Geopolitics Drive Shifts in EO Business as Companies Hone Focus on Defense Market

Earth Observation (EO) companies are shifting their focus from data sales to satellite sales to cater to the changing needs of the global defense market, which is opening new avenues for growth, unforeseen only a few years ago.

When Bengaluru technologist Awais Ahmed founded Pixxel in 2019, he had two goals — to build the best hyperspectral satellite constellation in the world and to create a business selling data to users to help monitor the world’s ecosystems challenged by climate change. Within five short years, the company’s strategy turned upside down.

In 2023, India’s government approached Pixxel with a request to purchase multiple satellites for the Indian Air Force, unlocking an unexpected revenue stream for the company as a manufacturer of satellites for other clients. By the time Pixxel began launching its Firefly EO constellation, defense customers were lining up for their services in numbers the company had not expected.

“When we started in 2019, the strategy was rather straightforward,” Ahmed tells Via Satellite. “Hyperspectral is a new data set, so it wasn’t difficult to develop a technological advantage in the sector. Although we originally started with climate and sustainability in mind, over time, defense and national security have become equally significant.”

Pixxel’s hyperspectral payloads take images of Earth in 150 separate wavelengths of light with a resolution of up to five meters. By capturing such a detailed fingerprint of every single pixel, hyperspectral images reveal much more information about the chemical composition and physical properties of the imaged scenes than either visible-light imaging or radar.

Although Pixxel initially intended its payloads to track vegetation health and spot forest fires, they found the technology equally good at detecting camouflaged assets, says Ahmed.

In August, Pixxel was selected to lead a consortium of companies to deliver a national EO constellation for India, consisting of 12 satellites equipped with a variety of sensors.

Pixxel’s evolution is part of a trend that has been reshaping the satellite EO sector over the past few years in response to rising geopolitical tensions around the world. Where five years ago companies were building business models around proprietary constellations supplying data for sale to any paying customer worldwide, they are now rethinking their strategies to best cater to the needs of nervous nations desiring sovereign assets and eager to bring the benefit of local satellite production to their home turf.

The Race for Sovereignty

Aravind Ravichandran, the founder and CEO of EO consultancy TerraWatch, traces the beginning of this trend to the invasion of Ukraine and the ensuing dispute over Ukraine’s and Europe’s access to American satellite EO data. The temporary pause of intelligence data sharing imposed on Ukraine by the Trump administration in March drove the point home for many nations that reliance on data purchases from a handful of mostly American suppliers may not be a sustainable bet.

“Ukraine has been a huge wake-up call,” Ravichandran tells Via Satellite. “A lot of countries are now looking into border surveillance but also satellite capacity to serve their public in terms of disasters. They want sovereignty and data independence to reduce their reliance on whoever they are buying data from.”

It’s not just the conflict in Ukraine. Emboldened by Putin’s moves, China has intensified its activities in the South China Sea, raising concerns about its desires to annex Taiwan. The Middle East has been rocked by the war in Gaza and the threat of its spillover into adjacent states.

For EO companies that have built up their business and satellite manufacturing capacities over the past decade, the past year has brought in a swell of new government customers. Over the past six months, Finland-headquartered Iceye has sold over 15 satellites to eight different countries including Poland, Portugal, the Netherlands, Greece, and Japan.

Similarly, the U.S.-headquartered EO pioneer Planet Labs signed a $230 million deal in February to build a constellation of Earth observing satellites for Japanese satellite operator JSAT. In addition to that, Planet clinched a $280 million agreement to supply images to the government of Germany.

U.S.-based synthetic aperture radar (SAR) constellation operator Umbra, too, is expanding its business from pure data provisions to technology sales. Last year the company debuted a new business line to provide entire satellite systems for customers and recently announced a further expansion to manufacture satellite components for customers.

Jason Mallare, vice president and general manager of Umbra’s Mission Solutions business, tells Via Satellite that one of the biggest changes in the market is nations waking up to the need for sovereignty, which drove Umbra to start the missions business.

“Defense and intel is arguably the one of the most important things a country does. Security is absolutely paramount and with that comes a sense of a need for ownership, for sovereign agency over that capability,” Mallare says.

A Burgeoning Market

TerraWatch’s data suggests that some 44 countries around the world have plans to launch sovereign Earth Observing constellations in the coming years. And many more such deals are expected to come.

“The current geopolitical situation will continue to call for increases in defense budgets,” Pacome Revillon, CEO of space consultancy firm Novaspace, tells Via Satellite. “We can expect to see more nations confirming procurement decisions and increasing their defense spending in the coming years in different parts of the world including Europe, the Middle East, and Asia.”

In its recent Earth Observations Satellite Systems report, published in June, Novaspace estimates the defense spending boom could bring a $182.6 billion windfall across the global EO satellite manufacturing and services sector within the next few years.

Companies with developed manufacturing lines are best positioned to make the most of those opportunities. But Revillon thinks that the opportunities may fuel the growth of a few not yet fully established players.

“There may be room for three or four players of a certain scale,” Revillon says. “The ones who win contracts within the next year or so will have a good chance. After that it will probably become more difficult to build a new and successful business.”

Build Them at Home

A new consideration may play a role in who will get the chance to grow. For many countries, just owning and operating strategic satellites is no longer enough. Nations are keen to develop or obtain the know-how and to foster their own industries. That could be good news for local companies that can benefit from investment boosts from local governments eager to develop “national champions,” Revillon says.

In Eastern Europe, close to Ukraine’s borders, new players have already emerged ready to contribute to the fight against Russia and ensure the region has its own cards in its hands. Kongsberg NanoAvionics, based in the post-soviet Lithuania, is developing a demonstrator SAR satellite in cooperation with Poland’s Eycore. The Warsaw-based Eycore has also been selected as a supplier of SAR systems for Poland’s planned National Earth Observation Program Camila. The three satellites of the constellation, part of a $59 million deal with the government of Poland, will be built in cooperation with Polish satellite integrator Creotech Instruments and are expected to launch in 2027.

Iceye’s recent flurry of satellite manufacturing deals involves provisions for local production, frequently in cooperation with local players. The SAR technology innovator, which currently flies a constellation of 44 satellites, has been building most of its spacecraft in Espoo, near the Finnish capital of Helsinki. In 2021, the firm opened a manufacturing base in Irvine, California, to be able to compete for U.S. government contracts. Over the past few months, the company announced a partnership with German arms manufacturer Rheinmetall to set up a factory near Dusseldorf. Another factory will open in Valencia, Spain, and further sites are in the works in Greece, Portugal, and Japan.

“The challenge is that the industry is starting to become very hyper-localized,” says Pixxel’s CEO Ahmed. “Previously, there used to be less than five companies globally, mainly set up in the U.S. or Europe who would sell globally. Now they need to get into joint ventures or partnerships with local companies to make sure these things are happening locally.”

Pixxel has set up an office in the U.S. to be able to compete for U.S.-government contracts and is exploring partnerships with Asian and Middle Eastern partners to establish a footprint in those regions as well.

Drones and AI

Not everyone, however, is changing their approach to EO. Colorado-based Vantor, which recently rebranded from Maxar Intelligence, which has been a key supplier of intelligence data to Ukraine since the early days of the Russian invasion, has seen “a significant increase” in data-supply partnerships with European countries since the March pause of U.S. space intelligence sharing with Ukraine, Vantor’s Chief Product Officer Peter Wilczynski tells Via Satellite.

Vantor’s offering combines images from its fleet of six new WorldView Legion satellites with SAR data and lower-res imagery by other providers, accessible through an AI-powered platform.

“A lot of countries didn’t even realize that they were relying on U.S. infrastructure to get space-based intelligence,” Wilczynski says. “Once they realized that, that drove the desire to have sovereign access to these capabilities.”

Vantor and other commercial U.S. EO providers supply data to the National Reconnaissance Office (NRO), which then makes some data accessible to its allies. Wilczynski says early conversations with customers suggested a preference for secure data-sharing pathways rather than purchases of Legion-class satellites as sovereign assets.

“It’s actually really hard for individual sovereign countries to launch systems at the level of exquisite capacity that we provide,” he says. “It’s much more common for them to launch cheaper Earth Observation systems, cheaper SAR systems, and then use those as complements to the more exquisite data as those collected by our satellites.”

Vantor, Wilczynski adds, is instead focusing on developing its strength as an integrator of data to enable users of all kinds to extract the greatest value from all available assets including the sovereign ones.

“We spend a lot of time with customers talking about the ground systems they need once they have these satellites in orbit to combine data from multiple different sensors and provide a unified analytical view,” Wilczynski says. “Another problem that’s been top of mind for us is the constellation management aspect. When you’re launching a sovereign constellation and you’re putting your own assets in orbit, you are going to want to schedule and task and use that constellation in conjunction with existing commercial assets so that you are not getting overwhelmed.”

To address those needs, Vantor recently launched a new AI-driven analytics platform called Sentry, which enables automated tasking across multiple constellations and real-time fusion of data for strategic monitoring around the world. On top of that, the company’s Raptor platform enables drone operators to tap into the satellite-based terrain models to enhance drone navigation where GPS is denied, directly addressing defense user needs in conflict areas.

“We’re currently working on feeding drone data back into the 3D living globe representation that we have that’s being fed from all of the sensors,” says Wilczynski. “We’re getting a lot of really good inbound interest in those capabilities, coupled together.”

An Unlimited Appetite for Data

Revillon agrees that the synergy between sovereign assets and data provided by commercial operators best supports the need for real-time monitoring, which has emerged from the geopolitical conflicts over the past three years.

“Very few nations will be able to build up such big constellations covering all types of sensors to completely replace the need for data from commercial constellation operators,” Revillon says. “Appetite for data is unlimited right now, and even though we may expect some stagnation in the data sales business, most nations will need to augment their data from other sources.”

Many of the companies exploring the new manufacturing business pathways are already sweetening the deals by adding access to data from their privately run constellations as part of the package with the purchases of sovereign satellites.

“For countries this is a good deal because for the price of the satellites, they get both — independent assets and access to the entire constellation — which is great because you get more capacity over your region than what your own three satellites or so can provide,” says Ravichandran.

Despite the current frenzy of activity, Revillon says that focus on defense is nothing new for the Earth Observation industry. Popular taglines about climate change monitoring notwithstanding, government defense and intelligence players have been responsible for around 80 percent of the sector’s revenue for the last 20 years, he says.

“It’s been much more difficult to break into many of the commercial segments and growth in these verticals has not been on the level that some of the companies may have expected,” Revillon says. “The current situation may increase the dependence on defense but, in fact, a large number of players have been dependent on defense customers for a long time anyway.” VS