Traditional Space and NewSpace – Understanding the Growth Trajectories and their Potential for India’s Space Economy

With the increase in demand for space-based services in the country with a projection of 70 operational satellites needed in the country, the Indian Space Research Organisation (ISRO) is increasing its engagement with the space industry for both the production of satellites and launch vehicles. Industry consortiums are being floated for the production of the Polar Satellite Launch Vehicle (PSLV) and the Indian Regional Navigation Satellite System (INRSS) satellites. This brings along a unique opportunity for the first time in the Indian industry ecosystem to build up systemic capacity to be able to deliver end-to-end space systems for the first time in the country.

This development in the traditional space industry is based on a two-pronged approach. One to transition to a state where the industry can achieve the required volumes of satellites/launch vehicles under ISRO supervision while allowing ISRO to focus completely on novel technology development over a longer horizon period and second being possibly getting a leg up for the Make in India initiative. This is a welcome step in further maturing the capacity of the Indian industry while the industry has both the supervision as well as a customer in ISRO.

The effect of such increased trust in Indian industry by ISRO shall provide further confidence for the industry to invest into infrastructure that can deliver to ISRO’s needs. The satellite AIT industry consortium has already accounted commitments of Rs. 100-150 Crore in investments to set up facilities that can support the operations required. In the current growth trajectory, Indian industry under the supervision will be equipped to deliver rockets and satellites by 2020.

While these developments are encouraging, India is now seeing a growing NewSpace phenomenon. Backed by private investors, Team Indus is the first Indian private company to sign a launch contract with ISRO. Bangalore-based space startup Astrome Technologies intends to launch 150 satellites into space by 2020 providing high-speed affordable internet to remote locations across the world. Astrome’s technology and the use of satellite for internet can provide a significant boost for the government’s aim to connect 2,44,729 Gram Panchayats (GPs) in the country. Currently, the government is pursuing the National Optical Fibre Network (NOFN) plan of connecting the GPs through the optical fibre cable (OFC). According to recent reports OFC in 76,728 GPs and optical fibre in 64,599 GPs have been laid which allows significant room for satellite to contribute to Digital India.

Similarly, NewSpace is also having an effect on the downstream ecosystem. Companies such as SatSure are building analytics engines based on satellite and complimentary sensor data to help decision-making purposes by governments, insurance and re-insurance companies, banks, pesticide and seed companies as well as commodity trading firms. These are exciting developments in the space industry of India. In order to understand the possible growth trajectories for traditional and NewSpace to exploit their full potential in developing a scalable space economy in the country, it is important to understand the key underlying differences between the traditional and NewSpace approaches.

  • Customer Landscape – Traditional space industry approach majorly depends on tax-payer funded requirements within the national demand framework administered by a space agency. This is a process that several countries have pursued in upgrading the capacity in the industry. NewSpace tries to build up B2B and B2C models which can scale both nationally and internationally without heavily leaning towards traditional space industry approaches for the majority of the business to stay afloat.
  • Technology Landscape – NewSpace companies try to use novel approaches such as design using Commercial-Off-The-Shelf (COTS) components while trying to reduce the cost of the overall system while traditional space companies are dictated by legacy space agency based approaches. The idea is also to use the approach of fail-fast and iterate quickly to constantly scale. However, this also increases the risk of failure.
  • Product/Service Development Landscape – Traditional space industry in India has typically been providing services of manufacturing according to the final integrator (ISRO) requirements at Tier-2/Tier-3 levels with the initial technology and knowhow itself has also been mostly borrowed from ISRO. Therefore, the traditional space industry will tend to gain more traction by working towards establishing a larger share in manufacturing/assembly of the systems as required by the customer (ISRO) as demand surges. This is the case with the industry led Assembly, Integration and Testing (AIT) of satellites and launch vehicles. NewSpace companies such as Astrome are developing a completely end-to-end service where the enterprise has complete control on the design, development, fabrication and market delivery of the space system which shall provide the service.
  • Financing Landscape – The traditional space approaches are based on Small and Medium Enterprises (SMEs) that have serviced the space agency with requirements growing systematically to upgrade capacity as the demand grows within the space agency. The scope of investment for such upgradation are based on performance/asset based guarantees with institutional investments limited to banks. NewSpace brings a high-risk, high-return scenario where traditional institutional financing such as banks are not an option rather attracts venture capital.
  • Growth Landscape – Since traditional space industry approaches mostly depends on the space agency/national requirements mandated funds as a primary customer the ability to scale business limits to large orders moved to industry. NewSpace due to its diversified business model approach with possible scaling to international markets brings a high-growth potential. It should be duly noted that there are a large number of failures associated with the startup nature of NewSpace as well.
  • Exit Landscape – Traditional space industry approach has exit scenarios are mostly via via Mergers & Acquisitions (M&As) due to a spike in increased demand within the space agency/national requirements with interest from larger corporations to take over such opportunities. NewSpace brings along the possibility of Mergers & Acquisitions (M&As) in consolidation and positive liquidation events for investors and entrepreneurs. A mature ecosystem is necessary for such exit scenarios.

From an Indian context, the argument is not Traditional vs NewSpace for India rather than enabling the development of the space economy of the country by systematically enabling both these approaches to increase their capacity to deliver systems and services. Both these approaches have the potential to scale the capacity in the Indian industry which is still pre-mature in the ability to design, development, deliver a complete end-to-end space system or a space-based service. NewSpace holds the potential of creating a multiplier effect on the space economy unlike the circulation of tax money that normally happens within traditional space industry approaches. Policy makers in the country need to support NewSpace in India to further catalyse the multiplier effect while steps are being taken to upgrade the capacity of the traditional space industry in the country.