Northern Sky Research

EO SAR Markets: Fast Out of the Gate

Nov 21st, 2016 by Dallas Kasaboski   More from this Analyst | Profile

Synthetic Aperture Radar (SAR) has always been a small component of the Earth Observation (EO) business. SAR satellites are typically more expensive to develop, and despite distinct advantages, the images are more complex, raising processing costs. However, with increasing focus on satellite constellations, and the rise of Big Data analytics, SAR-based opportunities in the next decade will grow, as global SAR revenues are expected to increase at twice the rate of optical.

NSR’s Satellite-Based Earth Observation, 8th Edition report projects cumulative global revenues from SAR imagery to be $6.2 billion by 2025. Owing to their mature markets, as well as an influx of SAR-based products, 85% of the EO business will be concentrated in North America, Europe, and Asia. These regions have space programs, an aware and mature customer base, and commercial industries supportive of EO products and services. The recent news that Capella Space secured a launch spot for the first U.S. commercial SAR satellite will further the development of this market, which is now entering the era of higher resolution images.

Indeed, very-high resolution (VHR, < 0.5 m) will be the fastest-growing market. Key anchor-tenant customers will be those in the Defense & Intelligence and Public Authorities verticals, especially. These customers have the demand and capital for priority access, premium imagery and, as new VHR satellites come online, some of these customers will move away from high-resolution products.

High-resolution (HR, 0.5 – 1 m) SAR products will be the largest market. Additionally, initiatives in North America, India, and Singapore demonstrate that commercial data is becoming more accepted by government customers; these initiatives will provide opportunities for VHR and HR players, and NSR forecasts Defense & Intelligence and Public Authorities will represent nearly 70% of HR SAR data revenues by 2025.

HR imagery can also detect most human activity. As such, applications are being developed for all verticals, taking advantage of the advantages of SAR imagery. From counting cars, to monitoring areas of interest, companies such as Ursa Space and e-Geos are extracting statistics from SAR imagery to better inform finance firms, industrial developers, and public agencies.

However, it is not all good news for SAR-based business. Medium-resolution (1-5m) sales are expected to decline after 2017, due to oversupply and availability of spectral diversity at high-spatial resolution. Low-resolution providers will find that growing archives, and free datasets, will force business models of bulk-purchasing and revenue-sharing. NSR forecasts global LR SAR revenues will decrease at a rate of 19.3%, representing very little of the SAR-based market.

Increased supply is sure to drive down imagery prices. NSR expects the increasing number of players in this space to promote industry consolidation among satellite operators, as the margins of smaller players will be severely affected. This increased supply may also bottleneck the market, leading to favoritism between imagery providers and specific, established analysis firms. Such favoritism may pose a formidable barrier to late entry to the analytics market.

The Bottom Line

The Earth Observation business is expanding fast, and SAR-based revenues are the fastest growing component of the market.

NSR expects SAR-based business to develop via a positive feedback loop, as seen above; increasing supply drives down imagery prices, lower prices will lower the barrier to the analysis market, more experience with EO-analytics improves the reach of SAR-based products, and more demand justifies more supply and more EO satellites. As much as the odds were slanted against this market years ago, there are now more reasons to bet it out of the gate first in the coming years.