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Aerospace & Defense

Japan rocket builders launch into satellite-based data services

Competition in traditional businesses push IHI, Mitsubishi Heavy into new fields

The two Japanese heavy machinery companies have long been developing and launching rockets.

TOKYO -- Japanese heavy equipment makers operating in the aerospace business are tweaking their strategies to focus more on satellite-based data services.

IHI Corp. and Mitsubishi Heavy Industries are rolling out new services, including medium- and long-term weather forecasting and disaster damage assessments. They are responding to a changing environment in the satellite launch business -- a new era that will see countless small rockets lifting off from spaceports around the world, putting strong downward pressure on launch fees.

The established players in aerospace have traditionally earned most of their profit from launching satellites for telecommunications companies and participating in large, costly, government-backed satellite projects.

But competition in the launch business has intensified markedly in recent years as startups such as Elon Musk's SpaceX and Jeff Bezos' Blue Origin, along with a host of smaller companies, have appeared on the scene. These startups offer low-cost alternatives to the big players by reusing rocket engines, for example, as SpaceX does. That is encouraging the Japanese players to branch out.

IHI's weather forecasting service will use data from satellites launched by its rockets to predict weather for periods of two weeks to two months. The company plans to start by selling its forecasts to big U.S. grain traders. Other potential customers include electric utilities and marine shipping companies.

The company's forecasting system uses GPS signals transmitted into space to measure such meteorological factors as temperature, humidity and atmospheric pressure. The system achieves 30% better accuracy than traditional forecasting using weather balloons.

IHI will also offer a service to the Japan Coast Guard that will identify suspicious ships using satellite images. The company hopes for annual sales of around 6 billion yen ($55 million) from these services by 2024.

Mitsubishi Heavy also plans to roll out new services. One will involve using artificial intelligence to analyze satellite data to estimate the damage caused by natural disasters for use in disaster response and rescue operations. The service will be offered on a trial basis this year.

In the event of torrential rains, for example, the company will use information on landslides and population density to estimate damage in specific areas. The estimates will be given to authorities, such as local governments and Japan's Self-Defense Forces.

Mitsubishi Heavy aims to grow these services into full-fledged businesses that generate 10 billion yen in annual sales within 10 years.

The two heavy equipment makers have long been in the business of designing, building and launching rockets. IHI is working with the Japan Aerospace Exploration Agency, or JAXA, to develop the Epsilon Launch Vehicle, while Mitsubishi Heavy is developing the H-III launch vehicle together with the agency. The two companies will launch these rockets for JAXA.

The launch business is basically limited to lifting satellites into orbit for customers. But stiffer competition from nimble new entrants makes it increasingly difficult for established players to turn a profit solely from building and launching rockets.

Satellite data services, meanwhile, have emerged as a potentially lucrative area in the aerospace industry. The market is promising, thanks to growing demand for geographical and positioning data for tracking and operational uses. The business is also seen as less volatile than satellite launch services because it offers steady revenue from data subscription fees.

In 2018, the global aerospace market was worth $414.8 billion, according to the Space Foundation, a U.S. specialist in the industry. U.S. Commerce Secretary Wilbur Ross has predicted the market will expand to $1 trillion over the next two decades. Satellite data services are expected to be a main source of this growth.

The market is expected to become increasingly competitive as the number of players grows. IHI and Mitsubishi Heavy are latecomers, but they have more experience and expertise in rocket launches than the startups -- something they hope will give them an edge.

IHI will also start selling launch and data services as a package. Both companies are considering tie-ups with startups to improve the quality of their services.

Many new players, particularly in the U.S., are vying for a slice of the satellite data services pie. These startups can tap a rich pool of expertise, including former NASA employees. Venture capitalists are eager for an opportunity to invest in a market with strong growth potential.

Planet Labs is an earth imaging company based in San Francisco that was founded in 2010 by former NASA scientists. The company's constellation of more 130 satellites continually captures images of the entire surface of the earth at a 3-meter resolution.

In Japan, the U.S. company has teamed up with satellite operator Sky Perfect J-SAT to sell images to public- and private-sector customers.

Orbital Insight, another U.S. startup, specializes in geospatial analytics to allow users to detect and quantify economic and political activity around the world. It offers, for instance, daily global and regional crude oil-reserve estimates by monitoring oil storage capacity across thousands of tanks, and daily traffic analytics for retailers derived from satellite monitoring of hundreds of thousands of parking lots.

Japanese satellite startup Axelspace, which develops small satellites, launched its first satellite at the end of 2018. It envisions using a constellation of dozens of satellites to monitor the earth daily. It started selling image data in May.

Tokyo-based Synspective develops synthetic aperture radar satellites that use radar technology to provide higher resolution imagery. The company said Friday that it had raised an additional 8.67 billion yen through a private placement of shares to Japanese construction company Shimizu and others.

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