How a tiny British company got rich off Musk’s space race

In the bright, white clean room at Filtronic’s manufacturing facility in County Durham, staff in blue lab coats test the limits of the advanced electronics critical to satellite signals and the future of war.Tiny gold wires between semiconductors are tested for durability by machines with the utmost delicacy. Ultra-powerful microscopes are used to view circuits before they are packaged.With some components destined for outer space, one machine simulates the G-forces of space travel to ensure the parts can handle leaving orbit.It requires devoted attention from Filtronic’s specialist engineers who work in the facility. But more recently, they could be forgiven for being a bit distracted.In the last three years, a breakthrough deal with SpaceX, Elon Musk’s trillion-dollar rocket company, has sent shares in the British group climbing by 1,300pc.The company’s 165-strong workforce is part of an employee share scheme which allows them to buy Filtronic stock on the cheap.It means profit from the soaring share price has allowed some to effectively treble their annual pay, says Nat Edington, the company’s chief executive.“It’s very motivating for people when they can make that kind of money,” he says. “We do literally have operators looking at the share price on their phones.”Filtronic – founded in a garage 49 years ago by a Leeds University professor who had pioneered work on radio frequency technology – helped develop Britain’s mobile networks in the 1980s and 1990s, but the collapse of the late 1990s telecoms bubble had seemingly sent it into obscurity.The company revealed in 2023 it had signed a contract with a “leading global provider” of low Earth orbit satellite equipment.A year later, it could keep the name secret no longer. It announced a “strategic agreement” with SpaceX that also allowed Musk’s company to take a 10pc stake.The relationship, which has seen SpaceX order around $150m (£112m) in equipment from Filtronic, has put the company on the map in the space race and funded a new manufacturing facility in County Durham capable of more than doubling production.Filtronic’s components – square, sandwich-sized boxes of metal and circuitry – are used to amplify radio frequencies so that internet signals can be sent from ground stations on Earth to SpaceX’s Starlink satellites, 300 miles above the Earth’s surface.The company had previously worked on ambitious telecoms projects from Google and Facebook to build high-altitude balloons and planes that would beam internet to rural spaces. The tech companies shut the programmes down but the work ended up opening a door.“Some of the engineers had found their way into SpaceX and they said, ‘there’s one company that can do this and it’s Filtronic’,” says Edington.The equipment is now critical to the Starlink network, which provides satellite internet to 10 million customers as well as Ukraine’s front lines and the world’s airlines.Mobile operator O2 started providing mobile signals through Starlink last week in areas where traditional networks do not reach.Edington says he has not had the pleasure of meeting Musk, although SpaceX certainly seems like a satisfied customer.David Finlay, the company’s senior director of finance, flew in from California to attend the opening ceremony of Filtronic’s new Sedgefield factory to laud the company’s “world-class engineering”.SpaceX placed a major order last August for the next generation of Filtronic’s amplifiers, which will more than double power output to allow better connections to Starlink satellites.Edington says SpaceX is a demanding customer – but it has transformed Filtronic, whose market value has climbed from £20m five years ago to £434m today. That would put it within touching distance of the FTSE 250 were it not listed on London’s junior Alternative Investment Market.The reliance on a single customer, especially one with such a mercurial chief executive, could be seen as a downside – especially since SpaceX accounted for 83pc of Filtronic’s revenue last year.Edington, an electronics industry veteran who joined the company two years ago, is all too familiar with what this can lead to.He previously worked at Wolfson Microelectronics, the Scottish chip designer whose audio components were used in the iPod before Apple dumped the company in 2008, sending it into crisis and ultimately a sale.SpaceX is a little less volatile than some of Musk’s other operations and Edington says the companies work closely enough that “we are regarded as an extension of their engineering team” – but it has made diversifying a priority.‘We should be spending more on defence’The US giant has proven to be a springboard for signing deals with other satellite operators including Eutelsat OneWeb and Viasat, which are hoping to challenge Starlink, as well as defence companies BAE Systems and Leonardo.The company’s defence equipment is used in radar and electronic detection systems, which are expected to become increasingly crucial in an age of drone warfare. Filtronic’s manufacturing site includes a secure cell protected by surveillance, special locks and reinforced walls. Entry requires security clearance.Edington is frustrated at the slow pace of spending decisions in the industry, however, in contrast with the fast-moving nature of its key customer.An example of this was on display last week when it emerged that Rachel Reeves, the Chancellor, had refused to sign off on a £1bn military helicopter deal with Leonardo before she reversed the decision.“Of course we should be spending more on defence,” Edington says. “I think anyone would agree with that.“It would be great if we could move faster on some opportunities. We are working on opportunities in which decisions get delayed and delayed and delayed and you feel like ‘this has got to happen’.”He says the company has had to adopt a “West Coast technology mentality”, spending heavily on research and development and trying out multiple ideas in parallel, knowing that many of them will fail.That could position it well for SpaceX’s next big bet.Musk is planning to take his rocket company public this year to raise money for an ambitious bet on data centres in space, claiming that the constant solar power and sub-zero conditions would allow for unprecedented power with which to train superintelligent AI.Musk has floated the idea of a million orbital data centres to realise his dream. Many of his critics have derided the idea but Edington says that, if the call comes, he is ready.“If there’s another million satellites, then that’s going to translate directly into what we could do,” he says.Filtronic is going to be busy – as long as its employees can keep their eyes off the share price.