NSR’s Top 10 Predictions for 2023
As the space industry embarks on perhaps its most transformational year yet, we at NSR thought it would be a great time to make bold predictions on the year ahead. The predictions provided herein range across the satellite & space market, but one trend is clear: never before has such change been thrust upon the global space industry. We hope you enjoy our prognostications, and as always, we look forward to continuing our dialog with you in 2023 and beyond.
Best,
Christopher Baugh
Head of NSR and Partner
Analysys Mason
Space Financial Outlook in 2023
Joseph Ibeh- NSR Analyst
The economic outlook for 2023 looks challenging, with interest rate hikes, inflation, and a potential recession. Space will be somewhat resilient compared to the broader securities sectors, given stable cash flows from long-term contracts. However, startups with negative cash flows and revenue expectations farther into the future will be disproportionately affected. We expect more delisting of non-revenue generating de-SPACed companies. Startups with enough run-rate will wither the storm. Highly leveraged established companies with stable cash flows will attract private equity buyouts, while deep-pocketed legacy primes will make strategic acquisitions for complementary assets.
Consolidation of the satcom value chain is a trend we expect will continue from 2022. 2023 will witness an additional dimension to the trend, with operators looking to build application-level differentiation in niche markets. Intelsat and SES are positioned to make further strategic bets with cash from accelerated C-band clearing proceeds.
A Banner Year for Space Tourism & Travel
Dallas Kasaboski- NSR Principal Analyst
2023 will be the ‘make or break’ year for Virgin Galactic and Boeing with Starliner to catch up to Blue Origin, which had to pause due to a glitch on New Sheperd. SpaceX is expected to leap forward by sending space tourists around the Moon for the first time in history. And on the international front, China’s space station is opening its hatch for business to commercial customers, so we are likely to hear more as a result about progress of NASA-funded commercial space stations efforts.
Direct Satellite-to-Device Becoming Real
Lluc Palerm- NSR Principal Analyst
2022 was big for Direct Satellite-to-Device with the inclusion of Satellite and NTN in 3GPP Release 17, initial in-orbit testing by Lynk and AST, and the rush of announcements by the likes of Apple/Globalstar and SpaceX/T-Mobile. But 2023 will be even bigger as this market takes off to become the largest satellite opportunity by the end of the decade. Next year will see Apple/Globalstar expanding services globally, early monetization of Lynk and AST constellations and more players joining the race, both established like Iridium (highly anticipated deal upcoming) and startups like OmniSpace. More importantly, 2023 will see initial mainstream chipsets designed for general public smartphones with satellite capabilities. Once Qualcomm and Mediatek are in the mix, the satellite ecosystem will change forever, unlocking a market worth tens of USD billions per year.
At Least One Smallsat IoT Constellation to “Pull a Hiber”
Alan Crisp- NSR Senior Analyst
In 2023, at least one player will abandon plans to launch dedicated satellites for IoT services. This could take the form of an official announcement, or the company could simply go silent. Instead of declaring bankruptcy or exiting the market, the IoT company will form a strategic partnership with an existing operator, perhaps Inmarsat’s ELERA network. With extreme competition in the IoT space, and the launch of new direct-to-handset services, including that from Apple/Globalstar, it will be increasingly difficult to be able to recoup revenues for systems that have huge CAPEX requirements for new infrastructure. Further, expect smallsat IoT companies to introduce new turnkey applications and data analytics services/partnerships to boost revenues as IoT connectivity costs continue to be a “race to the bottom.”
Cyber Attack on Satellites: not Sci-Fi
Charlotte VanCamp – NSR Analyst
The industry should expect more cyber-attacks on space and ground segment with software-defined satellites and constellations such as Starlink, who are the more likely to be targeted, given their high-profile role in the war in Ukraine. Indeed, interventions/services in conflict regions will put satellite operators at higher risk of such attacks from both government-led and activist hackers.
Monetize Mbps in Mobility Markets
Brad Grady – NSR Research Director
Selling ‘pure Mbps’ is a dying business in satcom mobility markets, as satellite operators buying or building services-focused business units is the norm. We expect more verticalization between infrastructure owners and service providers/integrators in 2023. Next-up, monetization of the network management layer via SD-WANs, 5G Private Networks, and other terrestrial management standardization is in play. Stitching together LEO constellations alongside other connectivity paths on planes, trains, and ships will help maintain margins for service providers (and their new satellite operator owners.) In all, look for more ‘bit monetization’ strategies in 2023 as satellite operators and service providers look to push into the application layer – including monetization of network management services, cybersecurity, and business operations apps.
What’s Your Starship Strategy?
Dallas Kasaboski- NSR Principal Analyst
Arianespace and ESA will finally launch Ariane-6 in late 2023 (in time for the holidays), and before that, ABL (RS1), Relativity Space (Terran-1), ULA (Vulcan) and Blue Origin (New Glenn) as well could have their maiden rocket flight. Amidst this flurry of new vehicles, another one is to be counted as more important than other: SpaceX Starship. Given its size, it will have a direct impact on the strategy of the other launch market players who will have to ask themselves: should we build our own large-scale rocket?
Finding the “Next SATCOM Market” on the Moon
Hannah Currivan- NSR Research Analyst
Low Lunar Orbit is the next giant leap for service providers, and the first to offer around the clock connectivity to the Lunar surface will obtain lucrative government and commercial contracts. This is most likely to come up in discussions in 2023 following the success of Artemis 1, with interest already appearing in Q3 of 2022 with a study from Russia on a design and study of satellite constellations in low lunar orbits, and Europe planning satellite navigation and connectivity constellation around the Moon by 2030. This could be the ultimate play against an increasingly competitive satellite operator marketplace.
Satellite Manufacturing: Services, Software and Struggles
Hussain Bokhari, NSR Senior Analyst
The trend towards hosted payloads and satellite-as-a-service as well as software-defined satellites will give more diversified work for satellite manufacturers, many who also build satellites for their own constellation (Spire, Satellogic) and are branching out. This is a welcome transition to leverage expertise in-house and in the face of funding challenges, could help start-ups. But the same space start-ups will face increasing difficulty in obtaining financing in an inflationary market, leading to consolidation. The satellite value chain will also have more struggles, this time due to the lack of…talent (and not components) as a highlight competitive human resources market will create a bottleneck and could mean more manufacture and launch delays. Besides the possibility that SDA’s Tranche 2 contract award could go to SpaceX, whose pivot toward government via its Starshield service did not go unnoticed, manufacturing facilities abound, and there will not be enough work for all of them.
Year of the “Gov/Mil Upgrade” Ahead
Sarah Halpin – NSR Research Analyst
Lessons learnt in Ukraine will see tech updates across nation states, and cyber-attacks will be increasingly prominent. Expect older Gov/Mil satcom terminals to get an upgrade in both ability and security. Manned- Unmanned Interoperability requirements will also expand (driven by programs such as the U.S. B-21 Raider). These new operational paradigms are driving architecture designs where multidimensional networks spanning across bands, orbits, frequencies, and owners become the norm. In all, more nations will develop national space strategies, which include a focus on ‘space as a warfighting domain’.