Space supply chain pressures.

Steve Jordan Tomaszewski: The space demand just continues to grow across the board. That is a good problem to have. It means that people are understanding the importance of space and what space can bring to the fight, and how it's changing our everyday lives. However, we need to make sure that we're making the right investments to grow the supply chain to keep up with demand. And we just don't have that right now. [ Music ]

Maria Varmazis: Welcome. I'm Maria Varmazis, and you're listening to T-Minus: Space-Cyber Briefing. In this show, we examine the evolution of cybersecurity in the global and orbital infrastructure that powers, protects, and connects our lives. [ Music ] Hello, and thank you for joining me today. It is a truth universally acknowledged, with apologies to Jane Austen, that a single industry in possession of a good fortune must be in want of supply chain issues. But seriously, the space industry must be in a very envious position right now, right? It's a boom time, especially in the United States. But the state of the space supply chain in the US is more precarious than you might imagine. And considering how much risk can be introduced to organizations and missions through their supply chains, yes, InfoSec friends, this macroeconomic story is indeed for you. So to walk us through it all today, I'm speaking with two guests. One is a long-time T-Minus friend of the show, and that would be Steve Jordan Tomaszewski, Vice President for Space Systems at the Aerospace Industries Association. And my second guest is Doug Anderson, PwC Principal Partner. Now, let's dive in with Doug telling us more about himself and his expertise.

Doug Anderson: Well, I'm a partner in PwC's operations and supply chain practice. So what does that mean? I help my clients with their supply chain challenges. I've been doing that work for 20 years. And prior to that, I was an engineer. So I did a lot of technical work that helps me understand the technical things going into the supply chain, not just the business side of it. So that's what I do.

Maria Varmazis: Thanks so much, Doug. And, Steve, friend of the show, I hate asking you to do it yet again, but why don't we just go for it, Steve? Tell us about yourself for the third time.

Steve Jordan Tomaszewski: Maria, thanks very much for the opportunity to come back on the show. Always a pleasure. So I'm Steve Jordan Tomaszewski. I'm the Vice President for Space Systems at the Aerospace Industries Association. My background is really focused on national security space, kind of doing intelligence analysis, budget strategy oversight, and now I get to represent nearly 300 companies across the aerospace and defense industry, and a lot of the manufacturers that are building the next generation of satellites and launch vehicles.

Maria Varmazis: Excellent. Gentlemen, thank you both for joining me today. And thank you for speaking to me about the state of our supply chain when it comes to space. So this is -- that's just sort of the general pitch. But I know there is a specific report that just came out through PwC about strengthening America's space supply chain. And, Doug, I feel like this is the place where I should get the elevator pitch for what this report is and maybe, like, starting super high level, what the key findings were. We'll just start there.

Doug Anderson: Sure. Yeah, I would say, you know, the numbers kind of tell the story here. So, like, if you look at 2025 alone, we launched 3,700 objects into space, so satellites and other things. And that's a nearly 10x increase over the 2019 volume. But the thing is, is that the industrial base, all the companies that are manufacturing the goods that make up those things and all the launching and other equipment needed to get that stuff into space, that stuff barely grew -- grew at -- barely grew at all. And if you look at, like, how old some of those facilities are, the average age of a lot of that equipment and facilities making the stuff going into space, it's like 26 years old. So we're kind of running this 2026 space economy on a 1990s infrastructure. And that gap between, you know, this demand that's exploding and the supply that's kind of crawling along is that's really why we wanted to write this report and why we felt it was urgent.

Maria Varmazis: Yeah, I could absolutely imagine the urgency there. And, Steve, from the industry perspective, I wanted to get your thoughts also, sort of to start from a high level on that takeaway here.

Steve Jordan Tomaszewski: So I think overall we have, as Doug mentioned, a big gap between the demand and interest in space and then actually what the supply chain and manufacturing system can actually produce. And that's a problem. So what we need to do is grow and scale the current supply chain to match all of this new incoming demand. I think one of the issues with space and supply chain has been, if you've talked to people about supply chain issues in space over the last decade or so, usually, you go right into a conversation about cybersecurity, and supply chain risk management, and the bad guys, you know, trying to get their hands on some, you know, great American space technology. And that's always going to be a concern. That just comes with the territory of the United States really being the prominent country in space technology overall, and we need to make sure that we're really securing our assets. However, the conversation about supply chain really needs to pivot to be more focused on how do we scale, how do we grow the overall space industrial base to keep up with all of this interesting demand.

Maria Varmazis: Yeah.

Steve Jordan Tomaszewski: And that's really what this report is about. It is about where are the current bottlenecks and challenges, and then a number of recommendations of how we can actually grow the supply chain.

Maria Varmazis: Well, that feels like the natural point to say, so what -- what do we do about all this? Because growing with the speed that's needed to catch up, that does introduce a whole level of risk where things may be missed, especially if we're talking on the cybersecurity level, but just even taking the cyber out, the security level of things, and not to say nothing of fidelity of what's moving through the supply chain. There's the thinking that you don't want to move too fast, and yet there is this urgency here, obviously. So what's to be done here? What -- this feels almost like a Catch-22 question, but what do we do? Doug, why don't I go for you for that one?

Doug Anderson: Yeah, well, I think one of the issues that a lot of these suppliers have is -- and why are they operating on 26-year-old infrastructure is they don't have good confidence in the demand signals going forward. And why is that? Well, a lot of that demand signal comes from the government. And what we've seen in government, you know, budget cycles is a, you know, lot of continuing resolutions, a lot of instability. You know, one year budgets are up, you know, 30, 40%. Next year, they're down. And so that instability in the demand signal tells these suppliers, "Boy, is it really prudent for me to make a big investment, a multi-year, multi-decade investment in my facility when I'm not sure if I'm going to have demand in a few years if budgets get cut?"

Steve Jordan Tomaszewski: I think the way to fix this -- there's no silver bullet here, right? So there's not just one thing that is what you can do to kind of grow the supply chain overall. Doug mentioned the demand, and that's a really key part. But our report actually outlines a couple of dozen recommendations of how you get this done. And it's a combination of looking at removing barriers to entry for new entrants and small businesses. It's looking at current specifications and requirements, making sure that you're not over-engineering certain space-qualified parts. It's looking at labor and logistics, actually growing the workforce, and you have incentives to make it easier for folks to work in the space industry. And I think a big theme of this report is actually it needs to be the government and industry working together to solve these problems because not only on the demand side, but of all the regulations that kind of come down to space companies, that come down to, you know, how you're even building factories and expanding manufacturing capability, is really important for the government and industry to have a constructive dialogue and to share information about what those pain points are. Especially the faster that we can identify pain points and the earlier, then the higher likelihood we have to actually fix some of these issues.

Maria Varmazis: And I would imagine for many of the components, obviously, there's a lot that goes into space systems that are very exclusive for space systems, but there is some overlap, well-known with other industries in general, some efficiencies I would think to be gained from that, but at the same time, that's also increased competition for those types of components. Is there anything -- is there any risk introduced there about maybe that crossover or any thoughts on that, Doug?

Doug Anderson: Yeah, absolutely. I mean, this demand surge that we've seen, it's translated into this really measurable supply chain stress. And where we saw some of the break happen first was surprisingly on the electrical infrastructure side. So it's one that you maybe don't immediately think about when you think about space systems, but these are like the switchgears and transformers which you need for a launchpad or a test facility. And, you know, if you think about some of the competing demand with AI data centers and things like that, we've seen lead times stretch to -- for this equipment -- stretch to over 130 weeks or more in some cases. And just not even a year and a half ago, nothing in that space had over a year lead time. So that's a -- that's a pretty stunning deterioration, you know, increase in lead times over a short window.

Maria Varmazis: Given that increased lead time and given the competition from potentially other sectors, it also reduces agility within the market to respond to market forces or customer demand, obviously. So it becomes a compounding problem, I would imagine. [ Music ] And you know what, before we move on, let's take a quick break. When we get back, we'll take a deeper look at the specific areas of higher technical complexity in the space supply chain that are seeing the greatest supply gaps and what kind of risk that might introduce. More after the break. [ Music ] Welcome back. Let's get back into the conversation about space supply chain bottlenecks. Here's PwC Principal Partner Doug Anderson with more.

Doug Anderson: The report actually calls out, like, nine specialized component categories that, when we, you know, interviewed the AIA member companies that they consistently said had capacity gaps. So these are really components that are kind of high in technical complexity. They're -- some of them are low in, like, commercial volume, and then there's like a high qualification burden. And this combination of forces, you know, it drives away some of the new suppliers. New suppliers maybe look at that and go, "Yeah, that's not an attractive market to me." One of the suppliers that we interviewed was really walking away from the COPVs, the composite overwrap pressure vessels. These are like the fuel tanks on launch vehicles and spacecraft. You know, because the work associated with that consumed, like, over 30% of their engineers' time, engineering functions' time, while it was only generating, like, low single-digit contribution to their revenue. So they just said, "This business isn't -- it's costing us too much to operate. We're going to walk away from it." So, you know, when the economics are that bad, you kind of can't blame them for leaving.

Maria Varmazis: Yeah. No, that makes a lot of sense. Steve, I imagine you have some thoughts to this that you want to add.

Steve Jordan Tomaszewski: Yeah, and this is -- what we're really excited about for this report is when we went out and talked to companies about, you know, what their current bottlenecks and challenges are, we got to this top nine list. And I'm just going to, you know, briefly call these out for your listeners. But what we -- yeah, what we found out was, for companies that are currently manufacturing satellites and launch vehicles, the top nine kind of components that they cannot get their hands on right now, or there's a lot of challenges with, are our optical inter-satellite links, pressure vessels and propulsion tanks, rocket motor nozzles, switchgears and transformers -- that electrical equipment that Doug just mentioned -- connectors, field-programmable gate arrays, actuators, valves, and then a category that we kind of summed up into post-processing steps. And so what happens is because the space environment is so difficult to operate in, with the vacuum of space and temperature swings and radiation environment, a lot of times, if you build a certain component, you're going to have to send it to specialized post-processing facility where maybe it gets extra heat treatments or chemical treatments just to kind of help it survive in space. And one just quick example for that is that if you're looking at a connector, if you go down to your local hardware store and just buy a connector, so think of something like a USB connector at the end of a USB cord, you know, that might cost you $7 at the hardware store. But to make something space-grade to be able to survive in space, a lot of times, that same type of connector would be $529. And that is over 7,000% increase because you have to make it space-qualified, extra testing, and make sure that it can survive the very challenging environment in space.

Maria Varmazis: That is a fantastic example, Steve. Thank you for illustrating it with such clear numbers right there. That really drives it home. I'm hearing all this information that you both are sharing, and I'm also thinking about international geopolitical movements towards space sovereignty for certain nations, and also here in the US, talk about Golden Dome. And it just feels hard to make these things make sense in the same context. And I'm just going -- my head's spinning a little bit. I can only imagine what it's like for the supply chain right now going -- we're hearing certain things in the news, for example, but the reality on the ground seems very different in terms of what can actually happen. How do we bridge this?

Steve Jordan Tomaszewski: Maria, one way that I might just sum it up to your listeners is that the space demand just continues to grow across the board. That is a good problem to have. It means that people are understanding the importance of space and what space can bring to the fight, and how it's changing our everyday lives. However, we need to make sure that we're making the right investments to grow the supply chain to keep up with demand. And we just don't have that right now. But, you know, if you're looking at how America could potentially, you know, be the satellite factory of the world, and be able to meet a lot of those increased demand signals from our international allies and partners, you know, the investments that we make today and how we're thinking about growing that supply chain will only pay dividends, as long as we can kind of follow through with that, and really to make sure that we have government and industry working together to solve a lot of these problems.

Doug Anderson: You know, the things that Steve just mentioned, some of those solutions, as well as some of the other ones that we highlight in the paper, like, I can see in five years a major improvement in the supply chain. And the way I would look to -- kind of the metrics I would look at to see, you know, have things really improved, like, I would like to see more qualified suppliers, you know, for those critical components. Like, we look at, you know, through the supply chain, through the different components and the ones in shortage that Steve mentioned, we look at, you know, where does that supply chain neck down to -- there's only, like, one or two or maybe three qualified suppliers. I'd like to see it, you know, much more than that. That would be one good way that we would know that there's a healthier supply chain, you know, move from two or three to five or more. And, you know, that competition will then return, and we'll also get, you know, better economics. Prices will come down. I'd like to see, secondly, like, lead time reduction for long-lead components. Like, we talked about that electrical infrastructure and switchgear at over 130 weeks. Let's get that back under 52 weeks. Steve mentioned the post-processing and testing infrastructure. Companies are waiting, you know, months and years, quarters, to get their slot in that. Let's get that down into weeks. And then maybe a third one would be, you know, like, supplier bid participation rates. So as companies are, you know, bidding out space work, let's, you know, get the trend to be up to more, like, you know, three, four, five companies bidding on things, not, you know, one or none. So I think those are some of the metrics I'd like to see as we employ some of these solutions and improve the health of the supply chain.

Maria Varmazis: That makes a lot of sense. A question that's been bouncing around in my head is I'm curious, given many of the components that are on that top nine list, these obviously are -- sounds like, you know, more high-touch, more, you know, mission-critical type spacecraft, for example, that these are going towards. Do commercial off-the-shelf parts make any dent in this kind of supply chain squeeze, or is that just statistically insignificant in this kind of context?

Doug Anderson: Great question. And I think, you know, there are a lot of good commercial off-the-shelf, you know, other grade components, automotive-grade, military-grade, that they're not quite space-grade, but if we take a risk-based approach to evaluating requirements, we actually -- we can find where those components make sense. And, you know, if you think about automotive-grade things, like those have in that standard has improved a lot over the years. And if we're just using a 1960s, you know, Apollo-era type requirement, we may not understand that those, you know, automotive-grade parts are actually capable of surviving the mission these days.

Steve Jordan Tomaszewski: You know, I think there's examples right now that you see companies pivoting to meet some of the demands of kind of scaling up constellations. One of the things that we didn't hear about or make it to the top nine this year was about solar panels, for example. So satellites need a lot of solar panels to provide the energy. There's been a lot of great innovation happening there, where you're not only increasing capacity for kind of the traditional space-grade high-efficiency solar panels, but you do have -- some companies are taking more risk, and having new types of, you know, silicon-based solar panels that might not be the same amount of traditional efficiency, but kind of getting more towards that, you know, commercial off-the-shelf type of approach where they're kind of substituting things in on a case-by-case basis to kind of meet some of those, you know, mass-proliferated types of requirements there. So I think the overall takeaway is we need to keep challenging the traditional specifications, requirements that we have for space systems, identify areas where maybe it's okay to take a little bit more risk, or maybe you don't need, you know, certain components and parts to be able to last, you know, quite as long as they might have used to in the past, and make sure that's integrated all the way up and down the supply chain. And the more companies that we have that are looking at coming into the supply chain, the better the overall industrial base is going to be.

Maria Varmazis: Absolutely. Well, gentlemen, I know we're coming up on time, and I want to make sure if there's anything I missed or anything that you wanted to make sure to mention to the audience, that I give you that shot. So, Doug, why don't I go to you first for closing thoughts, and then over to you, Steve?

Doug Anderson: Yeah, I just think this is a really exciting time with all the spike in demand in space. It's an exciting time to be working in supply chain, and it's an exciting time for new suppliers, new entrants, new startups, and entrepreneurs to really take a look at the space market and, you know, don't be afraid of some of the requirements and things that are out there to enter that market. It's a fascinating, worthwhile, high-growth market to be considering entering.

Maria Varmazis: Excellent. Steve.

Steve Jordan Tomaszewski: I might just wrap up by reminding your listeners that the full report about strengthening the space supply chain is available online. So if folks want to see that top nine list we talked about, or see our dozens of recommendations of what we can do to actually improve and grow the space industrial base, it's available, and really looking forward to working with government and industry together to figure out how we can scale up manufacturing.

Maria Varmazis: Well, excellent. We'll make sure to have the link in our show notes for our listeners so they can find that report and give it a read. Steve and Doug, thank you both so much for your time today and for this fantastic insight. I really appreciate it. Thanks so much for joining me today.

Steve Jordan Tomaszewski: Thanks, Maria. Pleasure to be here.

Doug Anderson: Thank you, Maria. [ Music ]

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