For the last 10 to 20 years, the space sector has witnessed the emergence of new stakeholders starting their investment in space technology or acquiring their first satellite. These “emerging space programs,” understood as countries investing in first- or second-generation satellites, represent a growing share of global space activity and are major business prospects for industry players or cooperation targets for other space agencies. Sri Lanka’s acquisition of a communication satellite from China earlier this year and the interest of Armenia for a similar deal recently disclosed in the press illustrate a growing desire for more countries to hold their own satellite assets.
Beyond these facts, we felt it necessary to assess in more detail the rationales, models and benefits of these emerging space programs. Why do they invest in space? For what purposes? And under which schemes? This is the purpose of our latest research report, “Trends and Prospects of Emerging Space Programs,” which assesses 29 countries starting their own satellite programs.
What can we conclude? While countries have their own specificities, they also share commonalities and, most importantly, lessons learned from early experiences.
First- and second-generation satellite programs will represent a growing part of the satellite market. The 29 countries assessed in the report have invested $1.8 billion in space activities in 2013, compared with $210 million in 2003 and $740 million in 2007. They launched 30 satellites over the past decade and they have already contracted 38 for launch within the next four years. Euroconsult forecasts that these countries will order 87 satellites within the next 10 years. Taking into account new entrants and countries not listed in the report, we anticipate that there could be up to 126 first- and second-generation satellites launched by emerging space programs over the decade.
Governments that wish to start a space program and generate concrete returns on their space investment primarily invest in a communications or an Earth observation satellite. The majority of satellites procured are Earth observation satellites, representing 19 of the 30 satellites procured in last decade. However, communications satellites dominate investments as they typically cost four times more than an Earth observation satellite. Beyond cost, decisions to procure an Earth observation or a communications satellite are motivated by different factors.
- In the Earth observation sector, first-generation satellites are usually technology demonstrators, with the objective of fostering government and industry interests in Earth observation data capabilities. Next-generation satellites often consist of operational data supply, meaning that specific end-user requirements have been established. As programs become more developed, commercialization of Earth observation data is more likely to bring a return on investment as most revenue on the commercial data market relate to high resolution. Investing in Earth observation technology is viewed as an accessible, relatively low-cost way of gaining industrial experience in space technologies and can form the base for establishing a national space industry.
- Countries developing communications satellites tend to buy operational satellites directly, as commercial prospects are usually more easily identifiable. Additional satellites may be procured after several years of operation if commercialization of the capacity proves to be successful (this is the case of Vietnam with Vinasat-2 and Nigeria with Nigcomsat-2 and -3). Governments with a long-established commercial operator may also realize that their needs are not entirely fulfilled by that operator and initiate a new program. This is notably the case with Brazil, which recently procured an X- and Ka-band satellite from Thales Alenia Space for civil and military use, and with the Malaysian National Space Agency, which is considering the acquisition of a communications satellite.
The development of space technologies is also often viewed as an accelerator of social and economic development for a country, benefiting populations, rural communities, various industry sectors, technology know-how, downstream sector, education, universities and more. Most countries have integrated the inception of their space programs inside a wider national plan for science and technology aimed at developing high-tech industries, science and innovation. This is often a key success factor for a new space program to make sure that an investment is not aimed only at buying the space infrastructure, but is actually embedded into a global strategy for technology and service development. As countries progressively build their domestic capabilities, the need for a centralized agency grows in order to lead the space program and clarify responsibilities. The creation of a national industry champion is often essential to manage technology development and transfer. Around half of the emerging space programs have established a space agency, which also helps maintain political and financial commitment to the space programs.
The majority of emerging space programs leverage first-generation satellites to progressively increase the level of domestic industrial involvement in successive spacecraft, through four main phases:
1) Startup phase, with policy objectives defined and initial investments secured. Technical capabilities remain limited and may correspond to the ability to operate satellite assets.
2) Capability-building phase, with the gradual development of local expertise and know-how through personal training and technology transfers from foreign prime contractors. Autonomy is increased gradually through several generations of programs. This technology localization process is the phase where most of the emerging space programs currently stand. In Nigeria, the National Space Research and Development Agency initially procured a first Earth observation satellite from Surrey Satellite Technology Ltd. (SSTL) with a resolution of 32 meters before ordering a more operational spacecraft with a higher resolution of 2.5 meters while developing in parallel a third mission, Nigeriasat-X, built by Nigerian scientists within SSTL facilities as part of the Know-How Technology Transfer program.
3) Maturity phase, with the ability to manage programs serving national needs. This is notably the stage of Argentina, which is currently developing two radar observation satellites as part of the Saocom program and a communication satellite platform for the Arsat satellites. At this stage, a country may begin to export components or subsystems.
4) Advanced technology phase, with the ability to develop more complex programs such as launch capabilities, space science and exploration, in full or nearly full autonomy. Programs reaching this stage, such as South Korea or Brazil, cannot be considered as emerging space programs anymore.
For satellite suppliers, emerging space programs represent a great opportunity in a period of contraction of their domestic institutional market. This also generates new challenges to meet specific requirements of these customers, especially technology transfer and financing facilities. In that regard, support from their home governments is a major competitive advantage for satellite primes. The ability to supply an extensive technology transfer program may be constrained by strict regulations (export control) limiting the ability to satisfy the countries’ requirements or to submit a competitive bid. Flexible financial mechanisms such as concessional loans, vendor financing or barter agreements are required for most projects but also depend on the political relationship between vendor and buyer countries as a key factor of success for the transaction. It is one of the major reasons that China has been particularly successful at selling communication satellites, accounting for a 40 percent market share in the orders of new space programs in the last 10 years.
Considering a tougher competitive environment, satellite primes’ future successes or failures to address this market will still rely on their ability to offer flexible and cost-competitive bids with adequate backing from their governments. Recent changes in the U.S. International Traffic in Arms Regulations are an example of how we can go in the right direction to facilitate industry access to this export market, but more needs to be done to open the door for greater cooperation between industry and governments, between established and emerging space players.
Steve Bochinger is chief operating officer, Jean-Baptiste Thepaut is a consultant and Timiebi Aganaba is a research analyst with Euroconsult.