With thousands of satellites blanketing the planet, it’s not just hype and we’re not on the cusp — this is the time of Low-Earth Orbit (LEO) constellations. Detractors may continue to shed doubt, recalling how the ambitions of the 1990s either shrunk down or withered completely. They point to the big plans of Globalstar, Iridium, Odyssey, and Teledesic. Only Iridium’s were realized, and all the rest suffered financial problems.
They echo the sobering cautions of analysts who call to mind that LEO constellations are very CapEx-intensive enterprises, and have such limited visibility of the Earth’s surface that addressability for all the vast capacity they supply is restricted. In some cases, such as ocean regions, the bulk of capacity goes to waste. They stir up skepticism about the viability of large LEO constellations, pointing to the fresh failures of LeoSat and recently resurrected OneWeb.
Yet, LEO continues to disrupt as services from broadband to Earth Observation (EO) increasingly go live.
Building the satellites is the starting point for this disruption. How are manufacturers adjusting to this new world? And just how big is the LEO opportunity, really? With tens of thousands of satellites needed, the potential seems significant. But what about the fact that the likes of SpaceX and Amazon are likely to keep their manufacturing capabilities in-house?
History is repeating itself: this is not the first time that the building process has shifted away from the manufacturers. In the past, the aviation industry saw some emerging airline businesses attempt to build their own fleet, mostly by adapting ex-military aircraft. Ultimately, though, the might of the manufacturers was proven, and today, all the major carriers are buying or leasing their fleet from companies specializing in aircraft manufacturing.
A similar development in the emerging smallsat industry is expected, says NanoAvionics CEO Vytenis Buzas, who, despite tight competition in the market, where traditional satellite manufacturers must compete against a series of ambitious newcomers eager to make their mark, expects the company to grow five-fold across its entire service portfolio for nanosat and microsat missions by 2025.
“Look at the conventional satellite industry, where all profitable operators and downstream service providers are using external suppliers to build their satellites. While some companies such as SpaceX and Amazon build and operate their own smallsats, the successful commercial results of such a business model remain to be seen,” he says.
NanoAvionics expects to produce about 120 satellites per year within this timeframe, aiming to capture 30 percent market share in nanosat or microsat manufacturing and mission provision services in New Space hub the United States.
Fast and Future-Proofed Changes
The right questions are whether the manufacturers are innovating, and if they have modular designs, software-defined systems, and standardized processes. For many manufacturers to be successful, they must design their products with scalability in mind while making sure the products are replicable. Changing these often over short periods of time isn’t profitable. Taking a vertically integrated approach using modular subsystems not only helps keep up with the increasing pace of production, but proves to be cost effective while helping mitigate unstable supply chain risk, too.
“Through standardized manufacturing and by using modular subsystems manufactured in large quantities in advance, we’ve been able to keep about 80 percent of the flight-proven architecture for our satellite buses consistent for each mission, allowing for cost-effective scalability. It also significantly shortens the time it takes to customize a satellite and lowers the overall price of a spacecraft, which means CapEx reductions for customers who can more rapidly integrate and deploy their spacecraft,” says Buzas.
Another satellite manufacturing change emerging is an increasing bus size. Earlier this year, Lockheed Martin had its demo mission with its mid-size LM 400 bus able to support missions to both LEO and Geostationary Orbit (GEO), while the market unveiled other bigger smallsats. NanoAvionics announced its 50 kilogram microsat bus, the MP42. Soon after, York Space Systems introduced its larger, more powerful LX-Class spacecraft, offering three times the power generation and a 300 percent increase in payload mass.
Customer needs drive this change. Many high-end applications and mega-constellations are power hungry, and larger bus sizes are required to accommodate this while coping with added complexity and thermal issues. This scenario is particularly common in telecommunications, remote sensing, and applications requiring high data throughput such as complex and emergency communications missions. Another contributing factor is reduced launch costs. Compared to the start of the nanosat boom about 10 years ago, launch costs are a fifth of what they used to be. This means that putting larger satellites to orbit has become more economically viable to the newly emerging applications.
Beyond the actual manufacturing processes, there is also a notable change in the requirements for data service offerings, explains Luis Gomes, CEO of AAC Clyde Space, which, as a LEO systems specialist, has not had to significantly change its manufacturing approach.
“The big change we are seeing is the introduction of Space-Data-as-a-Service, where we supply the required data using our own satellites,” says Gomes. “Our objective is to lead the smallsat market, but this isn’t done just through the sale of hardware – a large part of our growth will come from providing services and data to those who need them. This will open opportunities to many companies and organizations that never thought they could successfully use space in their business, further growing the accessible market.”
Integrating Different Orbits
Having taken a highly automated approach, OneWeb and Airbus Defence and Space have successfully achieved mass manufacturing of satellites. The factory for joint venture OneWeb Satellites currently produces two satellites per day. As the lead in the OneWeb satellite manufacturing business, Airbus is also exploring future manufacturing options for the orbit-proven platform for future commercial requirements beyond connectivity.
Satellites currently produces two satellites per day. As the lead in the OneWeb satellite manufacturing business, Airbus is also exploring future manufacturing options for the orbit-proven platform for future commercial requirements beyond connectivity.
This unprecedented level of automation not only saw the revolution of satellite manufacturing for LEO, but has benefited the manufacturing of Airbus’ other satellites, including its latest OneSat design. Airbus has been able to shorten development and production times, which provides its customers knock-on benefits. Historically, large five- or six-ton GEO satellites took some 30 months from design to production. The manufacturing techniques developed for the OneWeb satellites together with improved overall design has enabled Airbus to cut this down to 18 months for OneSat.
“We are currently working on how to benefit from those methods in all our product lines. We continue to drive further innovation and are looking at future satellite generations in all orbits,” says François Gaullier, head of Telecommunication Systems at Airbus Defence and Space.
With seven orders for the OneSat, Airbus believes this product line will give operators the “full flexibility” they need, enabling them to adjust satellite usage, from broadcast and High-Throughput Satellites (HTS) or both, as well as coverage area, capacity, power allocation, and frequency “on the fly” to adapt to short- and long-term evolving mission scenarios. According to the company, innovative flexibility is what operators require in order to adapt to this market of transformation and integrating different orbits.
GEO Demand Still Strong
While believing that the continuing LEO programs of OneWeb as well as Starlink will increasingly usher in industry changes over the next few years, Airbus sees GEO remaining key to operators in most market verticals. This is largely due to a less CapEx-intensive investment in addition to GEO still proving competitive in terms of capacity pricing for enterprise, VSAT, and broadcast markets, among others.
Airbus’s optimism for GEO follows a year of exceptional orders. In 2020, the company achieved more than 40 percent market share in the GEO telecoms market, securing sales for three Eurostar Neo and three OneSat satellites. Airbus is expecting the market to recover slowly from the lows of 2017 to reach 15 to 18 GEO orders for 2021 and beyond.
“The COVID-19 pandemic has shown the need for reliable, resilient, and universal connectivity; we think the structural fundamentals for a return to growth are not only there, but solid,” says Gaullier.
Of the expected future orders, Gaullier sees 70 percent being replacement satellites for similar missions and including mission expansion, but potentially with different technology. Noting that operators have had to push their satellites to the limits of their lifetimes but now need to replace their assets, Gaullier expects Airbus’ new technologies and industrial methods to offer the enabling price points suited to their customers’ businesses.
Is Consolidation Inevitable?
Rising GEO orders on the cards and the steady continuation of LEO programs paint a rosy manufacturing landscape. However, it’s one still punctuated by a multitude of players: the traditional satellite manufacturers eager to recover from the years of decline and a series of ambitious newcomers hungry to claim their share of the market. Could the result of this crowded environment’s tight competition end in consolidation? While it is too soon to say how many players the market can sustain, typically, every new industry reaches its peak and undergoes consolidation.
“At NanoAvionics, we expect the smallsat industry to be no different. Of course, stronger players will extend their reach, seek to build out service verticals and expand their service portfolios to become even more effective in their markets. However, there certainly will be a shakeout in the sector; we are already seeing mergers and acquisitions and will continue to observe this trend,” says Buzas.
For AAC Clyde Space, consolidation is inevitable. To some degree, it has already been happening for a while. AAC Clyde Space is, itself, a group of companies, four of which were independent hardware manufacturers. According to Gomes, this trend accelerated a year or so ago and still has a way to go, fueled by fresh money coming in from special purpose acquisition companies (SPACs).
“At the same time, we should not forget that this sector continues to see a very healthy crop of new startups, full of energy and great new ideas, making this a very dynamic sector,” adds Gomes.
While noting that there is and always has been fierce competition in satellite manufacturing, Gaullier sees adaptation as being inevitable, rather than consolidation.
“The fierce competition is what drives innovation and that will continue. We always look to push the boundaries with our spacecraft, offering innovations that translate into concrete business advantages for our customers. We do not see consolidation of manufacturers as inevitable, but some may have to adapt their business models and product lines to thrive,” concludes Gaullier.
How Big Is the Smallsat Opportunity?
In order to adapt to the smallsat market, traditional satellite manufacturers focusing on GEO are doing two things: they’re leveraging the flexibility they’ve achieved on the back of a growing trend to enable more satellite capability and greater choice of design; and they’re adopting economies of scale, which they've learned to do from the smallsat market. Through standardization, which improves cost efficiencies, scaling up production and extending capabilities through flexibility, they’re afforded a competitive edge.
At the same time, new entrants are keen to make their mark, while a trend has emerged where players such as the likes of SpaceX and Amazon are keeping satellite manufacturing in-house. Manufacturing is a very competitive market.
So, who will be victorious and just how big is the smallsat opportunity for the satellite manufacturers? NSR estimates that more than 40 percent of all Non-Geostationary Orbit (NGSO) constellations will be built in-house, including SpaceX, Amazon, and others across communications, Earth Observation and situational awareness markets. Most of this 40 percent represents large projects from various players, with the rest of the market consisting of smaller-sized constellations. NSR sees a big opportunity for outsourced manufacturing, but it is spread over a wide variety of customers.
The market is split as to whether the emerging model where operators build their own fleet will be successful or not, explains Dallas Kasaboski, NSR principal analyst. While there are advantages for the operators taking this route, the result is a siloed approach that lowers the progress of standardization which further distances them from reaching the subsequent cost efficiencies.
Kasaboski, NSR principal analyst. While there are advantages for the operators taking this route, the result is a siloed approach that lowers the progress of standardization which further distances them from reaching the subsequent cost efficiencies.
“Whether this model will continue and whether it will be successful for the companies involved, the answers are yes. While there is a strong opportunity for the outsourcing of satellite manufacturing, there is a very strong trend toward financing satellite operators to build their own fleets. Funding for hardware continues and is expected to continue to be quite strong going forward,” says Kasaboski.
On the matter of expected consolidation, he sees the established manufacturers maintaining market share, losing little to newcomers. Consolidation will likely occur among smaller, more niche manufacturers, losing out on projects as more operators focus on in-house manufacturing, he says. VS