TOUGH DECISIONS AHEAD FOR SATELLITE MANUFACTURERS
Some top satellite manufacturers companies may be forced “out of business” in next 2 years unless they merge or form strategic partnerships, or market demand dramatically improves, industry officials said. Analysts predict there will only be 25 satellite manufacturing contracts available in next 2 years, down from 60 this year. “There are 5 or 6 major players competing for 25 satellite manufacturing contracts,” Satellite Industry Assn. (SIA) Pres. Clay Mowry told us: “That’s a lot of manufacturers competing for a relatively small marketplace. The competition is pretty intense.”
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Alcatel, Astrium, Boeing, Lockheed Martin and Loral are preparing for downswing to expected average 25-30 contracts annually until 2004 by adjusting business plans and forming alliances. Also to be considered are smaller companies such as Alenia Spazio, Mitsubishi Electric and Orbital Sciences, which are carving out individual niches in construction market. Analyst told us “their presence could also have significant impact” on Big 5 if “they begin to win contracts” that normally are handled by major companies. Each already has won its share of contracts in recent years, analyst said. In addition, companies in China and India are building satellite manufacturing plants. “By 2005, this industry will probably look a whole lot different,” satellite official told us: “Right now, the market is filled to capacity and there just isn’t enough room for everybody. Just do the math. Somebody is going to get squeezed out.”
Another industry official said consolidation could be key to future. Alcatel Space and Astrium on Fri. announced strategic alliance to develop new generation satellite platform designed to keep European manufacturers competitive in marketplace. @BUS will be available in different models with launch weights up to 9.5 tons. Customers will be able to equip it for telecom, DBS or other services. New @BUS project is designed to compete head-on with U.S. satellite platforms manufactured by Boeing and Loral. Alcatel spokesman said @BUS had $425 million budget, but European Union approval for deal still was needed.
Boeing entered into partnership with Mitsubishi Electric for variety of services including air-traffic control, communications, satellite launch services. Other possible deals include Lockheed Martin-Loral and Loral-Alcatel. “There has been a lot of discussions among the companies,” Mowry said. Lockheed Martin officials told biennial Paris Air Show June 15-25 that satellite industry probably couldn’t support 5 major satellite builders. “Current supply exceeds demand 2 to 1,” Lockheed Martin official said. “The overcapacity has led to drop in prices per satellite. There is movement of all the manufacturers to this point of view, that we need a consolidation.”