In announcing layoffs last week, SpaceX pointed to its bid for riskier markets — providing broadband internet via thousands of small satellites and building a spaceship for Mars transportation.
What went unsaid was that the company’s money-generating business of launching satellites may also face a squeeze, with new competitors on the horizon and fewer launches planned for huge commercial satellites that operate in a fixed position relative to the ground.
SpaceX cited the need to become a “leaner company” when it said Friday it would lay off 10% of its more than 6,000 employees. The cuts appear to be concentrated at its flagship Hawthorne facility, where 577 employees will be let go, according to a state Worker Adjustment and Retraining Notification Act notice dated Friday. The cuts ranged from composites and propulsion technicians and manufacturing engineers to baristas, cooks and dishwashers. SpaceX declined to say whether its facilities in Texas, Florida, Virginia, Washington and Washington, D.C., were also affected.
Orders have slowed for school bus-sized commercial geostationary satellites. Once as numerous as 20 to 25 per year, worldwide orders across the industry dropped to 17 in 2015 and 2016, according to a 2017 report from the Satellite Industry Assn. trade group. More recent industry order data aren’t publicly available, but experts say the trend toward smaller satellites for Earth imaging and communications has continued.
SpaceX launched 21 missions in 2018, up from 18 the year before. President Gwynne Shotwell told CNBC in May that SpaceX expected a “slight slowdown” in 2019 launches, but the company indicated Monday that it is targeting more missions this year than in 2018.
SpaceX’s workhorse Falcon 9 rocket, which has a starting price of $62 million, could also face greater competition in the future. Blue Origin, led by Amazon.com Inc. Chief Executive Jeff Bezos, is developing a rocket called New Glenn, which is expected to reach initial launch capability in 2020. United Launch Alliance, a joint venture of Boeing Co. and Lockheed Martin Corp. that competes with SpaceX for national security launches, is working on a new rocket called Vulcan Centaur.
“Even though SpaceX ... has a competitive advantage, some of these new launch vehicle programs come along, maybe that competitive advantage will not be as distinct,” said Marco Caceres, senior space analyst at market research firm Teal Group. “Doesn’t mean they won’t have a very healthy launch rate. It means it’s going to keep it from doubling the number of Falcon launches.”
A SpaceX representative noted in a statement Friday the company’s plans to “succeed in developing interplanetary spacecraft and a global space-based internet.”
“Either of these developments, even when attempted separately, have bankrupted other organizations,” the representative said. “This action [the layoff] is taken only due to the extraordinarily difficult challenges ahead and would not otherwise be necessary.”
The company is also preparing to send NASA astronauts to the International Space Station this summer in its Crew Dragon capsule. That project, along with the Starlink satellite constellation and the Mars Starship, are “enough to challenge any company,” said Greg Autry, director of the Southern California Commercial Spaceflight Initiative at USC. “And he [SpaceX CEO Elon Musk] is trying to do all three at once.”
Musk may also be angling Starlink for military customers. In late December, the company won a $28-million contract for the U.S. Air Force’s Defense Experimentation Using the Commercial Space Internet project. The idea is to test various commercial satellite constellations to see if they could eventually be leveraged for use by military aircraft.
“Leasing their service, at the end of the day, makes a lot of sense for the DoD,” said Greg Spanjers, chief scientist for the Air Force strategic development planning and experimentation directorate. “We’re just saying this is an important enough change that the Air Force needs to be in there as an early adopter and first customer.”
Commercial companies, including SpaceX, have said they intend to use the satellites to provide broadband service to home users, “which means those costs have to be reasonably low on a per-user basis,” said Brian Beal, program manager for the project.
Contract award spending under this project could total $125 million to $250 million from fiscal year 2018 to fiscal year 2023, and companies could win multiple contracts under this program, Beal said.
Expensive as they are, the satellite and Mars ship projects are central to Musk’s vision.
“This is exactly why SpaceX is not a publicly traded company,” said USC’s Autry. “Elon wants to create the future single-handedly during his lifetime.”
The good news for the laid-off workers is that demand for aerospace workers in Southern California is strong, said Judy Kruger, director of aerospace and advanced transportation at the Los Angeles County Economic Development Corp. Major industry employers have had up to 2,000 open positions at any one time, she said.