Despite ongoing supply chain challenges, inflation concerns, and the fact that Starlink and other players now operate well beyond the 500-kg threshold traditionally defining smallsats, the smallsat market remains dynamic. Growth continues across all key metrics, thanks to increasing government investments and a steady influx of new commercial entrants. Defense agencies worldwide in the wake of the U.S. Space Development Agency, alongside growing demand from Asia, are fueling a robust pipeline of smallsat hardware and data services.
Market Outlook: 2024-2033
Around 14,000 smallsats (below 500 kg) are projected to be launched between 2024-2033, averaging 1,400 units per year. This equates to a daily launch mass of about half a ton over the next decade. However, the high-volume smallsat market continues to present several challenges, including limited market addressability for suppliers, challenging profitability, oversupply risks, and the dominance of commercial activities by a handful of established players, which is accelerating consolidation and heightening competition.
Continued Growth Across All Metrics
Excluding Starlink, Novaspace forecasts continued growth across all metrics (numbers, mass and market value). Two Chinese government-backed mega-constellations alone – GuoWang (China SatNet) and Qianfan/G60 (SpaceSAIL) – are projected to represent nearly one-third of all smallsats to be launched and about half of the smallsat launch mass over the coming decade. Yet these mega-constellations will only represent less than 10% of market value due to the large cost efficiencies of Chinese prime integrators combined with the economies of scale inherent to mega-constellations, leaving significant opportunities and market value for other market participants to capture. Opportunities abound at the subsystem level, particularly for components such as thrusters, solar cells, antennas, laser terminals, as well as a wide variety of electronics and on-board computers, among many others.
Challenges: Profitability, Oversupply, and Market Consolidation
Novaspace’s 10th edition of the ‘Prospects for the Small Satellite Market’ market intelligence report projects that the smallsat industry will accumulate around $113.3 billion in market value over the next decade. This growth will be driven by the replenishment cycles of constellations worldwide, as well as by more complex and costly single satellite missions for government users. Yet, the smallsat market remains largely driven by constellations – a very opportunistic yet highly captive and challenging market to address, with many new constellations expected to face scope reductions and consolidation as inflation and competition continues to impact their likelihood of materializing.
Strategic Impacts of Geopolitical Shifts
Despite market hurdles, smallsats still represent a significant capability-building opportunity for new entrants in the space sector. Recent geopolitical events and conflicts have further highlighted the strategic importance and value of commercial satcom and Earth observation small satellite constellations, showcasing their value proposition in active combat zones, with an eye now being turned to the value proposition of D2D and LEO PNT constellations.
In addition, the newly-elected Trump administration is reshuffling geopolitics and macro-economy, a large enough incentive or risk for some U.S. allies —and in some cases, rivals— to invest in sovereign space capabilities. Europe’s IRIS² initiative and emerging constellation programs in Japan, Korea and other regions illustrate this sovereignty-focused momentum.
PROSPECTS FOR THE SMALL SATELLITE MARKET OVER THE NEXT DECADE
Vertical Integration and Regional Capability Building
Regional and national demand retention rates as well as vertical integration are expected to only increase in the future, as more emerging countries and operators seek to procure their own smallsat systems and develop their manufacturing or launch capabilities, thereby reducing export possibilities open to established suppliers. This trend will impose constraints on the addressable markets of many commercial smallsat players, and force diversification in services portfolios. Emerging launch operators explore diversification into hypersonics for defense customers or subsystems and satellite manufacturing, enticed by higher profit margins compared to the launch industry. Some launch providers are even expanding into satellite operations and downstream services to broaden their business horizons, with Rocket Lab now considering to build, launch and operate its own constellation, following the SpaceX/Starlink pattern or vertical integration.
Government Contracts as Market Anchors
Long-term government agency contracts will remain a pivotal driver of smallsat market growth. Examples include ESA’s commercial constellation additions to its Copernicus program, the U.S National Reconnaissance Office’s 10-year contracts with commercial EO operators, or the U.S SDA Layers and Tranches which provide reassurance and resilience to suppliers and investors who value governments as anchor customers. This trend is particularly pronounced in Asian countries, where governments are driving numerous national initiatives, such as GuoWang, Qianfan and Chutian in China, but also in Japan, Korea and India, among others. This is also true of other regions such as Europe, as well as the Middle East or Africa where governments increasingly drive space budgets and investments in small satellites, which they see as capability builders and as a foothold and stepping stone into the broader space sector.
Conclusion
Smallsat market growth continues – with or without Starlink – and has proven resilient despite the COVID pandemic, the war in Ukraine and challenges on the supply side, notably in terms of competition, sustainability and profitability. The continued availability of capital remains a key enabler despite a clear slowdown in recent years.
There is a strong dynamism for Earth observation and Security projects driven by both new entrants and new constellation projects from established players. This is supported by advances in data downlink and processing, large defense investments, and notably sensor diversity – with operators complementing optical with SAR, Infrared, Hyperspectral, RF Monitoring, SSA, and more.
While a lot of uncertainty remains – most notably with regards to profitability – and as mega-constellations continue to be a sensitive topic in the industry due to their disruptive potential, some players are moving out of the fiction department. Full deployment is expected within the coming years for the most advanced projects, driven by deadlines set by licensing authorities. Yet OneWeb’s Chapter 11 and 2021 revival remain an important reminder of the massive resource requirements for such projects as well as a testament to the geopolitics in play.
