Satellite industry trends to watch in 2024

The satellite industry was abuzz with direct-to-device (D2D) communications during 2023, with the convergence of terrestrial (telcos) and non-terrestrial (satellite) networks heralding a new era for ubiquitous network coverage. Commercial launches in 2024/5 mean D2D will stay on center stage, but it won’t be the only force reshaping the satellite industry.

Over the last year several major telcos across different continents stitched D2D partnerships with satellite operators, including AT&T (OneWeb and AST SpaceMobile), T-Mobile (SpaceX’s Starlink), and Verizon (Amazon’s Kuiper) in the US; India’s Bharti Airtel (OneWeb) and Japan’s KDDI (Starlink) in Asia; and Vodafone (AST SpaceMobile and Amazon’s Kuiper) and Orange (OneWeb) in Europe, to name but a few. The collaborations encompass connectivity to underserved communities, offerings for enterprises, and the prospect of expanding roaming coverage for current mobile customers.

With many of these partnerships nearing the successful completion of pilot testing phase, D2D promises to be a game changer. At the same time, however, many players in the satellite industry are having to address issues of scale and financing, alongside technology advances, all of which points to a dynamic year in the sector.

Below are key trends and predictions to watch out for in the satellite industry in 2024/2025:

Satellite operators will seek revenue diversification and leverage partnerships to tackle tough funding climate

Prolonged macroeconomic uncertainty and financing challenges took a toll on private equity in 2023, impacting the full-year investments in the space economy. According to Space Capital’s report, the space economy witnessed private equity investments of $17.9 billion in 2023, a year-on-year decline of 25% compared to 2022. For an industry which is highly capital-intensive, with satellite constellation rollouts often costing billions of USD, lack of adequate funding will force satellite operators to explore new revenue pockets beyond broadband internet and D2D messaging service, for long-term sustainability. Additionally, seeking backing from existing partnerships will be crucial – AST SpaceMobile secured $155 million investment from telco partners AT&T and Vodafone, showcasing collaborative funding strategies.

More satellite operators will seek M&A to rival SpaceX’s Starlink

Starlink continues to grow from strength to strength, reportedly achieving ‘breakeven cash flow’ recently. It also managed to swiftly surpass 2 million active subscribers worldwide in September 2023 (2.3 million as of December 2023), comfortably toppling the satellite veteran Hughes Network Systems which had 1.06 million customers by the end of same period. Not only will replicating both these achievements be daunting for rivals, but many of them will likely risk elimination and succumb to bankruptcy. To counter Starlink’s supremacy and carve out their own niches, industry players of all sizes will contemplate M&A opportunities as witnessed in the past year with Viasat’s acquisition of Inmarsat and the Eutelsat-OneWeb merger.

Satellite networks will evolve further with integration of 5G and cloud

As noted above, tough market conditions and intense competition will compel satellite operators to explore additional market segments; 5G and cloud markets present potential opportunities. The convergence of 5G technology with satellite networks is poised to transform global connectivity, with the aim of providing 5G connectivity from space. For instance, last year AST SpaceMobile established 5G voice and data connection from a standard unmodified smartphone directly to a LEO satellite. SpaceX’s Starlink also plans to introduce voice and data capabilities for existing LTE phones in 2025. In both cases, the operators deployed satellites with higher power and innovative array antennas to enable direct satellite communication with existing smartphones. Additionally, satellite operators will look to provide cloud services for their enterprise customers in zones with limited or no coverage. Amazon’s Project Kuiper in particular, has set its sights in this segment, to allow users to seamlessly transmit data to the AWS cloud via satellite and liberate them from relying on ground networks. Starlink has a similar arrangement with Microsoft’s Azure.

Role of chip vendors will rise significantly in the satellite industry value chain

Suppliers of non-terrestrial networks (NTN) chips and modems are growing in prominence as smartphone manufacturers increasingly integrate satellite connectivity capability in devices. There are two modes by which smartphones can connect to satellites: utilizing spectrum for satellite, or for smartphones. The former involves using a phone's built-in component for processing satellite signals. The latter requires upgrading satellite hardware to transmit communication protocols and signal frequencies that can be processed by phones. Implementing the latter faces spectrum interference and regulation challenges, slowing progress in modifying spectrum allocation. Conversely, adding satellite capabilities with chips and modems to phones does not demand regulatory changes, facilitating earlier commercialization. The latter approach is likely to gain momentum in 2024. Notable examples of NTN suppliers include MediaTek, Qualcomm, and Samsung.

Generative AI hype will catch up with the satellite industry

As telcos explore the transformative potential of generative AI (Gen AI) for use cases in key telco domains, its hype is also expected to catch up with satellite operators in 2024. Gen AI offers substantial promise for the satellite industry, enabling innovation and enhancement technology development and operations. A key application lies in satellite design optimization, where generative algorithms tailor parameters like shape, size, and configuration to mission requirements, leading to lighter and more cost-effective designs. This is key for an industry grappling with high deployment costs and tough funding conditions. Beyond this, Gen AI's ability to extract relevant information from unstructured data enhances tasks like image analysis, signal processing, and anomaly detection, amplifying the capabilities of satellite technology in the dynamic space industry.

In conclusion, the satellite industry is poised for significant growth and innovation in 2024. The reach and quality of communication services it offers are set to achieve new benchmarks with D2D-aided 5G and cloud. However, only fundamentally strong satellite businesses will thrive amid consolidation propelled by intense rivalry and Starlink’s dominance, along with a gloomy funding outlook.