Space industry: on-going structural changes and paradigm shifts

The space industry is currently facing several structural changes with the accelerating growth of space activities in several countries (including global space powers like China, India, Japan, some other OECD countries), a growing number of corporate players (New Space) investing in space systems and their downstream applications, … and paradigm shifts (disruptive change of scale in terms of number of satellites to be produced for new satcom constellations, space data challenges) impacting both demand and supply sides.

Europe is today considered as a space world leader with tremendous successes in the development of technologies, the provision of competitive products, systems and value-added services dedicated to a large variety of public and private users/clients, and the scientific community. The European space manufacturing industry (launchers, spacecraft, ground systems) strengthens Europe’s position on the worldwide geo-strategic scene by giving Europe an independent access to space and the necessary technological expertise to support its own strategic decision-making process in case of environmental or security/military crisis. European satellite operators and providers of space-based services are worldwide key players of the EO and satcom markets.

But space-faring nations aiming at more independence (Turkey, Brazil…) or even market dominance are developing offensive strategies that challenge Europe’s position. China’s 2016 Space White Paper clearly illustrates that China is targeting major frontier areas of space science and technology to enhance the technological capacities of its space industry, while also starting to look at commercial opportunities in space applications and related value-added/integrated services (e.g. commercial and geopolitical engagements with numerous South/Southeast Asian, South American and African countries in the fields of telecommunications, mobile communications and TV broadcasts).

With regard to New Space, it is worth noting that the emergence of these new actors shall not be considered as a withdrawal of the public authorities’ involvement. In the U.S., this is public demand (NASA, DoD, NRO…) that has driven and allowed the emergence of such private players, by ensuring them long-term commitment and more freedom in the design/implementation of the space programmes and services they are currently developing.

Boosted by a sustained public demand (growing number of countries investing in space systems and their downstream applications, a trend that is expected to strengthen in the coming years), and by an increasing implementation of technological innovations (such as electric propulsion systems on-board large telecommunications satellites, advances in miniaturization making micro satellites even more affordable, robotic servicing technologies for space applications, use of Additive Manufacturing for some technical complex parts like the hydrogen turbo-pomp connectors…), the space industry is facing several structural changes and paradigm shifts impacting both demand and supply sides:

Structural change #1: Increased competition and clients’ pressure to get lower prices

• Incumbent players have to cope with a stronger competition on the commercial open markets for spacecraft, launcher systems and equipment/components, as more actors/corporate players (New Space) seek to enter global value chains.
• Founded in 2002 with the goal of creating the technologies to reduce space transportation costs and enable the colonization of Mars, SpaceX has moved from a spunky start-up with this seemingly outlandish goal of colonizing the Red Planet to disruptive competitor that has reshaped the rocket launch business.
• SpaceX’s capabilities and low launch prices, especially for General Telecom Organization communication satellites, meet market demand and have resulted in market pressure on competitors to lower their own prices. For Karim Michel Sabbagh, SES CEO, to partner with 3 launch system providers (ArianeGroup Ariane6, SpaceX Falcon9, and Proton or Mitsubishi?), and 5-6 satellite manufacturers would optimize SES business model. SES is targeting a “$30M launchers and 20% cheaper satellites” upstream ecosystem that would enable to deploy satellite networks worldwide and to really democratize the satellite usage.

Structural change #2: Improved design processes and industrial optimization… more necessary than ever to preserve/enhance competitiveness of the offerings

• The “cost leadership” strategy adopted by SpaceX has been successfully implemented by applying design-to-cost management techniques, the modular approach from software engineering (Falcon 9 uses 9 of the Merlin engines, which were tested on the single engine Falcon 1, Falcon Heavy uses three Falcon 9 booster stages), and an efficient vertical integration policy, principally because of suppliers’ prices evaluated as too high.

Around 85% of the entire Falcon/Dragon vehicles are produced in-house, including even the flight computer.

• In Europe, the whole European launcher industry, challenged to become more cost-competitive, is currently being restructured, consolidated, rationalized and streamlined. For Ariane 6, ArianeGroup has set up totally new engineering/manufacturing processes and industrial organization: regrouping on one site (Les Mureaux, France) of the engineering teams of ArianeGroup, Tier-1 suppliers (SABCA, RUAG, MT Aerospace, Air Liquide…) and ESA; creation of industrial excellence clusters (metallic parts – MT Aerospace, Germany, composite parts – Casa, Spain…) to optimize industrial capacities’ utilization rates.

Paradigm Shift #1: disruptive changes of scale in terms of number of satellites to be produced and Time-to-Market constraints generated by new satcom constellations (e.g. 900 OneWeb satellite fleet)

• Performance excellence: implementation of innovative industrial processes in manufacturing, e.g. adaptation of some automobile industry’s mass production techniques, integration of state-of-the-art automation (smart tooling, collaborative robots…) and data acquisition capabilities in the assembly lines of the 900 OneWeb communications satellites to shorten assembly times and provide means to analyze factory performance and process improvements.
• Time-to-Market challenges: assembling, at full speed, 40 to 60 satellites per month, or two to three per day, a pace never seen in the space industry, while managing to compress the cost of satellite between $ 400,000 and $ 500,000. Planned world’s largest launch campaign, sending new satellites up every 21 days.

Paradigm Shift #2: the Space Data Challenges

• Big Data, technological issues: the amount of data handled and/or generated in space is tremendously growing with the combined action of many technology and mission trends. The sector shall thus address this data challenge and implement/monitor key activities that support increased data handling requirements, such as secure data transfer, long distance data transfers, high data rates and all processing/storage issues. These developments are transversal in nature and may support missions in Earth Observation, Science, Telecommunications, and Navigation.
• As integral part of the space infrastructure, the user/mission ground segment will have to support the above mentioned key requirements of future missions and systems for increased data rates, flexibility, ergonomics and the implementation of cloud-based solutions and data dissemination optimized processes/models.
• Development of space-based services: Galileo, Copernicus, EO satellite systems are leading-edged technology developed programmes but the value-added service sector delays taking off (current service offerings, marketing and commercial strategies adopted vs identified solvent demand, levels of knowledge, maturity of the various final prospects-customers?)

Under the pressure of New Space players, space is becoming more and more a business to be managed like any other, where the notions of strategic thinking, appropriate response to users-clients’ needs, optimized R&D programme & technology portfolios, operational excellence and continuous improvement are key to be successful in an increasingly competitive environment.

For the space stakeholders, this requires strengthening strategic foresight capacities to assess the potential solvent demand, and challenging conventional thinking to foster accurate decision-making when considering current market positions to maintain or new activities/business models (micro-satellites, micro-launchers, new space based value-added services) to develop.

In such a fast-moving sector like space industry, this implies iterative approaches, considering in turn objectives, implementation and resources, and certainly a more “intelligent trial-and error” oriented mindset…