The groundbreaking space economy

Bottom line:

The space economy is booming – innovations coming from private companies are pushing the wave. New markets such as space tourism will emerge.

Entry barriers for the space sector are falling. Rockets launch costs are shrinking – this boosts satellites deployment for internet connection and data collection purposes.

Entry Barriers Down, Market Size Up 

Technological disruption in the satellite industry

Satellite technology is experiencing significant changes, disrupting the conventional satellite market. Dimensions, costs, and capacity are where innovation is having the most impact.

  • Nanosatellites (or cubesats) are small (10cmx10cmx10cm) and as cheap as $40k to launch.
  • High throughput satellites (HTS) can offer transmission speeds up to more than 100x conventional ones.
  • Satellite constellations increase orbit bandwidth by 10x at lower overall costs.

Expanding application markets

The technological disruption and lower costs in launches foster satellite deployment and open up new applications. Sectors such as agriculture, supply chain, and national security increasingly rely upon satellite for data collection.

  • Reusable rockets brought down launch costs from over $20’000/kg to less than $2’000/kg.
  • The satellite data services market is expected to reach $23.4bn by 2025, growing at a 21% CAGR.

A galactic opportunity

The space economy is facing a steep boost in investments and projects. Its market size is forecast to rise almost three-fold in the next two decades.

  • The global space economy will move close to $1tn in value by 2040, from its current size of $340bn (2018), a CAGR of 4.6%.
  • Private investments created companies worth billions such as SpaceX, Virgin Galactic, or Blue Origin.
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The Satellite Industry

HTS and CubeSats at the forefront

High throughput satellites and cubesats are the necessary building blocks to complete satellite constellations and achieve broad internet connection.

  • HTS provides superior capacity and high data throughput over small surface areas.
  • CubeSats allow for cheaply updating the constellation of satellites – the technology deployed will always be up-to-date.

Ubiquitous broadband internet

Broadband internet coverage for remote areas still lacks even in developed countries. Deploying cables and infrastructure to increase internet coverage is financially challenging in sparsely populated areas. Falling launch costs make internet access via satellite more affordable.

  • Three-quarters of the unconnected population resides in just 20 countries – almost 3.6bn people still lack internet connection or do not use it.
  • Servicing the unconnected global population is a $300bn opportunity.

More satellite, more data, more applications

As connectivity costs fall, satellite broadband will have a broader role in the rising demand for bandwidth expected over the next decades. New applications such as the Internet of Things will drive this surge in demand.

  • Deloitte expects the number of satellites in low-earth orbit (LEO) seeking to offer broadband internet to grow 3.5x from 2019, reaching 700 at the end of 2020.
  • As an example, the integration of the Global Navigation Satellite System (GNSS) in agricultural machines is expected to reach 35% by end 2020 – up from 7.5% a decade ago.
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Earth Applications From Space Data

A data-based agriculture

The agricultural sector needs data access. While drones and sensors collect some data, satellites can provide a larger scale. Precision farming thrives on using data to optimize the workflow (see our 10.06.2020 issue for more details).

  • Farmers can maximize yields, increase productivity, and lower their environmental impact by optimizing the deployment of herbicides and chemical compounds.

An additional eye for supply chain management

Satellite imagery will be essential also in supply chain management, as it will ease projections made by companies procuring commodities and other goods, as well as to develop models for forecasting and monitor re-routing options.

  • Descartes Labs uncovered through its geospatial imagery that soybeans were rerouted to South America from Asia after tariffs hit.
  • Computer vision, machine learning, and cloud infrastructure are essential for computers to interpret satellite imagery.

National space programs benefit as well

Declining costs also benefit national space programs, with National Security and advanced research the main issues being addressed.

  • The Hera project (European Space Agency) aims at controlling potential threats from outer space through small satellites. 
  • NASA is sending nanosatellites to travel into deep space (MarCO-A and -B).

The Billion-Dollar Club 

Cheaper rocket launch: SpaceX

Manufacturing and launching rockets are undergoing a revolution thanks to SpaceX, the company founded by Elon Musk that is focusing on low-cost satellite launch. Reusable rockets are expected to replace current expendable launch systems.

  • NASA used SpaceX to send US astronauts to the ISS in May 2020, ending nine years of reliance on Russia and the Soyuz rockets.
  • SpaceX plans to perform 38 rocket launches in 2020, up from 13 in 2019.
  • The company plans to expand its Starlink satellite constellation massively, from the current 538 satellites to the at least 12’000 already planned.

Above the sky level, faster than the sound: Virgin Galactic

Richard Branson founded Virgin Galactic primarily for suborbital space tourism. It will generate the first opportunity to experience space travel for individuals. It plans to add hypersonic flights at a later stage, bringing cities closer.

  • It received almost 8k reservations for its space travels, priced at $250k each.
  • Space tourism is expected to be worth $30bn by 2030.
  • The first suborbital launch is expected in 2020.

Closer to the stars: Blue Origin

The company founded and funded by Jeff Bezos aims at enabling private human access to space. It plans to deliver suborbital space flights and eventually aiming to reach the orbital level.

  • Its first launch carrying humans is expected in 2020.
Click the image to enlarge

Catalysts

  • Private equity appetite. Venture capitalists want to get a slice of the space economy. Private funding for space investments reached a record level in 2019, which should ultimately boost research.
  • OneWeb satellite constellation is going live. The 650-satellite constellation is under the ramp-up phase. It is expected to start delivering global satellite Internet broadband beginning in 2021.
  • FCC public C-band auction. The US Federal Communications Commission will commence the auction on December the 8th 2020, a pivotal moment for the future of 5G in the US.

Risks

  • Space debris. Adding thousands of satellites in the Earth orbits increases the risks of collisions. Several projects are under development to remove space debris.
  • SpaceX slowing down launch pace. SpaceX conducted 40% fewer launches in 2019 than in 2018 because of a lack of customers ready to launch. Customers’ readiness may hamper the speed of their progress.
  • ExoMars 2020 postponement. The European Space Agency (ESA) will determine if the mission to search evidence of past life on Mars can take off this year. A set of tests during 1H20 will evaluate if it will be live in 2020 or on hold until 2022.

Sources:
UBS Research, Morgan Stanley, Global Satellite Data Services Markets, 2019-2025, NASA, Company data

Companies mentioned in this article:
Blue Origin (not listed), Descartes Lab (not listed), OneWeb (not listed), SpaceX (not listed), Virgin Galactic (SPCE US)

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