UK-based SSTL has been building small satellites for the last 30 years – nearly six of those under the ownership of what is now Airbus Defence and Space. Investors have been flocking to the market in recent years amid technological advances and a global sea change in the commercial space industry. SatelliteFinance speaks to CEO Patrick Wood to find out how SSTL aims to capitalise on the bourgeoning demand, and what else could be in store for the industry.
UK-based SSTL has been building small satellites for the last 30 years – nearly six of those under the ownership of what is now Airbus Defence and Space. Investors have been flocking to the market in recent years amid technological advances and a global sea change in the commercial space industry. SatelliteFinance speaks to CEO Patrick Wood to find out how SSTL aims to capitalise on the bourgeoning demand, and what else could be in store for the industry.
Jason Rainbow: SSTL has been delivering small satellites for 30 years. How has the market changed during this time?
Patrick Wood: When we first started building Earth observation small satellites it was very much about working with developing nations with no current space capability, but with a real desire to have a flag in space. They’d want something they owned and operated, and also had ambitions to create a space agency.
The University of Surrey, which we were spun out of, had built up a great reputation over the years for helping people with various courses to understand this emerging space industry. It was therefore a perfect opportunity to bring together the capability to academically teach people whilst they worked on a project with SSTL – gaining knowledge and qualifications that they could use when they go back to their home country.
That was a great model in those early pioneering days. Today we have six space agencies around the world where the person that heads them was trained in Surrey on one of these kinds of missions. Nigeria is a classic example. And once a nation has a space asset, they want to utilise it financially and get value out of it, for agriculture, disaster and deforestation monitoring, etc. The country then gains a desire for higher resolution, more sophisticated spacecraft.
So, we’ve worked with customers on multiple occasions to build increasingly complex spacecraft over these 30 years. If you look at the rate of change it’s one of those classic exponential curves, where now we have venture capital organisations and new space startup companies entering the market. Of course they have the same ambition, but these days they want to leap in with a larger and more capable initial constellation. What we’re seeing is less of the traditional slow, developing capability and more of a quick start with a series of investments. Obviously with that comes a need for a rapid return on those investments. They’re looking for fast time to market, low cost and capable spacecraft. This fits exactly with where we’ve matured in our own capability, where we also have a more automated manufacturing process that enables us to build satellites in larger quantities.
We’re currently working on our sixth constellation that we’ve built for various people. Historically we may have built one-offs for countries or customers. This change in technical architecture is driven very much by the ability to raise capital and realise a more rapid return, and also the fact that it’s no longer a country ambition but a business that needs to get space-based data to enable it to make a profit and grow themselves.
JR: So in a very broad sense, there’s this shift from government customers to the business community, and also from a single satellite project to large scale constellations that also need to be renewed more frequently?
PW: Yes I think that’s the market that has evolved and people realise that with LEO satellites there is that replacement market. My background is 20 years in large GEO telecommunications satellites and ESA missions, so I’m very familiar with the typical 15 to 20 year recycled time. In the LEO market there’s around a seven to 10 year refresh rate, especially if we’re now dealing with companies that have created a revenue stream with their downstream applications and need continuity for them. I think we will see more of that in the foreseeable future, where people are now starting to look at the replenishment of LEO optical satellite constellations.
JR: How big do you see this small satellite market getting, and where will demand come from – geographically and by market?
PW: Geographically, we’re obviously seeing a large percentage of it coming from the US and Canada, but we’re also seeing it in Asia. There’s a very entrepreneurial spirit in areas like Singapore. We’re also seeing governments in Asia wanting more rapid revisit times, so even they are looking at constellation type systems, as long as the price point is correct.
In terms of the overall market, it’s wider than just what SSTL has access to, but we’ve grown to where we are today on just over £100m (US$150m) in turnover and, although it varies quite considerably, we’re typically building two or three very high resolution missions, a couple of medium resolution ones, and maybe one or two of the very low resolution disaster monitoring type of satellites.
These days we’re also seeing much more diversity. Whereas SSTL may have historically been seen as dominant in Earth observation, we are now working on GEO and LEO telecommunications, navigation in predominately MEO orbits, radar, and of course our more traditional optical missions. And even on top of that, orbital maintenance is becoming a topic with missions for the EU on debris removal, and there are also opportunities in space tug type of applications. It’s not only a changing customer base, and more new starters with venture capitalists and financiers, we’re also seeing much more diversity in the products that are being required.
JR: The increasing availability of cheap commercial off the shelf products (COTS) is helping to drive the burgeoning small satellite market, and a growing number of new ventures are building their systems in-house. Is this a threat for SSTL?
PW: No, we see a lot of marketing hype about COTS hardware, and there’s a lot of new startups in the space world that will say they’re building spacecraft from COTS because they don’t need to buy the high reliability components. Obviously we are also customers for these components but our story comes with a different heritage. Over the 30 years that we’ve been doing this we have identified a number of commercial components that work and those that don’t, because we’ve analysed or tested them. We have engineers that have been through this heritage of how to select commercial parts, and that has been very successful.
We’re very conservative about the way we select COTS parts, whereas when I hear some of the other presentations it sounds like they get a standard electronics catalogue and just pick items off it. You have to understand the internal structure of a component and the susceptibility of it. These are the things in the space world that you just can’t get around.
I think one of the challenges that the smallsat business has is this reliability issue, particularly with cubesats where 60% of them fail post launch. You have to start digging in and analyse what drives that, and often what is behind it is poor component selection, or not understanding the environment that you’re operating these components in. This is our differentiator in the marketplace.
JR: What differentiates you from the larger players that are moving from their traditional GEO telecoms satellites into the smallsat market? Companies such as SSL, which is now helping EO venture Skybox Imaging build its constellation?
PW: There are a lot of the larger traditional companies that are entering the market and are looking to use some of their production capability for it. Some of them will succeed I’m sure and we welcome competition. We’ve actually helped create some competitors over the years because of our training modules and our capability to pass on knowledge.
But whether some of these companies with these ambitions can actually deliver is a big challenge for them, and whether they can translate their large system and very capable design teams and complex manufacturing capability into very rapid, simplified systems.
That’s where we differentiate from these players, because it’s very difficult with their much larger cost overhead structures and facilities to build small satellites in an economic and viable model.
JR: How are you dealing with the other main issues that the small satellite industry faces – the regulatory time bombs that could follow this explosion in the number of constellations and also the potential for debris?
PW: These are two valuable topics that we spend a lot of time working on with organisations such as the UK Space Agency, which is incredibly keen to lead the way in regulatory compliance. If no one does it then we’ll just continue with the proliferation of missions going to greater than 600km orbits which will take decades to decay, and we’ll suffer the consequences downstream. As a satellite manufacturer we have to recognise that regulatory compliance is an absolutely fundamental part of our business and it starts on day zero of a project when we start having that dialog with regulators.
JR: Do you have or need access to export credit agency financing for your projects?
PW: We are working on a project at this moment which will use UK export financing, so absolutely. As a satellite manufacturer we export 95-98% of our products and we’ve become experienced in the regulatory side of matters and the need to understand financial models, so export financing is just one of those where we have to be able to work with people in the UK, and recognise the opportunities that it gives in a number of countries.
There are some great opportunities coming up and of course we like to pioneer the way…
JR: How does the relationship with Airbus work? How independent is SSTL from the group?
PW: We are an ‘arms length’ subsidiary of Airbus Defence and Space. That gives us the parent guarantees where necessary commercially on a number of contracts, and enables us to benefit from a larger pension fund. There are great advantages for having such a shareholder in a space industry with the size of risks and programmes that we’re dealing with.
There are also a number of cases where we’ve been able to team up, whereby they have built a high performing payload that we’ve integrated into one of our low cost platforms to offer something unique. Our Eutelsat Quantum product is a perfect example of that. Other times it has enabled us to act as a pure independent company and compete in markets where Airbus may not have the flexibility to offer the product that we can.
JR: Shouldn’t SSTL have had more of a part to play in the Airbus/Oneweb deal?
PW: We’ll have to see just how much we end up working on Oneweb. We can add value in some of the design aspects for low cost satellites and high capability. We are active on Oneweb but it is commercially sensitive to talk about that right now.
JR: Airbus is looking to revolutionise the way satellites are built with this deal, developing a production line system to rapidly churn them out. Could this leak into what you’re doing at SSTL?
PW: We have already focused on automation in the last few years, and that naturally increases the production rate and optimises costs for building multiple satellites. We’re working on payload number 22 for the Galileo navigation system right now, so we have already gained a lot of experience in repeat building payloads, structures and platforms for various customers.
JR: Are there other LEO-based projects that you’re looking at now – what can you say about them?
PW: Absolutely. One of our challenges as a company of 500 people is prioritising our time with some of the business development and sales activities, where people are wanting to do studies on new architectures. Everyone wants to differentiate themselves in the market with their final downstream product offering. Often we spend our time gently educating some of the new startup companies about the complexity and constraints of space, orbits, and how satellite control functions. It’s a very exciting time. We are getting a lot of requests to explore new constellations, technologies or opportunities.
The pace of change is much higher. People are looking for others to come into their consortium to de-risk their programmes and the financial business case. They don’t want people to turn up and say it needs a new piece of kit that takes 6-12 months to develop before work can even start on the project. They want us to take some pre-existing building blocks, understand their cost and schedule constraints, and then suggest a satellite that matches. It may not be exactly what they envisaged when they set out on the project, but they soon understand that using pre-existing building blocks, or an evolution of them, is a manageable level of risk.
JR: Where is the industry heading?
PW: With the rapid demand for near real time data, I think we will continue to see novel architectures. Maybe we’ll see combined sensors where it is not just optical – maybe optical plus telecommunications. I think we will see that continued evolution. It’d be wrong for any of us to say that we will reach a plateau. What happens and what has happened in space is, once technology gets to a certain plateau then we’d have already been looking at the next leap that will take the architectures or scale of integration in a different direction.
Now we’re looking at building constellations of 900 spacecraft. If you go back five or so years then it was impossible to imagine such a large system. When we look five to 10 years into the future, I think the processing and optical communications technology will see many new and exciting architectures. If it’s optical LEO back to GEO, to name just one example, then that will change the shape of what is achievable.
There’s also a lot of excitement around small to medium launchers, as well as heavy launchers. From my point of view, responsive space, the ability to launch missions very rapidly at low cost, will be one of those exciting technology areas which will again change the economics of space and drive us into a different direction and a different price point on constellations.
