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What role do you see the “big” traditional original equipment manufacturers playing in the future of space?

Aviation Week Executive Editor for Defense and Space Jen DiMascio responds:

Traditional OEMs may have seemed slow to recognize the power of so-called “new space” companies such as SpaceX and Blue Origin. But they are leveraging their strengths—cash, technology, and long, strong relationships with the government—and are likely to maintain a large role in the future of space.

Part of the reason for that is the size of the market is growing overall—particularly on the government side during these early days of COVID-19.

During a recent Aviation Week webinar on the growth in the space services market, Parsons President Carey Smith told Aviation Week Senior Business Editor Michael Bruno that the market for space could see $1.4 trillion in investment over the next 20 years. Part of that is driven by an uptick in the U.S. military’s budget for space. She said unclassified space efforts were $14 billion in 2020, rising to $18 billion in 2021—not including what the National Reconnaissance Office will spend.

That money will fund a space architecture that allows the prime contractors to continue making large exquisite satellites that fly in geostationary or highly elliptical orbits while adding a new generation of small satellites that fly in low Earth orbit and will have a shorter life span.

And the prime contractors, by virtue of their vast knowledge base built over years of government contracting, will help. “They understand how these systems operate,” said Bill Gattle, president of Space Systems at L3Harris Technologies. “So, there is a place for them in this role—they have an influence on the architecture [and] certainly the exquisite systems.”

Lockheed Martin, the biggest provider of spacecraft to the U.S. Air Force, already has secured contracts in that emerging architecture, which positions it for the long haul. The company is replacing the Space-Based Infrared System (which Lockheed made) with a Next-Generation Overhead Persistent Infrared satellite and also building the next generation of Global Positioning System satellites. Plus, it has won a contract to build 10 of the first 20 satellites for the Space Development Agency’s (SDA) transport layer of low-Earth-orbit satellites. Lockheed President and CEO James Taiclet outlined the importance of this contract win when talking to investors about the company’s third-quarter earnings report.

“This transport layer is one of the first elements of what we would envision in the future as 5G-[military] architecture,” he said. “And we’re right in the middle of designing that now with our customers.

“This will be a competitive space, but we want to get out in front of it. I think the Space business area of Lockheed Martin gives us a huge advantage over really anyone else and in taking the lead [on] this.”

When it comes to launch services, Lockheed collaborates with Boeing on United Launch Alliance (ULA), which won 60% of the Air Force’s medium- and heavy-lift launch services through 2024—a feat that for now, Lockheed is quite pleased with.

“We have seen SpaceX as an emerging threat. I mean, they are more than an emerging threat right now,” said Lockheed Chief Financial Officer Kenneth Possenriede. “We now have a price point that is compelling to customers that will allow ULA to get its fair share of awards over SpaceX.”

Increasingly though, Lockheed and other primes are partnering with smaller, niche companies.

For instance, Lockheed is working with Rocket Lab, in the small launch space, as the Pentagon and commercial space companies look for less costly rides to space. And Lockheed is teaming with Telesat on its SDA contract to use optical intersatellite links to move data to its low-Earth-orbit constellation of satellites.

Gattle said that is a trend that is likely to continue and one that raises an interesting conundrum for primes. “If you buy someone, let’s say it’s a small company that has certain unique [doctorates] in it, and they have, you know, their small company environment, and you give them the large company bear hug, you can actually destroy them,” he said. “For the OEMs, fundamentally, they’re going to own some programs of record. . . . But they’re also going to have to partner.”