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Satellite Manufacturing: Success Is In The Details

By | March 1, 2002

      By Nick Mitsis

      The global satellite manufacturing marketplace continues to be a highly competitive business. Thinner margins and shorter production cycles are often cited as the cause of a recent spate of spacecraft anomalies. As a result, hardware providers are increasing their focus on producing reliable equipment, regardless of size and application.

      Likewise, building larger spacecraft is no longer top priority. In fact, one area where size does not play the leading role among satellite manufacturers rests deep within the global assembly plants, at the hands of the skilled engineers who must perform under extreme pressure to translate a design into a highly productive machine.

      This pressure, fueled by an ever-tightening production schedule, continues to give rise to quality control and reliability issues that are now taking center stage. The satellite builders have yet to completely shed the negative image problem that shrouded the sector after a series of highly visible hardware failures, which began in 1997. While the streak of bad luck seemed to have gone by the wayside by 1999, new anomalies entered the industry in the 21st century and the perception remains strong that serious, ongoing reliability issues are a factor when constructing a satellite.

      “Payload and bus anomalies have always existed, but lately the major insurance loss anomalies have been increasing,” says Linda Williams, program manager with Bethesda, MD- based Futron Corp. “Anomalies happen every single day. But lately, of the anomalies reported as major insurance losses only 25 percent of them are payload-related, the rest occur in the bus.”

      In the last 12 years, 47 major anomalies hit 43 in-orbit satellites, resulting in major insurance losses, according to Futron. Out of that number, 74 percent of those incidents occurred within the last five years alone. Williams further adds that the manufacturing parameters are changing, perhaps contributing to the degree of error. Satellites are becoming higher powered; systems are becoming more complex; manufacturing schedules are being shortened; and many manufacturers are adopting the production line approach, which tends to lend itself to more streamlined testing and manufacturing procedures. “The disadvantages of the production line approach] are found in some sacrifices within the testing process, which result in stressing the satellite reliability standards,” Williams says. “The advantages within this procedure, however, are that you are developing a more economic production process that helps the manufacturer become more competitive and able to meet more aggressiveschedules, which ultimately makes them more desirable in the marketplace.”

      Luckily, engineers who are tasked with producing a quality product within the customer’s timeframe and budget has begun to turn for the better and more attention is being focused on the manufacturing stage. The global manufacturers are implementing specific processes of monitoring quality control, reinforcing a dedication to production excellence and maintaining a zero-tolerance for future hardware anomalies. All these checks and balances are adding strength to the next-generation spacecraft slated for orbit.

      Boeing Satellite Systems, one U.S. satellite manufacturer that has recently fallen victim to hardware problems, is now taking a proactive approach toward higher quality control. Last September, Boeing began notifying a number of its customers of a solar array output power problem on its 702-model satellite. “The reflectors were losing their optical quality to reflect the sun onto the solar cells,” says George Torres, vice president of communications for Boeing Satellite Systems. All six 702 satellites currently in orbit are expected to suffer gradual power losses earlier in their service lives than expected.

      “This problem we have had with the reflectors has caused us to go to a plainer design that does away with the solar reflectors. This new design adds a sixth panel to the spacecraft at no cost to the current customers under contract,” Torres says. “The new design is currently in production on a number of programs and the first one will fly on Galaxy 3C this spring.”

      The 702 satellite would normally launch with roughly 16 kW of power from its solar panels, a power supply that would decrease throughout 15 years of life to roughly 15 kW. In the case of the defective 702s in orbit, however, the satellites will degrade to roughly 12 kW after 15 years.

      With this problem isolated, Boeing is further implementing measures that will more closely monitor the production process. For one, a chief engineer has been assigned end-to- end responsibilities for each satellite platform. “This was a major business change for us,” Torres says. “On top of that, we also have formed an independent oversight board headed by Chief Engineer Todd Citron, who has the ability to stop production of any satellite should he deem it necessary.”

      The roughly $2.1 billion satellite unit historically meets eight percent margins, but the economy and fiercely competitive marketplace will keep Boeing executives busy this year as they work toward meeting that goal. The satellite manufacturer announced four commercial GEO orders in 2001, according to Via Satellite.

      Another U.S. manufacturer that is combating hardware issues is Space Systems Loral (SS/L). Last fall, Panamsat Corp.’s PAS 7 satellite experienced a reduction of approximately 25 percent of its power capacity as a result of one of the spacecraft’s solar arrays. Loral says that PAS 7 experienced an electrical power failure on its solar arrays that resulted in the loss of use of certain transponders on the satellite. SS/L believes the failure is an isolated event and does not reflect a systemic problem in either the satellite design or manufacturing process.

      Like its Boeing counterpart, SS/L is also implementing some checks and balances within its production phase. SS/L commissioned two independent internal teams that have evaluated the company’s reliability as compared to 10 years ago. “We are very satisfied with the reports that indicated that our reliability has not deteriorated,” says Pat DeWitt, president of SS/L. Another thing that the independent teams looked for were any signs of short cuts being taken within the manufacturing process and, according to company executives, nothing alarming was found. “While we need to continue to drive for improved quality, I am satisfied that I know that we have not taken any short cuts,” DeWitt says.

      The Saturated Market Place

      In a satellite industry that is currently suffering from a 35 percent to a 50 percent over-capacity, according to financial analysts, SS/L managed to capture five commercial contracts in 2001 according to Via Satellite. “All-in-all, I feel that it was a reasonably good year,” adds DeWitt. “The market is very challenging right now and the outlook for 2003 and 2004 has caused some concern as to what will be forthcoming.”

      Executives at Lockheed Martin Commercial Space Systems agree with DeWitt that they too are facing a softening within the satellite market. “A lot [of the market softening] is related to the consolidation going on within our customer sets as well as the slower-than-anticipated introduction of Ka-band as a new frequency for data transmission,” says Chuck Stees, vice president of marketing and sales for Lockheed Martin Commercial Space Systems. “Depending on what happens with Ka-band applications, we either will see the market returning to probably the 25-30 level per year starting in 2003, a market leveling out or becoming more of a replacement market.”

      Lockheed Martin inked five commercial satellite contracts in 2001, gaining three more than the company did in 2000. Now, like its industry counterparts, the U.S. satellite manufacturer is streamlining its operations into what executives hope will be a stronger market presence. “We are consolidating our satellite manufacturing, design and sales teams and putting them on the East Coast to function as a closer group,” Stees says. “In parallel, we are noting some past lessons learned and putting some rigorous control processes into place in order to gain a higher level of quality throughout our manufacturing process.”

      Currently, Lockheed Martin averages a 24-month turnaround time for a standard GEO satellite. Stees adds that the corporation is rather “comfortable” with that timeframe. “Some of our customers have a need for quicker delivery and we accommodate to the best of our ability without compromising quality,” he says. “We also rely very heavily on our supply chain and if we added pressure to that, you are merely asking for trouble you don’t want to deal with.”

      The over-capacity challenge, however, has not been limited to North American manufacturers. The European satellite hardware providers are also dealing with fierce competition.

      In 2000, European rivals Astrium and Alcatel grabbed more than half of the worldwide orders for commercial satellites, up from 16 percent the year before, according to analysts. One reason is that tougher U.S. export controls gave the Europeans an advantage in winning overseas orders. “Satellites being treated as ammunition is a disadvantage with our foreign competitors,” says Richard Dalbello, executive director of the Satellite Industry Association. “The U.S. government has not taken a firm role in commercial satellite communications and when the European manufactures gained an ‘Airbus-size’ share of the global satellite market, we felt the ripple effect.”

      Indeed, the export control issue is having a strong effect on U.S. competition. “ITAR controls are a major impediment to the sale of U.S. satellites. It is not clear how the situation can be improved unless technology controls are removed from commercial communications satellites,” says Roger Tinley, vice president of Telesat Canada’s Space Systems and International Consulting.

      Even though the export control issue does indeed hamper progress for U.S.-based manufacturers, 2001 rang a different tone for European market share gain, which materialized in fewer orders obtained. Combined, Astrium and Alcatel received a total of six orders, but Alcatel lost two contracts in November with GE Americom due to the merger of GE with SES Astra, resulting in duplicate footprints.

      “Some global operators have been ordering a lot of satellites for the last two years, but through satellite consolidation and privatization of operators, we think this will lead to a conservative market in 2002,” says Jean Michel Aubertin, director of telecommunication satellites for Astrium.

      Aubertin also is concerned by the increase of quality control problems and is working closely with his Astrium counterparts to ensure that satellites manufactured within his organization do not become victims to the same issues. “On our side, we run quality as a first perimeter. We have even decided to stop some launches in order to make sure that the quality of the product was indeed high,” he says. “In an effort to maintain quality control, we have complete cycles of internal reviews and checks and have worked a great deal on manufacturing processes for quality control.”

      The European manufacturer further focused its mission on producing quality satellites at the beginning of this year when a management restructuring materialized.

      Astrium’s new CEO, Antonie Bouvier, faces a number of challenges as he will attempt to strengthen the company’s financial situation as well as turning around the technical problems surrounding solar array problems that has stamped a negative image on some of its satellites.

      And, at least for the short term, Astrium will face an uphill battle in its rehabilitation process. From a contract-winning perspective, 2001 was a dismal year for Europe’s largest satellite manufacturer. According to Via Satellite, Astrium added only one new commercial communications satellite to its stable–Eutelsat’s W3A–and so far in 2002, has managed to gain Hispasat’s order for the Amazonas satellite.

      Bouvier has been tasked to conduct a dissection of Astrium’s financial situation and to restructure the company so its main focus centers on satellite activities. This means that the company’s launching endeavors may be transferred to EADS LV.

      Like Astrium, Alcatel executives also recognize the impact quality control has to their overall business success. “Alcatel is continuously struggling to ensure product quality and customer satisfaction. It’s a struggle because on one hand, after the recent in-orbit failures, the space business can’t afford new failures, so there is a zero tolerance for post-delivery defects,” says Laurent Zimmermann, communications manager for Alcatel. “On the other hand, the competitive environment drives all the costs down, including the cost to obtain and ensure quality.”

      Zimmermann further adds that Alcatel implements lessons learned from observed problems that stem from previous contracts and the adjustments made improve the product quality of existing manufacturing orders. “This ensures continuous improvement of company procedures and appropriate training of personnel in relation with observed results,” he says. Alcatel has 11 commercial satellites under construction and inked three contracts in 2001 according to Via Satellite.

      Small Sats Deal With Market Conditions

      As the global juggernauts compete for the large spacecraft contracts, Dulles, VA-based Orbital Sciences Corp. is carving out its own niche within the satellite marketplace. Even though its primary focus centers on small to medium size spacecraft, the overall market saturation and quality control challenges its counterparts are dealing with have not kept this player immune.

      “Many satellite operators have scaled down their plans due to economic conditions from larger platforms to smaller, more affordable ones,” says Ali Atia, president of Orbital Communications International, Orbital Sciences Corp. “We estimate that in 2002 there will be between six to eight small to medium satellite programs worldwide awarded.”

      In 2001, Orbital signed four contracts. The company’s Star GEO platform supports up to 24 transponders in the Ku-, C-, S-, X- and/or L-band frequencies.

      “We have an extremely tight quality control program. We are avoiding many of the problems larger manufacturers are having simply because we are sticking with well-proven products,” Atia says. “We take a conservative approach in regard to technology that is not well proven.”

      Atia adds that he would like to run a tighter ship, making Orbital even more competitive within the satellite arena. He wants to cut the delivery time with the suppliers to eight to 10 months from the current 12 in hopes of tightening Orbital’s overall 18-month turnaround time.

      Insurance Issues Hit Home

      The fumbling with quality in the production cycle is not merely felt by the operator and the manufacturer. A byproduct of the quality control issue within the satellite- manufacturing marketplace is what most executives in the industry perceive as a 20 percent insurance hike. In fact, some underwriters are “absolutely furious” with Boeing for its 702-design issue and they say, at this point, anyone coming to the market with a 702 may find it challenging to obtain insurance. The high cost of replacement to commercial satellite owners has given rise to a more than $1 billion a year payback business for insurers in seeking the successful launch and operation of these costly creations.

      The satellite insurance market capacity soared in the 1990s from around $300 million in 1990 to almost $1.2 billion in 1999, well in excess of the $175 million to $250 million of coverage required for most satellites, according to published reports from the global space insurers.

      “It is really a matter of supply and demand. In the 1980s, the premiums were about five to seven percent of the combined value of the satellite and launch vehicle,” says Roger Rusch, president of Telastra Inc. “But that was never a realistic number. The gap between payout and income has widened and $1.3 billion was lost, and so the premiums are hiking up again.”

      Rusch also says that such in-orbit anomalies should not be happening today. “The pressure is on to deliver quicker and cheaper. This fact is forcing people to take shortcuts,” Rusch says. “Certainly some people believe that many reasons why some of the failures have happened have been because we have not tested as long or as carefully as we should have. We should be smarter than that.”

      Tinley agrees with Rusch and states that Telesat has indeed observed some reduction in testing standards. “We always had to add to the tests being offered and pay extra attention above the tests already slated for the client.”

      The Next Generation

      However the global satellite manufacturers end up ironing out the various quality control issues, one thing is certain: satellite executives will be focused on the forthcoming changes that will ultimately separate the profitable winners from the struggling losers. In fact, some industry executives believe that the satellite industry is on the threshold of a more widespread consolidation wave beyond what has already transpired within the manufacturing community. “I do expect more consolidation. However, I do not expect that the European companies will do it,” says Rusch. “We do hear of aspirations of companies that want to consolidate but I don’t think it will fully materialize in 2002. We have five major manufacturers and I think we will see five major manufacturers going into 2003.”

      Nick Mitsis is Via Satellite’s Associate Editor.

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