Emerging Markets Driving Long-Term Earth Observation Growth
By Adam Keith, director, Space, Euroconsult (www.euroconsult-ec.com), Montreal.
Growth can be seen at each level of the global Earth observation (EO) value chain, from manufacturing, launch and data to services, despite strong budget pressures”particularly in North America and Europe.
The number of EO satellites launched continues to grow. Excluding meteorology missions, 29 nations launched
121 EO satellites for civil government and commercial purposes. From 2012 to 2021, the number of satellites to be launched is set to nearly double to 239, with 13 additional countries participating.
According to Euroconsult's latest research report, Satellite-Based Earth Observation: Market Prospects to 2021, the growth in the number of satellites units launched will vastly increase the data supply to serve a range of applications. Growing global investment and a developing commercial sector will support the increased activity.
EO Remains a Government Priority
EO remains a priority of most government space programs globally to support science and research and
development, develop industry, meet local/regional requirements for data and potentially gain a return on
investment through commercial data sales. Civil government investment in EO applications totaled $6.7 billion in 2011, which represents an all-time high and a substantive 23 percent increase from 2010's previous high.
This increase would seem surprising considering current government budget constraints. However, EO applications remain a priority with environmental monitoring and climate change at the top of political agendas. In addition, in-development and emerging programs continue to invest in, expand and develop new capabilities. EO continues to represent the first area of investment for emerging space programs, offering affordable access to space capabilities, with data used to meet local requirements.
However, current austerity measures are having an effect. Key government EO programs, such as those at NASA and the European Space Agency, face ever-tightening budgets, which may lead to uncertain developments in some programs. In addition, the stabilization and potential reduction of U.S. defense data procurement through the National Geospatial-Intelligence Agency (NGA) has impacted overall growth in the commercial data market and prompted the expected merger of the U.S. EO satellite operators DigitalGlobe and GeoEye. Budget tightening elsewhere also has impacted commercial data sales to other government departments, particularly in Europe, affecting overall sector growth.
Growth Slows in the Commercial Data Market
Growth in the commercial data market was up only 6 percent compared with 2010-2011, largely as a result of stabilization in U.S. defense data procurement and, to a lesser extent, a slowdown in the worldwide economy impacting growth in new markets. This followed five years of strong growth from 2006 to 2010”a compound annual growth rate (CAGR) of 20 percent. Considering NGA's significance as a commercial data customer following the awards of the EnhancedView contracts to the two U.S. private operators DigitalGlobe and GeoEye, further changes to the U.S. defense procurement could lead the sector into negative growth in the short term.
Nonetheless, the market still remains buoyant, with further opportunities emerging to spur growth. Sales to non-U.S. defense organizations continue to grow strongly, reaching $400 million in 2011”a CAGR of 22 percent during the last five years. Because few countries have proprietary high-resolution satellite imaging capabilities, commercial providers have enjoyed growing success in delivering data to defense customers to serve their image intelligence (IMINT) requirements.
With defense being a primary customer and ground resolution a key enabling factor, the strongest demand is
expected for high-resolution, high-accuracy data sets; very high-resolution (sub-metric) optical data accounted for 61 percent of all data sales in 2011. Growth also is expected for lower-resolution systems”to 2.5 meters”with higher swaths offering increased coverage and revisit times from satellite imaging constellations. The synthetic aperture radar (SAR) data market also has grown since the emergence of commercial high-resolution systems in 2007, with defense as the primary user.
Strong Growth in Fast-Developing Regions
In terms of absolute figures, North America remains by far the largest region, representing more than half the overall $1.4 billion data market. But the current financial environment continues to hamper the region's growth, along with the second largest market, Europe, where austerity measures affect public budgets in the region.
However, there are areas outside of these two regions experiencing strong growth. Southeast Asia, Latin America, Russia, and the Commonwealth of Independent States all report CAGRs exceeding 20 percent during the last five years. Growth for EO solutions in these regions is supported by favorable policies to support wider economic development, particularly for engineering and infrastructure applications and natural resources monitoring.
To meet the growing demand from non-core regions, commercial operators are partnering with local companies to support data distribution in respective regions. The EO industry, particularly for civil government end users, remains local; therefore, distribution reseller contracts are essential for meeting local demand. The local companies also provide additional advantages, such as providing access to local clients and having expertise in certain local/regional applications. In this regard, distribution diversification is expected to remain key to meet end users' diverse requirements”through local resellers to meet local/regional civil government requirements; through secure, direct access for defense; or through Web-portal/cloud computing to meet the demand of private clients or even consumers.
This will become apparent, with ever-increasing competition. The number of EO satellites offering commercial data is expected to double (up to 50) through the decade, as private enterprise seeks to tap into the market for commercial data and governments try to gain a return on their initial investments. Meeting end-user requirements for data and services delivery, as well as diversifying distribution and services offerings, will be key to developing business and growing market share in this challenging environment.