Here are three words I'll bet you'd never expect to see strung together: Space Force France.
And yet, while much of the discussion regarding the "space force" concept lately has centered on President Trump's plan to split off the U.S. Air Force's space activities into a sixth branch of the military, it turns out there are other countries planning to build -- or already building -- space forces of their own.
Countries such as France.
Vive la force spatiale française!
Echoing calls in the U.S. Congress for the creation of a space force, in late June 2018 French Minister of the Armed Forces Florence Parly recommended that France increase its investments in space surveillance. As Space Daily.com reports, France's National Centre for Space Studies (CNES), which operates France's military satellites, is currently awaiting a decision by French President Emmanuel Macron on whether to create a French "space force" to accomplish this.
But why is France contemplating building a space force at all, given the ridicule the idea has received in the U.S.? Here's one clue: In September, Parly described recent "suspicious activities of [a] Russian space satellite" approaching the Franco-Italian Athena-Fidus satellite "too closely," for purposes unknown. The incident convinced Parly to back raising the profile of France's Joint Space Command, up to and including the development of a dedicated space force. Without a stronger space capability of its own, France is ill-equipped to defend its satellites against foreign interference, or even to be entirely certain what the Russians are up to.
France's solution: The country plans to increase spending on its space program by some 14% this year. Then from 2019 to 2025 France will spend $4.2 billion upgrading its military satellite fleet, part of a broader effort by the country to boost its defense spending toward the 2% target required of all NATO members. According to SpaceDaily, even if an actual space force is never created, this money will fund French efforts to "update observation and communication satellites, modernize radar monitoring and develop anti-satellite weapons."
France fears falling behind
Are these efforts necessary? CNES president Jean-Yves Le Gall thinks they are. "China [and] Russia ... are launching many more military satellites than Europe," warns Le Gall, widening a gap in capabilities between Europe and potential rivals.
China, for example, conducted 39 satellite launches in 2018, more than any other country on Earth, and many with military capabilities. China has the world's first "quantum satellite" in orbit -- reportedly immune to eavesdropping -- and may eventually build an entire "quantum internet" in space. It's also building a Chinese version of America's GPS satellite constellation, and plans to put a "global, 24-hour, all-weather earth remote sensing system" in place by 2020.
On top of all that, China went ahead and created a "space force" in 2015, long before the U.S. (or France) began talking seriously about the idea. China's "Strategic Support Force" integrates the space, cyber, and electronic warfare capabilities elements of the People's Liberation Army into a unified space force, and possesses anti-satellite (ASAT) missiles and "co-orbital kinetic kill" weapons (killer satellites) as Defense One reports.
Russian bears in space
Meanwhile in Russia, Senate president Victor Bondarev has criticized Trump's plan to create a separate U.S. space force, equating the move with the kind of "militarization of outer space [that] is the path to disaster." Presumably, he won't be pleased if France follows the same path.
Then again, a rose by any other name can still have thorns. Russia, which used to have separate "Space Forces" of its own, integrated these into its Aerospace Forces in 2015, mimicking U.S. Air Force Space Command's current structure, and that of the UK as well. Within these Aerospace Forces, Russia is working to develop hypersonic missiles -- against which the U.S. Air Force says America has no defense -- and plans to begin deploying them this year. Russia also tested ASAT weapons as recently as last year, yet another space technology the U.S. has not deployed.
And in an echo of the Russian satellite that unnerved France last year, the U.S. State Department recently described another Russian satellite operating in a manner "inconsistent" with its stated mission of conducting in-orbit space inspections according to the Military Times.
What this all means to investors
When you get right down to it, whether we're talking about China, which has a dedicated "space force," or Russia, which says it doesn't, the race toward militarizing space has already begun.
Even if the U.S. Air Force isn't entirely thrilled with the idea, it may have no alternative but to fall in line with the President's plan and back the creation of a U.S. space force just to keep up with what adversaries (and now allies like France) are doing. As then-Defense Secretary Jim Mattis said last summer, the threat from Russian and Chinese space forces "is a reality." The U.S. is "not initiating this." But "if someone is going to try to engage in space with military means, we will not stand idly by."
What does this mean to investors? There are reasonable arguments for creating a separate, independent space force for the U.S. military, and reasonable arguments against. But whether American "space forces" are destined to receive their own separate military branch or remain housed within the U.S. Air Force, the need to develop space defenses is becoming pretty clear.
As an investor, I'd expect this to translate into more dollars for military contractors such as Boeing, Lockheed Martin, and Northrop Grumman, which have significant space operations -- spending that could potentially come at the cost of money for contractors such as General Dynamics and Huntington Ingalls, which have less space exposure.
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A second effect to keep watch for is the whole series of space start-ups -- companies with names like Vector, Planet, Rocket Lab, and Virgin Orbit -- that could potentially benefit from an increase in U.S. military space spending. Indeed, Vector in particular has already won a handful of Pentagon contracts, while Virgin Orbit recently set up a subsidiary dubbed "VOX Space" to compete for Pentagon work.
Although none of this latter cast of companies is currently public, given sufficient Pentagon funding to scale up in size I wouldn't be at all surprised if we see an IPO or three emerge from this group in the very near future.