The Amos-6 satellite, owned by Space Communications , was destroyed when an explosion destroyed a Falcon 9 rocket belonging to Elon Musk's SpaceX during routine test firing at Cape Canaveral in Florida, two days before it had been due to blast off and place the satellite in orbit.
"As far as the Israeli communications satellite industry is concerned, this is a very severe blow which could place the future of the industry in doubt if it is not dragged out of the mud," said Israel Space Agency chairman Isaac Ben-Israel.
He told Israeli Channel 10 television that it might take three years to build a replacement. The Amos-6 was built by state-owned Israel Aerospace Industries.
"This is a blow and the next satellite, if Space Communications manages to overcome the crisis which it will face and decides to order another one, could be in another three years or so," Ben-Israel said.
Beijing Xinwei Technology Group and Space Communications said last week that the Chinese company had agreed to buy the Israeli satellite operator for $285 million.
The deal reflected a premium of 41 percent to Spacecom's average stock price in the past month but after the explosion, its shares closed 8.9 percent down on the Tel Aviv Stock Exchange.
The Israeli company issued a statement to the Israeli stock exchange saying the "total loss" of the satellite "will have a significant impact on the company."