The Orbit is Cheap, The Ground is Expensive: Phased Array Economics in LEO Satellites

The New Cliff After Launch Costs

Driven by SpaceX's reusable rocket technology, the cost of sending a kilogram of payload into Low Earth Orbit (LEO) has plummeted. However, for space internet operators, the success of the business model no longer depends solely on the constellations in the sky, but critically on the "box" on the ground—the User Terminal (CPE).

This represents a classic "Hardware Subsidy Trap." If a satellite receiver (the "Dish") costs $1,500 to manufacture but must be sold for $500 to attract users, the operator eats a $1,000 cash flow loss (part of CAC - Customer Acquisition Cost) for every new subscriber. For Starlink, Amazon Kuiper, or OneWeb, the only path across the commercial chasm is to mass-produce the core technology inside that box—the Phased Array Antenna—at consumer electronics price points.

Phased Array Antennas: A Down-Market Strike from Military to Consumer

Traditional satellite antennas (like satellite TV dishes) are parabolic, relying on mechanical rotation to align with a satellite. But in LEO, satellites streak across the sky at 27,000 km/h, remaining in a user's field of view for only a few minutes. Mechanical antennas simply cannot keep up.

Thus, we must use Active Electronically Scanned Arrays (AESA). Technology once reserved for F-22 fighter jets or Aegis destroyers.

• The Principle: With no moving parts, these arrays consist of thousands of tiny antenna elements. By precisely controlling the "time delay (phase)" of the signal emitted by each element, the direction of the beam can be steered electronically in microseconds using wave interference.

• The Cost Challenge: This means the antenna is no longer just a piece of metal; it is a supercomputer. The PCB is densely packed with thousands of Beamforming ICs, amplifiers, and filters.

The Choice of Silicon: The Battle of CMOS vs. Compound Semiconductors

To turn a multi-hundred-thousand-dollar military radar into a $500 gadget, materials science is the first battleground.

Traditional high-performance radars favor Gallium Arsenide (GaAs) or Gallium Nitride (GaN). These compound semiconductors excel at high frequencies and power but are prohibitively expensive and difficult to integrate with digital logic.

To slash costs, the industry is aggressively pivoting to Silicon-based processes, specifically CMOS or SiGe (Silicon Germanium).

• The CMOS Advantage: Leveraging massive global foundry capacity (like TSMC, GlobalFoundries) to achieve extremely low unit costs and high integration (putting digital control and RF front-ends on the same die).

• The Price: Silicon has poorer power efficiency at high frequencies. This leads to significant heat generation, introducing high costs for thermal management. If you disassemble a Gen 1 Starlink dish, you'll find the heatsink and structural components likely cost more than the electronics themselves.

The Nightmare of Mass Production: Calibration and Yield

Even with cheaper chips, the "Yield" during assembly remains a massive hidden cost.

Phased array operation relies on the perfect synergy of all elements. The phase and gain errors of every single element must be Calibrated. Building one prototype in a lab is easy; accurately calibrating thousands of channels on hundreds of antennas coming off the line every minute is an industrial hell.

This requires expensive Automated Test Equipment (ATE) and Over-the-Air (OTA) chambers. Crucially, if a PCB has 1,000 chips and one fails during soldering, the entire expensive board might be scrapped (due to the difficulty of rework). For manufacturers (like Foxconn, Pegatron, Wistron NeWeb), this is an extreme challenge of First Pass Yield.

The Other Path: The Disruptive Potential of Direct-to-Cell

If dedicated terminals are so expensive, why not connect directly to phones? This is what Direct-to-Cell technology (e.g., Starlink V2 Mini, AST SpaceMobile) attempts to solve.

This path shifts the complexity back to the satellites in orbit. By deploying massive phased array antennas (basketball-court sized) in space, they capture weak signals from standard mobile phones on the ground.

• Commercial Logic: This eliminates user-side hardware costs (CapEx is absorbed by the operator at launch), drastically lowering the barrier to entry.

• Physical Limits: Currently, this is viable for text and voice, but bandwidth is far insufficient for 4K streaming or low-latency gaming. Therefore, dedicated high-performance terminals (CPE) will remain the mainstream for high-bandwidth applications for the next decade.

Conclusion: Supply Chain Consolidation and Elimination

For investors, the focus in the LEO sector should shift from "rocket companies" to the "Ground Segment Supply Chain."

Who controls the design of low-cost Beamforming ICs? Who possesses the capability for automated calibration and packaging testing of large-scale array antennas? These are the critical economic thresholds that determine whether LEO satellite networks remain "toys for tech billionaires" or become "global telecommunications infrastructure." The future winners will be the manufacturers who can turn military-spec radar tech into something as cheap and reliable as a Wi-Fi router.