SATELLITE
MANUFACTURING: PRODUCTION CYCLES AND TIME TO MARKET
May
2004
(courtesy of Futron Corporation)
EXECUTIVE SUMMARY
In purchasing a satellite, the
three key elements for the buyer are: Will it be cost effective and profitable?
Will it be reliable? Will it be available when I need it? This report examines
the latter of these elements: it reviews the production schedules for
commercial communications satellites of the six major satellite manufacturers
over the ten most recent programs, through the end of 2003.
Satellite
operators have consistently pressed manufacturers with demands for faster
delivery to increase revenue and help them meet regulatory targets. Any delay
in delivery of a spacecraft results in lost revenues, often millions of dollars
per year. At the same time, operators want more and newer technologies
incorporated in their spacecraft, which by necessity requires development time
and additional testing time. While faster delivery of better satellites might
appear to be an impossible goal, quality and reliability are actually more a
function of the manufacturer’s quality efforts than time. This is
important because, as satellite operators increasingly report to financial
shareholders with shorter business planning horizons, the drive for faster
production schedules will likely continue.
To provide consistency and
objectivity for this analysis, Futron used data as reported by the aerospace
loss adjusting and information company, Airclaims Limited, since Airclaims is
an industry standard for this type of information. We used the announced
contract date, as confirmed by Airclaims, as the start of the production cycle,
recognizing that this date does not always coincide with the contract
finalization or the beginning of long-lead item production.
This study
resulted in the following key findings1:
1 The research underlying this report was sponsored by Lockheed Martin; however, the analysis and conclusions were developed by Futron.
BACKGROUND
What do operators want when they buy a satellite?
The trade-off between cost
effectiveness and profitability of a satellite is unique trade for each
operator. This trade-off compares a satellite's commercial revenue generating
capability with its purchase, operating, and insurance costs. However, the
other two drivers for choosing a satellite are easier to
analyze.
Previously, Futron studied the reliability of various
commercial satellite buses, as well as customers’ perceptions of the ease
of use of these buses. The results of these studies have been reported in
Futron White Papers on satellite insurance rates and bus operations.2
This year we analyzed how manufacturers have
performed recently with respect to the length of time for the production of
their satellites and the variability in their production times, i.e., making
the satellite available when the customer needs it. Satellite operators have
continued to push manufacturers to find ways of making satellites available to
meet market demand in a timely manner, which is critical for the
operators’ long-term business growth. In addition, various national and
international regulators now insist that construction milestones be achieved
and the orbital slot allocated by the regulator be occupied by the deadline.
Finally, the satellite operators themselves do not like variations or
uncertainties associated with the delivery dates of their
satellites.
Thus, the overall length of the production time and the
variability in that time are key buying considerations for satellite operators,
and these are the parameters Futron has analyzed in this report.
2 “Satellite Insurance Rates on the Rise – Market
Correction or Overreaction?” July, 10, 2002. “GEO Commercial
Satellite Bus Operations: A Comparative Analysis,” August 13,
2003.
METHODOLOGY
In compiling the data for this
analysis, Futron used its own database of satellite orders and manufacturing,
combined with the Airclaims SpaceTrakTM database which tracks each
significant event in the life of a launched commercial satellite from
construction up to retirement/re-entry. The Airclaims SpaceTrakTM
data is considered as the most complete, and the standard used by the industry,
including by insurers and other financial institutions. It was used to provide
consistency and a validation to the Futron data. By using both databases,
Futron ensured that the information in this analysis was precise and
unbiased.
In addition to using the SpaceTrakTMTM data, Futron
worked with Airclaims’ Space Analyst, David Todd, to obtain advice on
interpreting key data points, and in reviewing the overall report.
The
data analyzed started with the last 10 satellites manufactured and launched by
each of the following companies:
The following data was compiled for each satellite:
In order to provide
consistency among the data, we assumed the satellite order date was the end of
the month for all orders, since only the month of the order was known for many
satellites. When multiple satellites were ordered at the same time for launch
in close sequence (such as the groups of multiple Intelsat 9 orders),
production on all the satellites in that order was assumed to start at the same
time. If a satellite was originally ordered as a ground spare, however, (such
as the AsiaSat 4) delays to the launch have been assumed not to be related to
the manufacturer. While some programs are more complex or innovative (such as
Thuraya), all of the manufacturers have some more complex and other relatively
simple spacecraft. When analyzing the totality of the manufacturers’ last
ten programs, spacecraft complexity was assumed to average out.
Military and civil government programs were excluded from this analysis, as the
characteristics of both their technology and procurement requirements are very
different from those of commercial customers.
REVIEW OF SATELLITE PRODUCTION SCHEDULES
While the primary factors
influencing the production schedules are within the control of the
manufacturer, many other factors are not. These include: customer requests for
design modification, or requests for storage and delayed completion, as well as
requested launch delays. However, while a delay is sometimes apparent, this
type of causal information is generally not available in the public domain
making incorporation of these factors problematic. Thus, Futron assumed, for
the purposes of this analysis, that these factors have affected the various
manufacturers more or less equally.
Futron’s analysis shows that
all manufacturers have experienced both longer and shorter cycles within their
last 10 commercial satellites launched. When adjusted for delays unrelated to
the manufacturer (e.g., launch delays, customer financial difficulties), the
production times ranged from a low of 15 months for the Astra 3A (Boeing 376),
to a high of 59 months for the Astra 1K (Alcatel Spacebus 3000). As shown
graphically in Figure 1, the trendlines are more highly variable for some
manufacturers than others. This variability will be clarified and discussed in
the following section of this report.
Using the same adjustments, the average production times by manufacturer for the last 10 commercial communication satellites launched ranged from 24 months for Lockheed Martin to 40 months for SS/Loral, with the overall average being 30 months, as shown in Figure 2.
The next graph presents a summary of the variations in length of production times by manufacturer, showing for each: the average production time (in the bars) the shortest and longest (in the lines), as well as the variance between the two (the star markers). Interestingly, the average differential between the shortest and longest program cycles for all manufacturers in this study is 30 months, which is the same as the average production time overall.
PRODUCTION SCHEDULE REVIEW BY MANUFACTURER
The following section provides
a more detailed summary of the individual satellite programs considered in this
analysis, specifically the last 10 satellites manufactured and launched by each
manufacturer as of the end of 2003.
ALCATEL
The last 10
satellites launched from the Alcatel production line provides a fairly average
representation of the manufacturing cycle, with a mix of shorter and longer
programs, some for new customers and some for old. The average total production
time of this group is slightly below the average (29 months), but the average
range from the shortest to longest is higher than the all-manufacturer average
range (42 months), reflecting both the very quick turnaround on the Eutelsat
W4, as well as the exceptionally long production time for the Astra 1K. In the
case of Eutelsat W4 and the AMC-9, the reasons for the longer total time to
launch than production were related to financial/market conditions affecting
the customer, rather than manufacturing issues.
EADS ASTRIUM
EADS
Astrium’s last 10 satellites have a close to average profile (32 months),
and with a similarly close to average range between fastest and slowest program
time (also 32 months). While the AsiaStar satellite shows a much longer
production time than its companion the AfriStar, the customer indicates that
this was within their original plan. The HotBird 7 total time to launch was due
to co-payload delays on what was ultimately a failed launch. As to the
HellasSat 2, the additional time to launch reflected multiple program stops and
restarts from the customer, not manufacturing issues.
BOEING
The Boeing
programs reviewed here are a shorter than average overall group in terms of
total adjusted production time (27 months), but one with a very high variation
between shortest and longest (36 months). The extra length of time required for
the Thuraya program reflected both the complexity of the program and the need
to retrofit the satellite with solar arrays without concentrators (after a
generic fault was found on similar spacecraft). The non-manufacturing delays
for AsiaSat 4 were due to this originally being a ground spare, with the launch
then postponed due to the Asian economic crisis and market difficulties. The
e-Bird launch was delayed due to co-payload issues, not
manufacturing.
Note that the “MOD” suffix on some Boeing designs stands for MODIFIED and is not an official designation by Boeing. It makes note of a significant change in a design after a generic failure - e.g. BOEING 601 MOD no longer uses tin in its electronic contacts, BOEING 702 MOD and BOEING GEM MOD have a new design of solar arrays.
LOCKHEED
MARTIN
These last 10 satellites produced and launched from Lockheed
Martin represents a group with significantly lower than average overall
production time (24 months). This average is also the lowest of all the
manufacturers included in this analysis. In addition, Lockheed Martin had the
smallest variation from shortest to longest cycle (12 months). The longest
programs represented either a completely new client (New Skies Satellites’
NSS-7) or one with a new venture (SES Americom’s AAP-1). One of the
shortest times was for the Nimiq 2, and it may reflect the fact that there was
an earlier, cancelled order for this satellite, although there is no apparent
evidence of production having started before the Telesat order.
ORBITAL
SCIENCES
Of the manufacturers reviewed in this analysis, Orbital
does not actually have a full complement of 10 satellites to be studied, but
rather six. We have included them, however because Orbital is increasingly
entering into direct competition with the other manufacturers when customers
seek smaller satellites. It is because Orbital’s satellites are
considerably smaller, and somewhat less complex than those of the other
manufacturers, that this group represents a set of data slightly below the
average in terms of total production times (29 months). However, it is above
the average in the variation from shortest to longest (38 months), in part
because of the mix of legacy manufacturing operations (CTA and Orbital
Sciences).
SS/LORAL
The
final company analyzed is the one with the longest average production time in
the group of satellites studied (40 months), but one with the second-shortest
variation in cycle times (22 months). The exceptionally long production times
in this group reflects the fact that 6 of the 10 satellites here are Intelsat
9s, ordered at four different times. Intelsat is known to be intensively
involved in the production process, and to make frequent program adjustments.
Thus, its spacecraft production cycles are most often longer than others. Among
the other satellites here, the Optus C-1 launch was delayed for 5 months due to
customer financial issues.
CONCLUSIONS
The production of a satellite
requires emphasis on two key factors – reliability and timeliness.
Reliability is a major element in the long-term cost of a satellite, and is of
key concern to insurers as well as operators. The ability to get financing for
a project will often be dependent on financial institutions being comfortable
that there is no undue risk in the production cycle; and the ability to obtain
premium prices for capacity is dependent on customers being comfortable that
their networks will not go out because of satellite failure.
At the same
time, time to market has increasingly been a key issue for satellite operators
and their customers. While faster does not necessarily mean better with respect
to possible effects on satellite quality and reliability, there are limits to
what is commercially acceptable in satellite delivery times. In addition,
licensing authorities and regulators also often require construction milestones
and launch deadlines to be met.
While this analysis represents only a
snapshot of the most recent production cycles of the major western satellite
manufacturers, it is clear that all manufacturers have fluctuations in their
production cycles. It is, in fact, this continued variability that is the most
observable trend we have identified from this set of data.
Clearly some
of the smaller and simpler satellite bus designs are much quicker to build than
others (e.g., Boeing 376HP) and this does explain some of the difference in
variation between satellites if a manufacturer is offering several different
product lines. Sometimes variations are caused when a satellite suffers
unexpected delays due to the need for extra remedial testing and manufacturing
after a generic fault has become apparent on similar satellites already in
orbit (e.g., Boeing 702/GEM series), although these are to be considered
manufacturer-caused delays. It is also noted that variations in production
times for apparently similar satellites can occur due to certain operators
contracting for additional testing, which results in somewhat longer
manufacturing times in their pursuit of the highest possible reliability.
Futron has, in the past, analyzed production cycles in relation to on-orbit
reliability, expecting to find that faster production yielded poorer quality.
We found instead that quality and reliability were actually a function of the
manufacturer’s quality efforts, not the amount of time it took to produce
a satellite.
The continuing variability in production times thus
represent an effort by all manufacturers to make their production processes as
efficient as possible while endeavoring to keep their quality and reliability
high. Nevertheless, Lockheed Martin has demonstrated the unique ability to
maintain a lower than average overall time for production of its satellites,
with a much tighter range of time as between programs, and importantly, with a
high reliability in orbit. When customers are looking for assurance that their
programs will be completed as scheduled, and as needed to meet their market
demands, this consistency is a key consideration, and Lockheed Martin stands
out on this metric.
Futron Overview
| Futron Corporation is a technology management consulting firm. Futron applies analytically rigorous decision-support methods to transform data into information. We collaborate closely with clients to relate decisions to future outcomes and measures of value. Our aerospace consulting services include market and industry analyses, safety and risk management, remote sensing, and communications and information management. Futron was founded in 1986 and is headquartered in Bethesda, Maryland with a branch office in Houston, Texas. |  Futron's headquarters in Bethesda, Maryland |
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