Defense Requirements Creating New Opportunities Along Earth Observation Value Chain

Limited number of countries expected to invest in proprietary defense solutions despite high IMINT needs, potential for commercial providers and manufacturers to provide alternative solutions

Paris, Washington D.C., Montreal, Yokohama, March 30, 2016 – According to Euroconsult’s latest report, Earth Observation: Defense & Security, the number of countries expected to launch proprietary Earth observation (EO) defense capacity is expected to remain limited, despite increases in global tensions. Under exploration by multiple countries are other avenues to receive data capable of image intelligence (IMINT) applications, such as dual-use and commercial approaches.

“Only six countries launched dedicated EO defense capacity over 2006-2015; this number is not expected to differ greatly moving into the next decade,” said Adam Keith, Managing Director of Euroconsult Canada and editor of the report. “Only a few new entrants (such as the UAE) are expected, as the high costs and technical know-how to develop and maintain capacity capable of submetric/high geolocation accuracy imaging is an inhibiting factor.” A further four countries launched dual-use satellites (implying mixed defense & civil financing & usage), spreading the costs across multiple government departments. Several dual-use systems are expected to be launched over the next decade, such as in Peru, Morocco and Spain; in total, 80 defense/dual-use satellites (discounting U.S. classified programs) are expected to be launched over 2016-2025, a marginal increase over that of the previous decade.

The manufacturing market value of these 80 EO defense satellites over 2016-2025 will be approximately $20 billion. The manufacturing market for defense satellites is historically closed. However with several countries exploring dual-use/defense options with a limited national satellite manufacturing capability, an export market is emerging. As with the civil domain, technology transfer remains a component, however the focus is on obtaining an autonomous IMINT capability rather than first developing a national manufacturing industry. National pride and the “neighborhood effect” are further factors when taking the decision to invest in a defense EO system.

Defense end-users requirements for IMINT include both submetric SAR and optical data sets with, for most applications, a high revisit. Given that most countries launching defense capacity are only developing one satellite or a constellation, not all requirements for defense will be met. Instead, an autonomous system allows for at least some data collection capability when needed. For instance, France operates optical systems, whereas Germany operates SAR only. Other satellites being manufactured for the UAE, Peru etc. may only be one or two satellites. Thus it is essential to further augment data, such as through defense partnerships (either for mutual data share between programs, or wider defense agreements), or via the commercial sector.

Defense is by far the first destination for commercial EO data, totalling over $1 billion in data sales in 2015, nearly three-quarters of the data being from ≤1m ground resolution systems, such as from DigitalGlobe and Airbus Defence and Space. The U.S. NGA remains the single largest procurer of imagery to support defense applications, however non-U.S. markets remain a key growth driver across the commercial data market as a whole. By 2025 it is expected that commercial defense data sales will top $2 billion (7% CAGR). Asia and Latin America in particular are witnessing a strong uptake in the procurement of commercial data, facilitated by direct access solutions provided by the commercial operators and driven by heightened regional unrest.

As with government solutions, commercial high native geolocation accuracy/submetric systems require sophisticated components and stable platforms which imply higher manufacturing costs. Several emerging lower-cost constellations using smallsat technologies however are being developed with data offerings around 1m ground resolution and the ability to price data much cheaper than current commercial offerings. If geolocation accuracy can be improved with post-processing and end users are less stringent on native accuracies, then the data can be suitable, adding competition to the commercial supply scenario.

About the Report
Earth Observation: Defense & Security assesses from an economic and political perspective the Earth observation (EO) industry focus on defense and security. This is inclusive of national government supply and demand, and commercial solutions being developed to meet some of these requirements – both in manufacturing and commercial data supply. Key metrics such as satellites to be launched and costing, commercial data markets and manufacturing market values provide a 360-degree view of mechanisms to receive data to support defense applications, as well as providing a forecast as to how this situation is anticipated to develop.

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