Space start-ups sharply increase in Japan

The Yomiuri Shimbun

The space industry is undergoing a period of change, and an increasing number of space-related start-ups in Japan are making headway at opening up new markets. The aims of these start-ups so far range from communication services and data collection using small satellites to collecting space debris, but their value has yet to be tested.

To become truly competitive, they need originality in their innovations as well as generous government support.

50-plus companies in 2020

The value of data obtained from photographing Earth from space by using satellites has grown exponentially, as big data has become the lifeblood of many businesses due to the progress of digitization.

Globally, there are more than 10,000 space-related companies competing in this arena. The Space Foundation in the United States estimates that the market has grown to more than ¥40 trillion.

In Japan, new companies are entering the market one after another, so as to not miss out on the global wave. The number exceeded 50 in 2020, which is three times the number five years ago.

Earth observation and communication services using small satellites have essentially gone mainstream.

Rather than developing expensive, unique satellites that cost more than ¥10 billion each, mass-producing small satellites that cost less and launching scores of them is the more efficient approach, and makes updates and replacement easier. The enhanced performance of digital components has also greatly facilitated research and development for small satellites.

On June 10, Axelspace Corp., a pioneer developer of small satellites, started providing image data taken by five small satellites that weigh about 100 kilograms each. These five satellites can take images once every two to three days anywhere in the world.

Using this data, crop growth and even factory operations can be monitored and analyzed at a high frequency. The data can then be marketed to customers in diverse industries, the company said.

“We are receiving inquiries from inside and outside Japan, and the number is sharply increasing. We will build up our track record and gain momentum,” Yuya Nakamura, the company’s president and CEO, said.

The Yomiuri Shimbun

Financial hurdles

Yet, only a few space start-ups in Japan are actually getting off the ground, because developing satellites and rockets requires a lot of money and time for the initial investment.

Masayasu Ishida, CEO of Spacetide, an organization promoting the space industry, said: “The speed of technological and business development of Japanese companies is not fast enough to catch up with overseas companies. They need to raise funds with a view to going public and speed up the cycle of trial and error.”

In contrast to the global market, the domestic market size has yet to expand.

Sales for the space industry have remained flat at about ¥1.2 trillion, even though the government has said it aims to double that number in the early 2030s.

In Japan, space development has been led mainly by major heavy industry and electronics manufacturers with the support of governmental demand. Despite its high technological capabilities, the Japanese space industry has been lagging behind overseas competitors as a result of price competition and insufficient market-needs analysis.

Under these circumstances, the government has thus far positioned start-ups as “playing a part in growing the domestic space industry.” It has been providing support to these companies by such measures as creating a mechanism to help build ties between companies and investors, but this is far from sufficient.

To grow start-ups substantially, the government needs to consider entrusting large-scale projects to these companies, which would foster an environment that encourages venture capitalists to invest.

Chance to win

There are, however, some companies entering the space market with their own unique ideas.

One example is Astroscale, which aims to start collecting space debris, especially fragments of rockets and satellites floating in space. In March, the company launched its first satellite to demonstrate the technology it has developed for the purpose.

Astroscale CEO Mitsunobu Okada said: “I think it is meaningful to do something new in a field where there is no market yet. The Japanese space industry is now at a critical point in this respect.”

The company has so far raised more than ¥20 billion from investors in Japan and overseas, indicating that there are some high expectations for the company. Astroscale plans to launch this business by 2024, after securing contracts with companies that operate satellites and other interested parties.

Prof. Kazuto Suzuki at the University of Tokyo, who is knowledgeable about trends in the space industry, said: “In some fields of the industry, who has won or lost is becoming clear in Japanese companies’ competitions with overseas companies. From now on, they should aim for fields with high added value or unexplored fields. The government needs to become a customer of promising companies and actively use their services.”