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Inexpensive smallsats are replacing large satellites, presenting a challenge to existing manufacturers.   © Mitsubishi Electric/ Kyodo
Business Spotlight

Asia's mobile revolution puts satellite makers into spin

Low-cost innovation helps Rakuten and other newcomers take on established players

MITSURU OBE, Nikkei staff writer | Singapore

SINGAPORE -- When Japan's Rakuten announced this week that it had acquired a stake in AST & Science, the Texas-based outfit building the world's first space-based mobile broadband network, it brought home a new reality: the satellite revolution is coming.

Designed to connect regular smartphones to satellite internet for the first time, the two companies said the SpaceMobile network would initially offer a 4G connection, with plans to deliver 5G services.

"Our investment is part of our broader strategy to become a leading mobile network operator in Japan," said Hiroshi Mikitani, the billionaire founder and chairman of Rakuten, whose would-be global tech giant is seen as Japan's answer to Amazon.

The same day, China's Geely Holdings, a leading automaker which also owns Volvo, said it would become the first private Chinese company to produce and operate a low-orbit satellite constellation as part of its push to develop driverless cars.

Once the domain of hulking geostationary satellites flying 36,000 km above the Earth that take two years to build and cost $200 million each, a wave of technological innovation has made satellite communications available to a host of new, more nimble players.

Miniaturized memory chips, faster microprocessors, better batteries and more efficient solar panels now means that a large number of smaller satellites costing just several million dollars each can be deployed as low as 100 km above ground, and which can orbit the Earth in as little as 90 minutes.

As people in Asia become richer, driving up mobile connectivity across the region, many believe that small satellites could be the only way to satisfy ever-increasing demand for access to high-speed networks.

"The dream is to make sure everybody is connected all the time no matter where they are," says Tang Kum Chuen, deputy president at the electronics division of ST Engineering, a Singaporean maker of satellite communications equipment. "You'll go to mountains, an African safari or desert and you'll always be connected," he said at the Global Space and Technology Convention in Singapore last month.

Satellite constellation was a main theme at the Global Space and Technology Convention held in Singapore on Feb. 6-7. (Photo by Mitsuru Obe)

Satellite communications are expected to complement terrestrial telecommunication networks such as 5G because they can cover much broader areas and help ease congestion in data traffic.

The prospect of the coming transformation has encouraged new entrants and sparked a price war in the satellite market, upending an industry that was once dominated by industrial giants such as Mitsubishi Electric.

"In a purely commercial environment where the government is not funding the business, building satellites is a miserable business because it is very high risk, very capital intensive, [yet] the profit margin is very small," said Martin Sweeting, group executive chairman of Surrey Satellite Technology, a small-satellite pioneer. "There are now at least 800 small-satellite companies that have been developed in the last three-to-four years."

Take SpaceX, the California-based aerospace manufacturer founded by Elon Musk. Each month the company sends at least 60 new satellites into orbit, strengthening its Starlink broadband constellation that aims to cover the entire world.

Following last month's fifth successful launch, Starlink constellation now has around 300 small satellites in orbit, and is aiming to have 12,000 satellites in orbit.

Soon, Sweeting predicts, satellite coverage will be so comprehensive that if an elderly person suffered a fall, a sensor in the person's clothes would detect a sudden jerk and immediately communicate the accident and location to that person's family.

According to Bryce Space and Technology, a research company, small satellites weighing 600 kg or less made up about 80% of the total satellites launched last year, with 37% launched for communications purposes, and 26% for Earth observation.

"The push for a very large, long-life geostationary spacecraft is changing because technology is moving so fast that it is very difficult to predict the services that are going to be needed in 10 or 15 years of time," Sweeting said. "The emphasis is going to be on reconfigurable spacecraft."

The trend now is having either low-cost, short-life satellites that can easily be replaced, or very high-throughput satellites that can handle large volumes of data.

Both Tang and Sweeting predict that terrestrial and satellite telecom networks will merge within a few years, keeping smartphone users to stay connected as the smartphone automatically switches between the two networks, depending on which service is available.

Still, satellite constellations are not without their challenges.

One of the biggest difficulties lies back on Earth. Because low-orbit satellites typically circle the Earth every 90 to 120 minutes, that means ground antennas need to track the satellites as they pass overhead.

"The business case for low-Earth orbit satellites is not well-proven," says ST Electronics' Tang. "Today, there are no cost-effective ground terminals to support low-Earth orbit satellites."

The Singaporean company, which makes antennas and other ground facilities for broadcast satellites, is developing a new antenna that can track moving satellites, much like phased-array radar, and which are so small that they could be mounted on aircraft, ships or even cars.

Focusing on ground facilities "gives us a better return on investment compared with building satellites that do not have a certain business case," Tang said.

Aerospace giants, such as Airbus, are also trying to get in on the act.

In 2015, the European multinational formed a joint venture with the United Kingdom's OneWeb to create a constellation of 900 satellites for broadband internet. Their plant in Florida is capable of constructing two satellites a day.

For Airbus, the mega-constellation project is "the same case as going to the Moon," one Airbus official told Nikkei. "People decided to change the world," the official added.

While the project has lifted Airbus' satellite manufacturing capabilities, the company is not sitting on its laurels.

"It has a strong venture mindset," points out Shinichi Nakasuka, aeronautics professor at the University of Tokyo and an expert on the Japanese satellite industry. "Airbus is investing in a range of technologies as potential revenue sources for the future."

The company is capable of such investments because it already has a solid revenue source -- making commercial aircraft -- notes Nakasuka, with Airbus surpassing Boeing last year to become the world's largest aircraft manufacturer.

On Feb. 6, OneWeb launched 34 satellites into space. The company plans to have a constellation of 900 satellites in low-earth orbit to provide internet connectivity around the world.   © OneWeb

Other players include San Francisco-based startup Planet, which already has 140 optical satellites in orbit to sell imagery of the Earth, Japanese startups Axelspace and Synspective, and Finland's ICEYE, all looking to enter the satellite imagery business using synthetic aperture radar technology.

In Singapore, satellite startup NuSpace aims to operate a constellation of hundreds of tiny satellites, each weighing up to 4.5 kg and costing just hundreds of thousands of dollars. The first satellite is due to launch next year.

All of which leavers traditional satellite makers such as Mitsubishi Electric scrambling to respond to the rapid industry shift.

Last year, the Tokyo-based company received no orders for new satellites as global demand for geostationary satellites plummeted to around 10 units a year, from about 30 the year before. The company is now bracing for a price war, as the rise of small satellites puts downward pressure on the entire satellite market.

"The price of geostationary satellites could fall as much 30% in the next two-to-three years," predicts Minoru Ueda, general manager for space business at Mitsubishi Electric Asia. Satellites used to be a tailor-made product for each customer, but they are fast becoming like "off-the-rack suits," Ueda said. "Of course, we have a sense of crisis."

The company is developing a platform for small-satellite production and will test a fleet of new 100 kg-class satellites next year, while also looking to supply components to small-satellite manufacturers.

Mitsubishi Electric is Japan's main satellite manufacturer, having built some 70 satellites, including those which comprise Japan's global navigation system. It is also developing the country's first lunar lander, known as SLIM.

Mitsubishi Electric and other Japanese satellite makers such as NEC -- maker of the Hayabusa asteroid probe -- have long relied on government contracts to fund its space business, and are now struggling to adapt to the new era of commercial activity.

Mitsubishi Electric's Ueda says that the company will have to double the size of its space business to around 150 billion yen ($1.4 billion) in revenue over the next five years or so if it wants to stay in the game.

With little growth expected in Japan's space program, much of the growth will have to come from overseas, especially in Asia. "We want to be among the winners," said Ueda.

Even so, said Shigeki Kuzuoka, who worked as engineer at both companies and now runs independent space consultancy Satellite Business Network, aerospace is just a small part of both companies' overall business.

"They have depended on government orders in the last 30-40 years," said Kuzuoka. "They look at space business as good for PR, as long as it doesn't entail too much risk."

The question is whether that mindset will allow them to compete against dedicated aerospace companies.

One solution for Mitsubishi Electric, said Tokyo University's Nakasuka, would be to spin off its space business. That would allow it to take more outside capital and pursue bolder challenges.

"It would be difficult to expect the space division to grow into a major player while being part of a big company," Nakasuka said.

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