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KT Long Read: Watch this space

Major disruptions in the global space industry, including in India that recently liberalised the sector, are heralding an emergence of a whole new world: ramifications will be wide-ranging, high-yielding — and ultimately benefit humanity

“Space has the ability to produce a triple bottom line, or ROIII: Return on Investment, Innovation, and Inspiration”

— Robert C. Jacobson

Last month, the United Arab Emirates reconfirmed it will be launching the region’s most powerful high-resolution satellite, MBZ-Sat, in 2023. The big update was they would be using the services of Elon Musk-owned SpaceX, which is rapidly disrupting the entire business of space with national space agencies scrambling to keep pace. And a few weeks earlier, China tested new frontiers of its space capability with the successful testing of the hypersonic nuclear missile which circled the world before hitting its target.

Elsewhere in Asia, India signalled its intent to hit a fundamental reset in its space policy and readied for the induction of the private sector as an equal partner to the government-owned Indian Space Research Organisation (Isro) to etch a new paradigm for the country’s space ambitions (so far, the private sector’s role has been limited to being a vendor to Isro).

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The hyperactivity in the space sector across the globe is no coincidence. It is the beginning of a competition among countries to acquire supremacy in space — a race with both strategic and economic stakes. This will not only be about the ability to launch rockets and satellites and ‘conquer’ (so to say) spaces beyond the realm of Planet Earth; it is to farm and mine the information so gathered for a range of hitherto unheard-of applications. Case in point: at present, every time you use an ATM, you are using satellite services; in the future, remote areas will be able to use broadband beamed through satellite constellations.

It is not that such ambitions did not exist previously. But today, there is an enabling environment, especially on the heels of the runaway success of SpaceX with its reusable Falcon 9 rocket; the consequent reduction in expenditure, as the parts are reusable, have lowered costs dramatically, becoming the benchmark to beat.

Besides decreasing hardware costs for building and launching satellites, the growing convergence between space and non-space activities — especially in communication and imaging applications — is enlarging the business pie like never before. Expectations are that the present size of the global space market, estimated to be at around $400 billion, could scale up several times by 2030 to $1 trillion as demand for alternative data from space grows.

The India Story

At present, the world is keenly watching India’s moves in the space sector. They are curious about the structural policy fixes being initiated in the country, and also eyeing the opportunity the India market is likely to provide for space applications. In fact, the first week of the ongoing Expo2020 in Dubai saw the India pavilion host a series of events showcasing changes underway in the Indian space sector, where the top brass at Isro also joined in virtually.

The core message from the Indian delegates was that the country was unshackling its space sector long defined by Isro. Last month saw the formation of the Indian Space Association (ISpA), an industry body that will act as the bridge between the government and the private sector. The underlying game plan is similar to the highly successful playbook pursued by the National Aeronautics and Space Administration (NASA), the United States space agency: collaborating and incubating ventures with private enterprise in space sector projects. Delivering the inaugural address, Prime Minister Narendra Modi formally acknowledged the proposed changes when he said that the government was doing away with ‘artificial’ divisions like public and private sector.

“In a way, the country has given a new gift to the talent of India’s entrepreneurs by opening up India’s space sector in its 75th year of independence,” he said. “ISpA will play a huge role in this.”

To put it simply, the Indian private sector in general and start-ups in particular are being empowered to pursue commercial applications in the domain of space. “Now, they [private sector] will be partners in owning, building, running a satellite for example. They will be part of the system and provide services commercially for domestic and international use,” Dr K Sivan, Isro chairman, explained in an interview to the government-owned television channel Doordarshan.

The new Spacecom Policy, which now awaits formal clearance from the Union Cabinet, will cement these proposed policy changes, replacing the existing Spacecom Policy of 1997. In addition, the policy will regulate the commercial use of the Indian space ecosystem, including use of satellites and also define the rules for foreign direct investment in this sector.

This big policy shift is likely to inspire innovation, especially among start-ups, in the space applications industry.

In the run-up to the launch of ISpA, the government unpacked functions of Isro. It set up the Indian National Space Promotion and Authorisation Centre (IN-SPACe) — not without controversy as it ran into some resistance from within Isro — to ensure smoother coordination with the private sector as and when they are drafted as partners for future space projects. The new entity will oversee permissions and regulations to private companies and the sharing of the existing space infrastructure, including testing facilities, developed by Isro.

Earlier in 2019, the NewSpace India Limited (NSIL) was set up to optimise the ability of sector to provide services and products to international clients. The first successful execution of a commercial deal by NSIL was the launch of a Brazilian satellite, PSLV-C51/Amazonia-1, in March this year.

Clearly, the intent is to develop a new ecosystem around Isro, but with key functions like commercialisation of projects/services and management of the space infrastructure farmed out to new entities — in a bid to streamline coordination and partnerships with the private sector.

The Isro Legacy

Working against all kinds of odds — including crippling international sanctions following the first nuclear test in 1974 — generations of dedicated scientists at Isro have not only developed cutting-edge technology but also managed to commoditise the business of building rockets and satellites. The biggest legacy of Isro is the introduction of the word ‘credibility’ in the Indian space lexicon.

Over the last four decades, Isro ensured that India carve out its own special place in the global league. And they were able to generate impressive value for money in every space project without compromising quality. This includes 100-plus satellite missions, 70-plus launch vehicle missions (including the ones to Mars and the Moon), and the ongoing plan (Gangayaan) to send Indian astronauts into space.

Going forward, however, Isro will have to scale these abilities exponentially as the race for space heats up. Further, cost is not going to be the only differentiating metric. Instead, innovation will be the key to India acquiring the desired capability and competitive edge at the global level.

A partnership with the private sector — like it is happening elswhere, internationally — may be a win-win: on the one hand, Isro refocuses on its core abilities and, on the other, the private sector concentrates on innovation even while saving on costs by tapping into Isro-owned space infrastructure.

The implicit thought is that, eventually, the private sector will be able to hold their own in non-Isro linked ventures and thereby enhance India’s share of the global space industry pie from the current level of 2 per cent. Especially since 90 per cent of the revenues accrue to space applications; satellite production and launch accounts for less than a tenth of the commercial pie. And within the non-satellite activities, the revenues are equally divided between manning ground stations and creating space-based services.

The LEO Opportunity

The rapid proliferation of disruptive technology, especially in microelectronics, is powering an entirely new growth trajectory in satellite ventures. This is because the bulk of the sub-system, made up of the payload and the telemetry system which transmits the data, comprises microelectronics.

Disruptions in technology have reduced the cost of microelectronics and have, alongside, progressively made them sturdier — capable of withstanding extreme temperatures and thereby even better for space applications. Not only did this pack more into satellites, it also made them cheaper and smaller in size.

Simultaneously, this also enabled the operation of small satellites in Low Earth Orbit (LEO) as opposed to the existing Geosynchronous Equatorial Orbit (GEO). In the case of the latter, the satellites were big as they have to operate at 36,000 km above the earth, while LEOs revolve, weighing less than 100kg, at heights less than 2,000 km. Being closer to earth, the cost of the components in the subsystem, especially the telemetry, is that much lower. Consequently, the conversation has shifted from GEO to LEO communication. The only drawback is that LEO satellites have a maximum shelf-life of five years. However, with SpaceX discovering reusable rockets, the costs of launching these satellites are plumbing new lows.

“The cost of access to space has come down. Twenty years ago, if you wanted to launch something it would have cost you $150,000 per kilogram. Today, companies like SpaceX are offering that at $5,000, which is an order of magnitude change,” says Narayan Prasad, Chief Operations Officer at Satsearch, a global platform to buy and sell space products and services.

According to Prasad, the massive improvements in the microelectronics industry, which provide the telemetry in a satellite, over the last two decades is also a key contributory factor. “We are not doing anything in the space industry in electronics. The industry is producing capacitors, resistors, microchips. Someone is building cars from this, others refrigerators and we are simply building satellites from it,” he adds.

Interestingly, several Indian startups are already exploring this opportunity in LEOs. In fact, Sunil Reddy Indurti, Director-Business Development, Azista-BST Aerospace, the Indo-German joint venture for manufacturing small satellites, describes the business opportunity underlying LEOs as the ‘Henry Ford moment’.

Pointing out how Henry Ford pioneered the assembly line factory in 1910 and completely rewrote the rules of manufacturing, Indurti says, “The logic of Ford was that if you offer a standard bus, you could reduce huge costs. And that is what we plan to do. You hear of Elon Musk building a constellation of 40,000 satellites and Amazon about 4,000-5,000 satellites. In all these examples, the system design remains the same and you are only replicating it.”

Their present facility located in Ahmedabad has a capacity of manufacturing 100 satellites a year. Though the satellite design is complete, the unit is scheduled to commence production starting 2022.

Similarly, Bengaluru-based Pixxel is partnering with Isro to launch a constellation of LEOs to detect, monitor and predict global phenomena on an almost real-time basis. To do this, it proposes to use its satellite network to obtain hyperspectral imaging — collecting hundreds of images of the same location, which are then mined by computers to generate the desired information — and service both domestic and international clients.

“Pixxel is launching its first two satellites by early 2022. It plans to launch nearly 40 satellites by December 2023. The fully serviceable constellation will have visible and near-infrared (VNIR) plus Short Wave Infrared (SWIR) capabilities to image the entire planet,” says Awais Ahmed, founder and CEO of Pixxel.

Ahmed estimates that the global market for LEOs will grow to over $7 billion by 2025. Indurti agrees that the number of satellite launches is poised to grow exponentially from 1,500 satellites a year at present to about 50,000 satellites by 2030.

Not surprisingly, the growing number of Indian space start-ups are drawing interest from venture capitalists. According to news portal YourStory, about $30.8 million in VC funding has come in this year; it was $18.2 million in 2020. This includes $11 million in Series-A funding round for rocket launching companies Agnikul Cosmos and Skyroot Aerospace in May and $7.3 million seed funding for Pixxel in March this year.

Ravinder Singh, partner in Kalaari Capital, the Bengaluru-based early-stage, technology-focused venture capital firm, is not surprised that the Indian space sector is a draw for investors. Speaking on the podcast hosted by NewSpace India, Singh argued that early-stage investments are based on technical milestones and that Indian start-ups were well placed to compete both in terms of cost and speed of delivery. “It makes tonnes of sense to invest — and [so] the flow of capital will happen on its own. We do not have to make the case for it,” he said.

(Anil is a journalist based in New Delhi, India. He tweets @capitalcalculus)