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| On December 28, 54 Starlink internet satellites and a Falcon 9 rocket belonging to SpaceX were launched from Cape Canaveral. Credit: Flickr via SpaceX |
SpaceX is positioning itself to respond to the Pentagon's call for commercial allies with its government-focused "secured satellite network." Now that the company has established itself as a leading provider of launches for U.S. national security, it is launching a new product line called Starshield to try to gain a larger share of the defense market. Last month.
SpaceX quietly introduced Starshield, which makes use of SpaceX's investment in its Starlink broadband satellite network to provide defense and intelligence agencies with custom-built spacecraft, sensors, and secure communications services.
SpaceX, like other businesses, is looking for opportunities brought about by the United States' "great-power competition" with China and Russia. China is referred to as a "pacing challenge" in a document titled "U.S. national defense strategy" that was released by the Pentagon in October and describes it as a threat to surpass the United States in terms of defense and space technology. DoD intends to use commercial innovation to win this competition.
The commercial space industry in the United States is by far the most resilient in the world. At an Aspen Security Forum in Washington on December 8, Deputy Secretary of Defense Kathleen Hicks stated, "The Chinese know that, and we're going to lean into that." We will ensure that we utilize all commercial space capability and collaborate closely with the commercial sector.
The importance of imaging satellites and SpaceX's satellite broadband service Starlink, as well as the space industry as a whole, were highlighted by Russia's war in Ukraine. With more than 3,000 satellites currently in orbit and thousands more on the way, the system demonstrated its resistance to jamming and the strength of this type of proliferated architecture.
John Plumb, assistant secretary of defense for space policy, stated on December 14 at the Center for Strategic and International Studies, "This wasn't available before." He noted that the first major conflict in which commercial space technology has played a significant role is Ukraine.
According to Plumb, incorporating commercial space into military operations is "the way of the future." Now it is pretty clear that the department does not need to create its own constellation for each mission set to implement resilience.
In a memo dated November 21, Heidi Shyu, the undersecretary of defense for research and engineering, stated that the Pentagon anticipates a greater reliance on the space industry and asked the Defense Science Board to make suggestions on what the DoD should do to ensure that it has access to commercial sources.
According to the memo, "a comprehensive plan for using commercial space systems in the context of classified U.S. space capabilities is needed" because of the rapidly improving commercial space capabilities.
OPPORTUNITIES FOR COMMERCIAL SPACE SpaceX hasn't told SpaceNews much about its Starshield product line, and the company didn't answer questions about the project. Starshield is described as a "secured satellite network for government entities" on the website of SpaceX. It has an "initial focus" on direct delivery of processed Earth observation data, secure global communications made possible by inter-satellite laser links, and satellite buses for hosting "the most demanding customer payload missions."
The business also emphasizes its existing relationships with the military and intelligence community in the United States, as well as the expertise it gained through commercial Starlink operations. The Pentagon was aware of Starlink's capacity to operate in Ukraine with minimal disruptions.
Since the war started in February, SpaceX has sent 22,000 Starlink terminals to Ukraine, including replacements for units that were destroyed in combat, as reported by Bloomberg on December 20. Bloomberg was informed by a representative of the Ukrainian government that the nation will request 10,000 more.
According to defense budget analyst and managing director of Metrea Strategic Insights, Todd Harrison, Starshield would probably provide customized Starlink terminals and satellites that the Department of Defense could either own or lease.
Harrison stated, "I think SpaceX is ready to use the expertise and manufacturing prowess it has developed from its Starlink business to mass produce pretty sophisticated satellites."
He noted that commercial players like SpaceX "have been preparing for some time to fill a demand in the defense market," and national security space is now one of the DoD's fastest-growing areas. DoD received $69.3 billion more than the Pentagon requested in the 2023 spending bill that Congress approved on December 23 to fund the government until September 30. Space Force programs receive $1.7 billion from the defense increase.
According to Harrison, SpaceX's initial strategy was to offer Starlink communications to the Department of Defense as a commercial service. However, "I think they’re finding that that’s harder than they thought," and there are also lucrative opportunities in the sale of customized satellites made possible by utilizing their existing production lines.
Starshield is utilizing SpaceX's expertise as a supplier of satellites to the Space Force's Space Development Agency as a source of inspiration. SDA is purchasing satellites for the construction of a Transport Layer in low Earth orbit, a mesh network for moving data collected by missile-detection satellites in the Tracking Layer.
SpaceX and Leidos Corp. collaborated on the construction of four Tracking Layer satellites for a 2020 contract that is expected to launch in March. Harrison asked, "Why not just double down on that and build government-unique satellites if that's what they want?" given that a hot production line was producing approximately 120 Starlink satellites per month.
He stated, "SpaceX can use that to break into this market and probably out-compete a lot of the traditional primes" by combining its manufacturing capability with its expertise building military satellites.
Starshield is a "logical next step for SpaceX to leverage its mass manufacturing of satellites and terminals — one you could argue it has already taken through its SDA and related national security work," according to Oliver Wyman's space industry analyst Andrew Penn.
Penn remarked, "SpaceX is basically telling government buyers that it is ready to set up a separate business unit to handle built-to-order satellites for customers in defense and intelligence." With its second-generation Starlink satellite buses, which promise to be larger and able to host payloads requiring more power, the company will be better able to serve the military.
Penn stated, "there is an opportunity for DoD to take advantage of a hot manufacturing line to realize meaningful cost savings compared to more traditional bespoke acquisitions" given the company's rapid satellite production.
DoD PRESSED TO INNOVATE Frank Calvelli, the head of acquisitions for the Space Force, stated that the DoD must pivot away from traditional development programs that are consistently behind schedule and over budget in order to take advantage of technologies that are commercially available.
Calvelli, assistant secretary of the Air Force for space acquisitions and integration, stated on December 15 at a Washington Space Business Roundtable event, "There’s a lot of pressure on the Department to go faster in space acquisition."
Calvelli stated, "Speed in space acquisition is a very simple formula." You build smaller satellites, use technology that already exists, and reduce engineering that doesn't happen often. You use commercial capabilities and carry them out.
Even Rogers, a former space operations officer in the United States Air Force who is currently the CEO of True Anomaly, a brand-new venture-backed space startup, stated that these remarks represent an acknowledgement that the United States military "is going to have to embrace a new model" for procuring space systems.
Rogers stated, "The Space Force needs to partner with companies like SpaceX and whoever can provide fully integrated mission solutions, not just a single spacecraft or algorithm."
He stated that DoD prime contractors are "really good at big, expensive programs that are kind of the backbone of security infrastructure and deterrence." They aren't good at very quick iterations to adjust to a changing environment quickly.
He stated that commercial space companies also require national security customers and face a challenging financial environment. Due to the strategic rivalry with China and Russia, defense will experience the most expansion. The Department of Defense wants defense technologies to advance at the same rate as commercial technologies. That is the ultimate prize.
Venture capitalists, according to Founders Fund principal Trae Stephens, "are thinking about fundraising very differently than they were in 2020 and 2021."
“Before, we were kind of complacent because we believed that the world was perfectly safe and that the only real money to be made was from consumer and internet products. On The Burn Bag national security and foreign policy podcast on December 3, Stephens stated, "And I think Ukraine has woken people up."
“I think everyone’s kind of coming back to the drawing board and saying, if we’re going to invest in things that matter, that are strategic, that are mission-oriented, there’s a real opportunity here,” he said. “With everything that we’re seeing internationally, not only with Ukraine, but also what’s going on in Iran, what’s going on in North Korea, the potential threat to Taiwan.”
According to Peter Arment, an analyst in the aerospace and defense industry at Baird investment bank, what SpaceX has done with Starlink is to clearly demonstrate how commercial space technology serves national security applications.
He stated, "Obviously, this helps SpaceX, but it also helps the entire industry attract investment." At the moment, the area of defense spending is kind of rising.
Before Starshield was even a name, other space-related businesses started making moves to better position themselves to compete in the national security arena.
Rocket Lab, a commercial launch provider and satellite manufacturer, made the announcement on December 1 that it will establish a subsidiary in the United States for work in defense and intelligence, including classified programs.
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Rocket Lab spokesperson Murielle Baker said in a statement that the new company, which is called Rocket Lab National Security, will have "close engagement with U.S. government customers to understand their mission requirements, which may be dedicated rapid call-up launch, satellite design, build, and integration, spacecraft operations or all of the above."
According to Tess Hatch, vice president of Bessemer Venture Partners, an investor in Rocket Lab, "investors in boardrooms were pounding our fists on the table saying ‘growth at all cost.'" Customers in the defense industry can be "a little lumpy and unpredictable." On the other hand, there are a lot of potential contracts, Hatch stated on December 6 at the TechCrunch Space conference.
Hatch stated, "The diversity of the customer base is so important with markets down and possibly commercial needing to push a little more throttle." Currently, when the commercial side isn't as efficient, the government is more helpful to space companies.
In order to better serve military customers, satellite manufacturer Terran Orbital shifted its focus toward producing space hardware for NASA, the Department of Defense, and Lockheed Martin, Terran Orbital's strategic investor, at the end of 2022.
The business HawkEye 360, which uses satellites to monitor radio-frequency emissions, decided to concentrate almost entirely on the signals intelligence market for national security. HawkEye 360 CEO John Serafini stated on November 17 at the Baird defense investment conference that this sector "has always been the purview of the big defense industrial base entities like Lockheed, Northrop, and Raytheon that build very expensive spacecraft to do exquisite things."
According to Serafini, the company increased the number of employees with security clearances and invested in infrastructure and accounting systems with security clearances in order to compete with traditional defense contractors.
HawkEye 360, like other players in the remote sensing industry, gained attention during the Ukraine conflict. Serafini stated in September at a Gabelli Funds investors conference, "We have performed over 1,000 individual missions over Ukraine, and it has given us bona fides that we can then go take to other places where we are required, particularly Asia Pacific with the rise of China."
Serafini stated that the DoD's attitude toward commercial businesses and startups "has definitely shifted." Has it completely changed to the point where everyone completely embraces unclassified commercial capabilities? No. However, you have to strike a balance.
He asserted that businesses will tailor their products to meet government requirements as a result of the market's emphasis on profitability. We are aware that running a startup business by 20-somethings who spend money like drunken sailors does not work in the long run. To create products that customers truly care about, discipline is required.
Leonardo DRS Global Enterprise Solutions, a network integrator and manager of satellite communications services for the Department of Defense and other government agencies, was acquired by commercial operator SES in March in the satellite communications industry.
SES will have a stronger presence in the field of national security as a result of the $450 million acquisition. According to the company, the merger of the U.S. subsidiary of the satellite operator and DRS GES was recently rebranded as SES Space & Defense to "reflect the organization’s new positioning and expanded offering serving the needs of the U.S. government customers."
In the meantime, the value of commercial satellites has placed private sector assets directly in the crossfire. COMMERCIAL SPACE IN THE "GRAY AREA" That was made abundantly clear by Russian officials, who recognized the crucial role that Starlink communications services played in assisting Ukraine. The Pentagon has been forced to think about ways to compensate commercial businesses if their satellites are damaged while supporting the U.S. military in a conflict due to these threats.
Casey Dreier, chief policy adviser for the Planetary Society, a non-profit organization that promotes space exploration, stated that this is a striking reminder of how far private players have advanced into domains that previously only belonged to governments.
He stated on December 13 that Starlink is the poster child for this trend. “Crystallizes how all-encompassing and integrated space is to all sorts of things that we take for granted in the current world order,” as a private company is recognized as a legitimate target in warfare.
According to Dreier, this is posing difficult questions for dual-use businesses "that are being cross-pressured by different needs." Do you fully commit to serving the US government's needs in ways we may not have fully considered when the US government is just one of many customers?
Due to Elon Musk's dual role as head of SpaceX and CEO of electric car manufacturer Tesla, which has significant operations in China, Dreier said that SpaceX, for instance, could find itself in a sticky geopolitical situation if China invaded Taiwan.
SpaceX and other DoD contractors would be needed to help the United States, which is committed to Taiwan's defense.
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