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Smallsat and the Downstream Sector- a Volatile Relationship: By Krishna Reddy

With time, a certain product, or service tends to enter a threshold state, beyond which the only way to thrive is, innovation. Now, innovation need not be based on the scientific fundamentals but more of a hybrid version which is an appropriate mix of appealing technological innovation, led by a master business plan. 

For example, look at the video rental market shift from Blockbuster to Netflix in the late 90s where Netflix’s smart business plan and understanding of the market trends gave it the upper hand in this battle. Similarly, Apple Inc. and the recent technology development can be compared to the strong relationship between the small satellite industry and the downstream sector – satellite data analysts.

The Origin of the New Profound Trend 

Before we dive deep into space, let us have a look at what’s happening in another technology producing market: the smartphone industry. If you are a close follower of the technology market, you would have seen how Huawei is building everything on its own and within its facility, from hardware to the chipset (Kirin series) and now an entirely new operating system, Harmony. 

Whereas, Apple Inc. decided to do away with the third-party manufacturers for semiconductors. As a result, we have the new M1 chip which has been integrated into its new MacBook range, unlike the older one with an Intel chipset. We thus have a blazing fast laptop, faster any other laptop in the market. Apple steadily entered all sectors of the market (excluding camera sensors and modems), with the launch of its products like the iPhone and the A-series Bionic chipsets. 

Looking at these developments, what can we learn or see in a different yet naive market of space exploration?

Smallsat and Satellite Data Operators – The Fragmented State of the Sector  

Why was the first satellite launched in space? Apart from cementing the Soviet’s position in the technological front, it was also meant to identify the density of high atmospheric layers through measurement of its orbital change and provide data on radio-signal distribution in the ionosphere. With time, Earth Observation and Defence application came into play, and soon the former emerged as one of the key applicators in employing the smallsat into the Earth’s orbit. Having multiple satellites in orbit (Low Earth Orbit specifically), the need to operate and filter the data of these satellites also came into existence and later transformed into a downstream market. 

Satellites today, act as a data mine where information can be produced as per our requirement and demand. The satellite data is then filtered, analysed, and processed to understand it’s applications in segments, like the ocean, forest fire, minerals, air pollution, weather, and disaster management.

The young smallsat industry, which is yet to emerge, has a long way to go before making an impact. The reason it needs to prove itself and pass through the phases of TRL (Technology Readiness Level) to enter the commercial market, and then become commercially viable. Hence, the downstream sector has the lead, and this, in many ways, plays well for the existing smallsat industry operating as we speak. The sector’s stakeholders are building several solutions to cater to the vast global commercial market by utilising the data from the existing smallsat in orbit. These satellites, however, don’t have the latest hardware but can be classified as an almost outdated piece of technology.

The link between the commercial market and the stakeholders is not complete without a data processing unit, i.e. the satellite data analysing people. For instance, a banking industry would not process the satellite data on their own, even if they have access to the data directly. Data management and processing is an entirely different ball game, and it does require a mammoth amount of time and energy to get the desired results, which satellites aren’t capable of doing on board today. 

In a parallel sector, the data sets required by banks and government are similar to the byproducts of minerals we extract from the Earth. For instance, CNG, LPG, petrol, diesel, and other forms of fuels are just a byproduct of the fossil fuels extracted from the ocean floor. The difference lies with the fragmented stakeholders in the space sector, unlike in the fossil fuel sector, where a specific company carries out extraction, filtration, processing, and sale of the byproducts.

The Gap of a Pendulum

The question that we have here is about why these downstream sector stakeholders aren’t acquiring the data mines in orbit? The answer – they don’t need to. The software development and the analytical tools used for extracting and processing satellite data are bound to outrace themselves in years to come. Hence, no matter how old a satellite or how outdated it would be, the extraction and the quality of data-oriented solutions will only tend to enhance and grow over the years to come. But, with certain technological advancements in satellite design and manufacturing, specific innovators today are capable of accurate and precise data sets from orbit to their provider without the need for any downstream data analytical support. 

It is up to the stakeholders and their business plans on acquiring the satellite manufacturers. The shift in the market share between impact and market behaviour is like a pendulum, it won’t remain stationary and will oscillate, which will again depend only upon a business strategy and not entirely on the technological front.

At present, the downstream sector stakeholders have the lead due to their focus and use of a software product, instead of hardware which is built by the upstream sector. The rate at which solutions are churned out, and market share is acquired, is quite instant when compared to the upstream players. However, we do see some behavioural changes where some potential downstream market players have shown concern in collaborating with the satellite manufacturers. As we speak, such collaborations are taking place, which is like an alignment of bringing the data mine and data processing sector in one line. 

Partners for Life

No matter how the markets mature in the years to come, the objective of the new emerging satellite market isn’t limited to orbit, but beyond it. The technology to understand those data sets derived from deep space would need a whole new approach and possibly have some business potential in the coming days, which would make it immortal with the help of downstream sectors.

The reason for this is because satellites are like an independent floating body with no manual control. Hence, the datasets it provides would eventually become a constant, serving a variable market. It’s just like how we use our smartphones, having Android 11 is what everyone desires, but that’s not enough. It would help if you had an updated or the latest hardware to make the best use of the Android 11 software update, and it’s possible in this commercial market where manufacturing phones for a mass market is feasible. But this isn’t possible with the smallsat industry. Hence, the investment and focus on building a better solution in the downstream segment are always on the rise. This means, extracting multiple information and answers out of a consistent quality dataset to meet the market demand.

In the end, what will accelerate the global space players will be the strategy devised solutions to capture the commercial segment. On the other hand, technological advancement will always have government agencies at their behest to fuel their curiosity to study deep space.

I believe that in the future, neither the downstream sector nor the smallsat industry would exist without each other. What fascinates me, is that with every breakthrough, smallsat tends to outrace the downstream sector operators by providing processed and filtered data right from the orbit. On the other hand, downstream sector operators tend to outrace the new smallsat industry by developing and implementing new software solutions to extract and provide data-oriented solutions of a much higher quality than from an older satellite.

Among the experts and market analysts, it will be the launch vehicle industry, who would and will with time emerge as a market expert.  After all, these launch vehicle industries are the link, to say the least, between the downstream sector and smallsat operators, if not now, then in a few years.

Written by Krishna Reddy, Innovation Officer, Consulate General of the Kingdom of The Netherlands. This article was originally published in The SatSure Newsletter (TSNL).