Analysis | Are smallsats entering the maturity stage?

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The exponential growth of the global market for small satellites with a launch mass below 500 kilograms over the last decade is due in part to a small initial market size. The smallsat market experienced a 23% compound annual growth rate (CAGR) from 2009 to 2018. Even greater expansion is expected between 2019 and 2024.

In 2018, 322 small satellites were launched globally through 44 launches. For the second year in a row, the number of smallsats launched was above the 300 units-per-year threshold, i.e twice more than the 160-per-year average identified between 2013 and 2017. Smallsats accounted for 69% of the satellites launched last year in number of satellites but only 4% of the total mass launched (i.e 372 tons). Last year, 50% of the demand was driven by the U.S., with more than 100 of those smallsats belonging to commercial companies. Technology demonstration was the main application. 

This market, still rife with uncertainty, is at the beginning of an explosive growth cycle as large scale, expensive constellations face their initial launch, with growth giving way to a more stable pace of maintenance and replenishment by 2025. 

In the fifth edition of “Prospects for the Small Satellite Market,” Euroconsult anticipates the rolling five-year growth rate for smallsats to peak at 48% in 2024. Following 2024, market size should stabilize until second-generation megaconstellations begin to launch. Euroconsult projects that between 2019 and 2028, more than 8,500 satellites will be launched, half of which will be to support broadband constellations, for a total market value of $42 billion. 

Smallsat broadband megaconstellations are becoming a reality by entering full deployment after successful in-orbit validation and the latest financing rounds of the most advanced projects, namely OneWeb and SpaceX’s Starlink. Other projects outside of the smallsat range (i.e., Telesat, Leosat) are gearing up, too, but have yet to commit to their suppliers. For all these projects, market acceptance has yet to be validated. Availability of low-cost terminals and efficient distribution networks are key success factors for them. 

Market segments other than broadband constellations include government (defense), Earth observation and narrowband providers. Government interest in smallsats for operational service is evident, closing the loop after pilot studies with 20-year horizons for responsive and scalable capabilities. The most advanced optical Earth observation constellations are nearing the completion of their first generation, and now need to generate revenue and commitments from end users. Other value propositions with different sensors are emerging, such as synthetic aperture radar and hyperspectral imaging, but only few have launched satellites so far. Companies sponsoring narrowband projects for Internet of Things applications are already seeing some shakeout, with follow-on impacts to suppliers. Only a few of these companies will actually be able to close funding and bring capability to market. 

On the supply side, the industry is shifting to new solutions. “As a service” business models are appearing across the value chain, including data analytics, payload and ground segment. Access to space is becoming less of a bottleneck thanks to rideshare opportunities on International Space Station-bound cargo missions and the introduction of new launchers dedicated to small satellites and facilitated by launch aggregators. 

Dedicated solutions such as micro launchers are just becoming available but many industry observers recognize that the number of new small launch projects far exceeds likely demand. The position of launch aggregators, meanwhile, is shifting from logistically challenging dedicated flight onboard heavy launchers, such as Spaceflight booking a Falcon 9 for its SSO-A dedicated rideshare mission, to micro launchers where they book launch capacity in advance to strengthen their backlog.

On the manufacturing side, mass production of megaconstellation is just beginning to meet deadlines set by spectrum licensing authorities. Enabling components such as electric propulsion and deployable antennas to be tested before commercialization will provide more agility to their customers.

Eventually, supplier consolidation could accelerate to reach equilibrium. 2019 will serve as a stress test for the whole community with consolidation or a few failures anticipated for the less mature projects. In addition, investors may be looking to lock in the momentum of the past few years with successful exits. 

During the upcoming years, the market will drive the value of propositions currently under development and determine whether smallsats are now reaching a new threshold of maturity or if radical and quick changes are now part of the whole satellite industry.    

Maxime Puteaux is a senior consultant at Euroconsult. Alexandre Najjar is a consultant at Euroconsult.