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Space the Next Frontier for Business
Technology Briefing |
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TranscriptIt is becoming increasingly clear that few things will be more important in the coming decades than who wins the game-changing struggle for control of space. This emerging competition will be a marathon, not a sprint. And it will not simply determine who will control future generations of indispensable communication satellites. The new space battle represents a war over opportunities for exploiting the vast resources of various extraterrestrial objects and gaining a decisive defensive or offensive military advantage. Until a decade or so ago, space was dominated solely by superpowers and a dozen or so aerospace contractors serving them. But while most managers, investors, and governments have been looking in a different direction, space has suddenly become a big business. And it's certain to get much bigger! Boosted by a huge surge of investment, space-industry global revenues have nearly tripled since 2000, rising from $175 billion in 2005 to almost $424 billion in 2019. And by 2040, Morgan Stanley projects annual global space-industry revenues will reach $1.2 trillion! Today, the big money, $271 billion, is devoted to communications satellites and launch services. But soon, markets will emerge for space tourism, manufacturing in space, and mining asteroids, as well as the moon. In fact, the monetary potential in mining one specific asteroid for key resources like lithium, cobalt, and gold has been estimated to be as high as 27 quintillion dollars. However, the most important struggle during the next two decades will involve military and dual-use applications. Consequently, the coming "space war" is not just about money. It's also about power. And the United States faces a challenge on this front from China, Russia, the European Union, Japan, and even Israel. As Brandon Weichert notes in his book Winning Space: How America Remains a Superpower, America's claim to being the world's sole superpower rests to a large degree on dominating the space front. Right now, for that reason, military advantage clearly remains a prime motivator even though the profit potential of space is rising rapidly. Why? Control of satellites will be crucial in any future conflict because militaries depend on satellite communications for both surveillance and battlefield operations. That means, the winner of the next global confrontation will be the alliance which can control access to space. Unfortunately for the United States, China is highly aware of this. Ye Penjiang, the head of its moon program, views space from an imperial perspective, comparing it to the islands China is occupying or creating in the South China Sea. And Ye has gone so far as to suggest that China's "descendants" would never forgive them for giving up the realm of space. So, it's not surprising that Chinese young people now dream of being astronauts, like Americans in the 1960s. Meanwhile America's young people seem more interested in becoming social media influencers. Still, despite such apparent challenges to its continuing leadership, America remains the leading player in space technology, in large part due to its burgeoning eco-system of private space companies. In 2018, space-related Chinese companies raised $516 million, compared to the $2.2 billion raised by American firms. And while some of these American firms are backed by such moguls as Elon Musk, Jeff Bezos, and Richard Branson, these big names control only a relatively small portion of America's 150+ space-related companies. That's far more companies than any other country, and that's far more than either China or Russia. Furthermore, these firms are engaged in everything from launch facilities and launch-service provision to reusable-rocket production and Moon and Mars vehicles. Right now, space-related entrepreneurs are keeping the United States well in the lead technologically. In fact, the U.S. represents over 40 percent of world's launch services industry, taking market share from both the European Union and Russia in recent years. And while a decade ago, Americans were dependent on launch sites and launch vehicles from France and the former Soviet Union, today the biggest players in the launch services business include private American firms like Space X, Boeing, Northrup Grumman, and United Launch Alliance (or ULA). Within the United States, the industry is dominated by a few industry clusters that grew up around America's government-driven space programs. At this point, California remains without question the central heartland of the space industry. Though info-tech and other high-end employment categories are dispersing at a rapid pace from areas like Silicon Valley, the unique nature of the space industry, including its dependence on accessing rare skills and technical networks, favors California's continuing leadership. The talent pool, developed over the past eighty years, is still critical. Local universities like USC, UCLA, UC Berkeley and Caltech have ongoing R&D efforts to support the aerospace talent pool and technology development. For that reason, California has a 19 percent share of the overall global space industry, as well as 40 percent of the U.S. space industry sites. But now other states, especially Florida and Texas are working to knock California off its perch. Texas, with its boundless open space and ambition, already has the "second-most attractive" aerospace market in the nation. Therefore, state authorities in California should be seriously worried by the recent decision by Elon Musk to move Space X to Texas and to build its new spaceships there. Its resources include NASA's Johnson Space Center as well as private sector leaders like SpaceX, Blue Origin, Boeing, Lockheed, and L3. It also has a host of geographically important resources for the space industry such as launch sites, historic rocket testing locations, and production facilities. Texas is already the site for the bulk of rocket testing and certification flights. SpaceX and Jeff Bezos' Blue Origin have large test facilities in Van Horn and Brownsville, respectively. In addition, Texas has two spaceports, Midland International Air and Space Port as well as the Houston Spaceport, which has enjoyed state support since 2013. Meanwhile, new venues, including Washington, Oklahoma, and Michigan, are targeting the space industry with tax, real estate and worker-training deals. This competition shows why the United States is "number one in space capabilities" and is likely to stay there. Nevertheless, America may not be the top dog in space, forever. And other countries are eager to step in, if it stumbles. With that in mind, it's important to recognize that history generally favors countries and places which risk the most and work along the cutting-edge. Right now, we can expect governments to fund much of the innovation effort, particularly on the military side. And we might find that modern adventurers, like their counterparts in the age of sailing ships, will be the ones pushing the envelope technologically, whether n reducing launch costs, using 3-D printing for making rocket parts, or accommodating space tourists. Given this trend, we offer the following forecasts for your consideration. First, the most significant short-term and medium-term space-related opportunities will come from satellite broadband Internet access. Morgan Stanley estimates that satellite broadband will represent 50% of the projected growth of the global space economy through 2040-and as much as 70% in their most bullish scenario. Launching satellites that offer broadband Internet service will help to drive down the cost of data, just as demand for that data explodes. The demand for data is growing at an exponential rate, while the cost of access to space is falling by orders of magnitude. It appears that the largest opportunity in the medium term comes from providing Internet access to underserved and unserved parts of the world. But there also is going to be increased demand for bandwidth from autonomous cars, the Internet of things, artificial intelligence, virtual reality, and video. In fact, as data demand surges, driven particularly by autonomous vehicles, the per-megabyte cost of wireless data will fall to less than 1% of today's levels. Second, reusable rockets, the mass-production of satellites and the maturation of satellite technology will combine to drive down the costs of satellite broadband Internet access by 100-fold. Currently, the cost to launch a satellite has declined to about $60 million, from $200 million, via reusable rockets, with a potential drop to as low as $5 million. And satellite mass production could decrease the cost of a new satellite from $500 million to under $500,000. Third, beyond the opportunities generated by satellite broadband Internet, the new frontiers in rocketry offer other tantalizing possibilities. Packages today delivered by airplane or truck could be delivered more quickly by rocket. Perhaps private space travel could also become commercially available. And mining equipment could be sent to asteroids to extract minerals. All this is possible, theoretically, because of the recent breakthroughs in rocketry. And, Fourth, because China lacks America's mature space industry ecosystem of private sector firms, government sponsors and research universities, it will be unable to catch up with the United States in strategically important uses of space. The United States began building a world-class space ecosystem back when China was an impoverished, agrarian society which valued conformity. Government incentives and cheap labor will not enable China to overcome America's enormous head-start. |
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