Opportunities remain in the EO market for manufacture and data export; short-term growth for commercial data driven by defense, enterprise markets also faster emerging
Paris, Montreal, Washington D.C., October 9, 2014 – According to Euroconsult’s newly published report, Satellite-Based Earth Observation: Market Prospects to 2023, 353 Earth observation (EO) satellites are expected to be launched over the next decade compared to 162 over 2004-2013. This will result in $36 billion in manufacturing revenues over the period, an 85% increase over the previous decade. Organizations from 41 countries are expected to launch EO satellite capacity by 2023, compared to 33 over the previous decade. Government supply continues to grow strongly as more countries expand their portfolios of EO satellites to meet various policy needs. In addition, newcomers are launching EO satellite capacity to develop a local industrial base, create the building blocks for a space program, obtain greater autonomy in data acquisition, and/or meet local demand for data and services. As a result, investment in EO and meteorology programs reached a high in 2013 at $8.7 billion, a 13% increase over 2012. This represents the 8th year of continued investment growth, with EO remaining a primary concern for government space expenditures.
Commercial supply is also expected to go through a significant expansion, both from private sector initiatives (the expansion of fleets, and new entrants) and government commercialization of proprietary systems. New entrants such as Skybox Imaging have launched their first satellites, and others, particularly in the domain of commercial meteorology and environment monitoring solutions, could follow suit in the next decade. “With this expansion in commercial supply, differentiating positions of the operators will come to the fore, with trade-offs in ground resolution, revisit, geolocation accuracy, and data prices,” said Adam Keith, Director of Space & Earth Observation at Euroconsult and editor of the report. “Nevertheless, competition is increasing and with new entrants possibly pricing data and solutions very competitively, there is the potential for disruption in the market.”
COMMERCIAL DATA MARKET GROWTH STAGNATION DISGUISES OPPORTUNITIES
Supply of EO solutions continues to expand and diversify despite an overall slowing of commercial data demand; this slowing is a result of reduced U.S. government defense spending on commercial data compared to previous years. The commercial data market totaled $1.5 billion in 2013; this represents stagnant (0%) growth from 2012 as the impact of reduced U.S. government spending takes effect.
The level of the U.S. defense outlay however disguises growth elsewhere in the market; in particular in sales to non-U.S. defense users. The commercial data market to non-U.S. defense organizations totaled $560 million in 2013 and has grown at a 14% CAGR over the last five years. In order to meet this demand, commercial operators are successfully providing direct-access satellite contracts to defense users. Emerging enterprise markets are also expected to further develop, particularly location-based services and support to engineering and infrastructure projects.
In 2023 the market for commercial EO data is expected to reach $3.6 billion (8% CAGR over 2014-2023). Regionally, the Asian markets, Latin America and Africa are expected to have strong growth profiles with expected growth at over 10% CAGR to 2023. Natural resources management, engineering & infrastructure, and again defense are expected to be the main application areas supporting growth.
MANUFACTURING EXPORT OPPORTUNITIES TO INCREASE, POSES DILEMMA TO THE INDUSTRY
Satellites launched from emerging programs will account for a growing part of the manufacturing market. Between 2004 and 2013, $1.9 billion of the total EO manufacturing revenues were derived from these programs; this is expected to increase to $4.4 billion between 2014 and 2023. Such programs, which may lack proprietary manufacturing solutions, are expected to be a key driver for the upstream industry looking to export solutions.
The majority of export activities to date have focused on lower-cost technology transfer missions to help develop a national industry and/or space program. Partnerships have been a successful mechanism to build up emerging manufacturers’ expertise. However, further countries have chosen to procure high-cost EO systems to meet more immediate national requirements, particularly for defense. For countries lacking a national manufacturing infrastructure, more direct procurement is required from existing “high-end” solutions. In this case, capacity building is dropped in favor of obtaining a high-performing satellite delivered in a shorter timeframe. The dilemma for the established manufacturers capable of designing “high-end” systems is whether they expand into the development of lower-cost solutions, or remain with high-end provision, despite the more limited number of export opportunities.
There is however already strong competition to address these opportunities as most major prime manufacturers look to expand their business. In addition, by 2023, 26 countries are expected to have full manufacturing capabilities (acting as a prime and/or integrator); this will add further competition in the longer term for the developing EO satellite export market.