Israeli Firms Join Forces on Microsatellites – Business Venture Fueled by Ministry of Defense Space Plans

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Israel’s top government-owned aerospace firms are putting aside their historic rivalry for future space work and forming a new commercial joint venture aimed at the prospective market for microsatellites.

Executives at Israel Aircraft Industries (IAI) Ltd. and Rafael Armament Development Authority Ltd. expect to sign an agreement formalizing the new entity by mid-October. Tentatively called MicroSat, Ltd., the new company should end a protracted turf battle between the two firms over Defense Ministry (MoD) budgetary allocations and the marketing rights associated with the development and production of relatively low cost, multi-mission satellites weighing no more than 120 kilograms.

For years, IAI — the nation’s sole satellite-producing firm — has aggressively opposed attempts by Rafael to encroach on what it views as its exclusive domain. IAI executives argued that it would be a waste of taxpayer funds for the cash-strapped nation to invest in the duplicative infrastructure demanded by space-related development activities.

The matter was ostensibly put to rest in mid-2003, when Amos Yaron, then director-general of Israel’s MoD, strong-armed the two firms into agreeing to coordinate rather than compete for funding and infrastructure development associated with microsatellite initiatives. Jacob Toren, a former Rafael chairman, succeeded Yaron as MoD director-general in mid-September.

In interviews here, government and industry sources said the new firm would combine IAI’s satellite design, manufacturing, integration and launch expertise with capabilities developed at Rafael in the fields of micro propulsion, inertial sensors and inter-satellite, laser-linked communications.

“The new firm will focus on joint development and sales of micro-satellites that could weigh as little as 10 kilograms and no more than 120 kilograms,” said Nehemia Miller, director of Rafael’s Space Systems Directorate. “It will be the first commercial space venture jointly managed and owned by IAI and Rafael, with the managing director coming from Rafael and the chairman from IAI.”

And while MicroSat, Ltd. is initially aimed at commercial and scientific projects, sources here readily acknowledge it would serve to further national military space initiatives that have been hard hit by budget cuts in recent years. MicroSat, Ltd.’s focus on the micro satellite and so-called nano satellite niche markets conveniently overlaps with MoD’s ambitions to launch on demand, from fighter aircraft, very small satellites capable of operating as a unit for a variety of intelligence gathering, targeting and command and control missions.

As envisioned by the MoD military space roadmap — details of which remain classified — the generic, low-cost satellite bus would house a variety of so-called plug-and-play payloads, with mission functions divided among two or three platforms so that the sum of the formation far exceeds the contribution of each individual spacecraft.

Tal Inbar, senior research fellow at Israel’s Fisher Institute for Air & Space Strategic Studies, refused to elaborate on MoD military space plans. He noted, however, that in a small country like Israel, where less than a handful of firms are responsible for developing space systems, “any gains achieved through commercial space programs naturally serve to promote national security goals and our defense industrial base.”

In a Sept. 28 interview, Inbar said he was optimistic about the eventual prospects for the micro-satellite market. “Very small satellites with a short lifetime that can be launched on demand to the most efficient low Earth orbits could be an excellent tool for disaster monitoring and mitigation. Such platforms are not yet available, and recent Katrina and Rita hurricanes made clear that even a space superpower like the United States lacked sufficient satellite coverage for these missions,” he said.

He added that such satellites could potentially be launched from airliners. “In this exclusive and potentially lucrative niche market, the Israeli industry has much to offer,” Inbar said.

However, Israeli executives directly involved in the establishment of the MicroSat venture were much more hesitant in their expectations for the emerging market.

“In the long term, our vision is to provide a constellation of micro-satellites whose contribution is far greater than any one of them,” said Yossi Weiss, manager of the Space Division at IAI’s MBT Group. He quickly added, “But this is still in the research and development phase and could take 10 to 20 years to realize. We’re going to need to do a lot of research in order to validate if there is truly a commercial market out there for this niche.”

Likewise, Rafael’s Miller conceded there is no immediate business justification for the new firm. Nevertheless, he said the MicroSat venture represents a long-term investment that could yield future profits while promoting nearer-term Israeli development goals. “Right now, there is no killer application and no real business benefit in support of these extremely small satellites. But we’re looking to the future. Not too long ago, nobody expected laptop or hand-held computers to become the necessity they are today. We expect the same trend to materialize in the micro- and nano-satellite niche.”

Ironically, the first tangible program to be managed and implemented by the new firm does not fit into the category of microsatellites. Nevertheless, government and industry sources intend to leverage work performed for Project Venus, a French-Israeli cooperative program aimed at precision agricultural imaging and environmental monitoring, into future microsatellite initiatives.

Planned for launch in 2008, the Vegetation and Environment Monitoring New Micro-Satellite (Venus) mission is based on the same satellite bus developed by IAI for MoD’s TechSAR synthetic aperture radar satellite, which has an estimated weight of 210-260 kilograms. It also will incorporate a low-thrust electric propulsion system developed by Rafael in cooperation with Israel’s Technion University and the country’s Nahel Sorek nuclear research institute.

Israeli industry executives said the new IAI-Rafael venture would sign a contract soon with the French space agency, CNES , which partners with the Israel Space Agency on the Venus program. Weiss said use of the TechSAR satellite bus for the Venus project would allow the new firm to demonstrate its ability to provide small, low-weight generic platforms for multiple missions. Similarly, Miller said demonstration of the Israeli-developed electric propulsion system for Venus would serve to benefit other micro-satellite initiatives, including those required by MoD.

“Validation of our concept through Project Venus will benefit other small satellite programs. We expect to achieve significant savings in fuel consumption and the ability to change orbital paths in flight, which will allow us to improve satellite revisit time,” Miller said. He was referring to the ability of the satellite to linger longer or position itself more accurately over high-value target areas.

Seed money for the new IAI-Rafael firm is expected to come from the CNES contract associated with Project Venus, the Israel Space Agency, Israel’s Ministry of Industry and Trade and from the two Israeli government-owned firms.

Government and industry sources here declined to provide a specific breakdown of funds destined for the new MicroSat venture. However, they roughly estimate the CNES contract at about 12 million Euro, and the collective Israeli government share at about $14 million. An additional, as yet undetermined investment amount will be shared evenly by IAI and Rafael, sources here said.