touched upon, with many admitting that this could be one of the major challenges facing the industry over the coming months.  
    “There is a real issue in terms of access to space. I think the liquidation of Sea Launch would be a tragedy to this industry. A number of satellite operators are concerned by that,” said O’Neill.