The (Laser) Shot Heard Around the World.
SpaceX is eyeing another segment of the space economy for disruption. Last week, speaking at a panel at the Satellite 2024 event, SpaceX President Gwynne Shotwell unveiled a new optical communications terminal (OCT) product offering, which SpaceX calls “Plug and Plaser.” Acknowledging the new foray into product sales, Shotwell said, "We generally don't sell components, so this is a little bit of a new thing for us."
With its track record of rapid innovation, efficiency, and rock-bottom costs, SpaceX could rapidly become a formidable competitor in the emerging OCT market. OCTs, enabling optical inter-satellite links (O-ISLs), are mission-critical to proliferated defense constellations (e.g., SDA PWSA) and to future commercial LEO broadband constellations alike. And in some ways, SpaceX has an early lead in OCTs, ramping from on-orbit testing in 2021 to wide-scale deployment by early 2024, boasting 9,000 “space lasers” (OCTs) on-orbit pushing over 42 Petabytes/day of data.
Does Shotwell’s announcement signify a paradigm shift at SpaceX – i.e., is the company poised to become a merchant supplier of high-volume, low-cost spacecraft components, leveraging its enormous Starlink production scale to drive lucrative new product revenue streams? Recent OCT merchant supplier prices are ~$300K per LEO OCT, suggesting BOM plus AIT costs of maybe $125-150K, but SpaceX’s internal OCT costs are significantly lower. It could garner market share quickly.
The entry of SpaceX as a merchant supplier, first into OCTs and later into other component arenas, would have profound implications for the space industrial base. As it turns out, this is not SpaceX’s likely intent. The size and the nature of the components opportunity makesmerchant supply a very unlikely priority for the company on a standalone basis. Presentations by Mynaric, a pure-play OCT leader, suggest that the laser comms market will reach ~$1 billion in size around ~2026. While not a pittance (and quite attractive for companies like Mynaric), this is hardly a game-changing motivator for SpaceX to shift its highly successful business model.
We believe that (1) driving interoperability standards and (2) introducing a powerful new Starlink “on-ramp” are the real motivations behind SpaceX’s recent surprise announcement.
A clue to the interoperability driver is Space-BACN, DARPA’s attempt to create an “internet” of LEO satellites, enabling seamless communication between military/government and commercial/civil satellite constellations that currently are unable to talk with each other. A number of leading companies (including SpaceX) are involved in the Space-BACN program. SpaceX success in pushing its space laser approach commercially could help put SpaceX into the driver’s seat for future OCT/O-ISL standards.
Regardless of whether it becomes the ultimate technical standard-bearer industry-wide, SpaceX surely sees a lucrative opportunity to drive network traffic onto Starlink via integration of its OCTs onto others’ spacecraft. Other commercial and military customers can leverage SpaceX OCTs to backhaul their traffic via the Starlink network, creating both a stronger Starlink ecosystem and an attractive potential new revenue source for the company (at the same time potentially boosting other SpaceX initiatives, like Starshield).
Spacecraft component companies, including OCT vendors, can breathe a sigh of relief for now. SpaceX isn’t barging into your front door with its latest announcement, but it looks like it may be trying to sneak in the back.
SOURCE: https://www.reuters.com/technology/space/spacex-says-plans-sell-satellite-laser-links-commercially-2024-03-19/