Iridium is actively implementing tariff countermeasures to protect itself from rising import taxes amidst escalating global trade tensions. Historically, the company imported satellite communications equipment primarily from Thailand. However, CEO Matt Desch announced on April 22 that Iridium is expanding its European third-party logistics partnership to redirect nearly all non-U.S. shipments away from the latest round of U.S. tariffs. Only 25% of Iridium's annual equipment goes to U.S. customers, and the company sources minimally from China.
Desch stated, “We estimate that the current U.S. trade policies, based upon a minimum tariff of 10% for Thailand, would result in approximately $3 million of incremental cost to Iridium this year,” a cost the company will absorb. However, he warned of potential additional costs reaching $7 million if a previously proposed 36% tariff on Thailand is reinstated.
While Iridium appears well-positioned, analyst Armand Musey of Summit Ridge Group cautions that the broader satellite industry could face significant disruptions. Musey notes, “The satellite industry sources equipment through a wide global network, so no one will emerge unscathed.” He highlights the impact on user equipment and companies with rapidly expanding customer bases.
Iridium reported a 5% year-over-year revenue increase to $215 million for Q1 2019, driven by service revenue growth, particularly from Internet of Things (IoT) devices. Net income rose 53% to $30 million. While commercial broadband sales dipped due to competition from Starlink, Desch emphasized Iridium's unique position in safety-critical sectors where Starlink lacks regulatory approval. Desch also discussed the company's plans to test its own direct-to-device (D2D) service.
Despite recent USAID funding cuts and geopolitical challenges, Desch expressed confidence in Iridium's position as a neutral global partner. He stated, “We believe Iridium is fairly insulated from the recent protectionism and nationalistic rhetoric, but like every company, we may face issues on the margin as we move through the year.”