THE NEXT GAFAM IS EMERGING. IT IS CALLED SPACEX.
- Opinion -
Elon Musk controls more than half of the satellite launcher market. He may deal it the final blow as early as 2024 with his giant Starship rocket.
Even Jeff Bezos, who knows a thing or two about economic domination, talks about SpaceX being a monopoly in the making. Despite the Amazon creator's personal investment of $2.5 billion in his Blue Origin space venture, it has never put anything into orbit. Bezos relies more on his lawyers to undermine Elon Musk's position than on his engineers; he is right: the former Blue Origin employees denounce a detestable atmosphere and persistent technical impasses.
Elon Musk, on the other hand, is making his way. This autumn, SpaceX passed the $100 billion mark in valuation, which puts it on a par with Airbus and Boeing, with their range of commercial aircraft, and their space and defence activities.
And SpaceX's trajectory has not reached its peak, far from it. A crucial episode is being played out in Boca Chica in South Texas. At its Starbase construction and launch site, created from scratch on the Gulf of Mexico, the firm is rapidly assembling its giant Starship rocket, which is set to explode the global market for satellite launchers (excluding China). This is according to several specialists interviewed in recent weeks as part of a series of papers I am preparing on these subjects.
Here are the factors that could lead SpaceX to this global domination, a quasi-monopoly situation and add a letter to the acronym GAFAM.
1. FASTER, BETTER, CHEAPER.
Musk has taken the concept of agility further than anyone else. Ironically, the phrase Faster, Better, Cheaper was coined in 1992 by Daniel Goldin, then administrator of NASA. His engineers told him that you can't have all three. In thirteen years, Musk has demonstrated the opposite by overturning the principles that had dominated the space industry for half a century: instead of trying to get everything right from the first flight of a rocket, usually at the cost of an endless and ruinous technical investment, Musk has opted for the build-and-break principle, building prototypes at a steady pace, testing them relentlessly - often with spectacular accidents - and constantly learning as he goes.
2. Support from the US government.
Contrary to what the French media like to repeat about SpaceX, Elon Musk was not a billionaire who gave himself a new toy. Sure, he had enough money to finance his very first rockets, but after three initial failures, he had exhausted his personal reserves - which were also stretched by the development of Tesla - and his company was on the verge of bankruptcy.
SpaceX was rescued, and definitely relaunched, thanks to public orders. This takes a different form in the United States than in France: instead of showering entire sectors with quasi-subsidies (via the BPI or regional funding), American government agencies award contracts to promising companies likely to demonstrate a technological advantage and, above all, to deliver a product or service. This is more meritocratic and much healthier than maintaining asthmatic albatrosses ad vitam as is done in France.
SpaceX has benefited from this system on several occasions: first to build the Falcon 9 rocket and the Dragon capsules that refuel the International Space Station, and most recently for the new series of missions to the moon. The Commercial Orbital Transportation Service (COTS) contract brought in $400 million for SpaceX and the Human Landing System will bring in $2.9 billion in revenue. In addition, there are several billion dollars in contracts of unknown value for Department of Defense and other agency launches.
Unlike the usual subcontractors who tended to pig out without restraint or concern for productivity, Musk's talent was to maximise "the bang for the buck", in other words the return on every government dollar.
SpaceX has insourced everything from the engines of its spacecraft to the design of electronic components, saving huge amounts of money and escaping the racket of space hardware suppliers with their insane mark-up schemes where a component costing $2,000 is charged $50,000. Musk's intuition to build recoverable rockets has done the rest: on a Falcon 9 that costs $63 million net, recovering the first stage and fairing saves at least $40 million per flight. This leaves a solid margin for SpaceX, which can also bill 50 million dollars to its private customers and up to 100 million dollars to the US Department of Defense, which always requires tailor-made missions and permanent availability to deal with strategic emergencies. Moreover, SpaceX's commercial contracts stipulate that the Pentagon has priority over the launch schedule.
Incidentally, by choosing to support the new kid on the block, Nasa is better off: industry analysts estimate that if Falcon 9 had been developed according to the production principles used by Nasa's suppliers, it would have cost the US space agency ten times more. Supporting SpaceX was therefore an excellent decision in terms of managing US taxpayers' money.
3. Support from Wall Street
Wall Street believes in Elon Musk, his drive and his industrial efficiency. American finance is fully behind SpaceX, as it supports Tesla and its $1 trillion-plus capitalization, more than the combined value of Ford, Honda, BMW, Daimler, Volkswagen and Toyota.
With a valuation of over $100 billion, and interest rates still low, SpaceX has access to a huge pool of near-free money with which it can take all the industrial risks and consider all the acquisitions as long as they accelerate its developments and outpace the competition a little more (see below).
4. The Starship gamble
Private customers who need to deploy telecommunication or earth observation satellites look first at three parameters: the cost per kilo put into orbit, the flexibility of the launchers to put the spacecraft in the right place at the right time, and finally the reliability of the launchers. SpaceX already ticks all the boxes with its Falcon 9 rocket and its 132 launches in 11 years, a 98% success rate and a variety of payload configurations and mission profiles.
Today, for a mission where a satellite is in "passenger" mode (placed in a pre-defined orbit with hundreds of others), the cost per kilo falls to 5 000 dollars and rises to 10~15 000 dollars for a more specialised launch, whereas Arianespace's Vega rocket will charge 20 to 40 000 dollars per kilo, according to one of its customers. These figures should be taken with great caution because of the number of variables. But satellite operators agree that SpaceX is 30% to 50% cheaper than its competitors.
They also agree that the Starship super rocket will drive prices down dramatically. Once mass-produced, Starship will have a payload capacity of 110 tonnes and Musk estimates that each launch will cost him just $2 million, as the rocket is fully recoverable. That puts the cost of a kilo dropped into low earth orbit at... $18. Even if Musk is wrong, overstates his vision, or wants to maximise his return on investment, he can still drive prices down to $100 or $200 per kilo dropped into orbit, which will vaporise the Western space launch industry. While it will take time for SpaceX to reach a rate of several launches per week to achieve this cost level, the industry has reason to be concerned.
Some analysts temper SpaceX's new paradigm - a huge, low-cost, mass-produced, fully reusable rocket - with the fact that there would be no market for such a payload: finding 100 tonnes of satellites, each weighing a few hundred kilos and wanting to go into the same orbit at the same time, would be an illusion. But that's without taking into account the space tugs that would be embarked in the Starship's nose cone and its 1100 cubic metres of capacity (i.e. about fifteen containers); in practice, these are self-propelled vehicles capable of delivering the satellites to where they are needed, possibly far from the initial orbit. Several companies are working on this concept and it is highly likely that an equivalent project is on Elon Musk's roadmap. In any case, it makes economic sense: to pool the enormous energy expenditure to reach an orbit and to need, by comparison, only a flick of the wrist for final positioning. When the time comes, SpaceX could either develop its own tug itself or shell out a few billion dollars to acquire the first company to develop this technology.
SpaceX thus has all the hallmarks of a tech company capable of unchallenged dominance in its sector:
Low marginal cost of operations
High scalability, unprecedented in the space sector
Ultra-mastered industrial processes
Iron discipline in day-to-day execution
High productivity, well above traditional space industry practice
Systematic commercial aggressiveness - SpaceX will always try to be the best bidder on the contracts it wants to win
An ability to manage different types of risk: SpaceX will continue to 'break' test rockets at a steady pace (the first Starship orbital flight scheduled for January is likely to be a sport), but the company has shown a rigorous record of safety in its manned flights.
Today, it is hard to see what could possibly thwart SpaceX's ambitions. Certainly, space is paved with uncertainties and the level of risk is unparalleled in other tech sectors. In the next ten years, there will inevitably be accidents, including loss of life, and oracles will predict SpaceX’s end.
Not to mention the vagaries of Elon Musk's great dream of colonising other planets. In the meantime...
Frédéric Filloux, Editor, JEDI Episodiqu.es
(Stay tuned for the second part of this series that will look at the lack of response from a space-faring Europe bogged down in its politics and piling up the worst possible choices)