Report: Space economy at growth “inflection point”
April 5, 2023
By Chris Forrester
A management report from McKinsey says that the space sector is at an “inflection point” – similar to what commercial air travel experienced after World War II and the internet saw in the 1990s.
“When we speak about space with CEOs across geographies, industries, and backgrounds, we receive a range of reactions. For some, space is the stuff of science fiction, easily dismissed as a national-security domain dominated by a small number of governments. For others, space is the lifeblood of their institutions. Imagine ride hailers operating without the benefit of global positioning satellites, which provide the turn-by-turn directions that drivers need,” says McKinsey’s report.
But it stresses what it describes as “Massive technological innovation is creating the opportunity for more capabilities to be deployed above Earth for the benefit of those on Earth.”
“We assert that space is a timely topic for all leaders. Today, the space economy is valued at nearly half a trillion dollars and is growing at about 9 per cent annually. Massive technological innovation is creating the opportunity for more capabilities to be deployed above Earth for the benefit of those on Earth. These capabilities – and the prices at which they can be delivered – could provide the linchpin in solving hard problems not only for businesses but also for civilisation and the health of the planet,” states the report.
“The cost to access space long proved prohibitive, undermining commercial-business cases. Only recently have we seen significant acceleration down the cost curve: launch costs have fallen 95 percent (with another massive reduction expected in the coming years) thanks to reuse, improved engineering, and increased volumes,” adds McKinsey.
The report continues: “The world is in the midst of another acceleration down the cost curve, as satellites become less expensive and harness the scale of commercial electronics – think cameras from mobile phones and semiconductors used in autonomous-driving systems – to generate huge capability improvements per size, weight, and power. In turn, space systems’ increasing reliance on software is reducing the physical size of space assets. Smaller satellites mean less weight to orbit and more capability when the satellites get there. The smaller size also manifests in vastly improved cost performance over time – often to a much greater extent than seen with other technologies.”
McKinsey adds: “While the US government remains the primary source of funding, private companies, especially new space players, have substantially increased their investment in recent years. Private-sector funding in space-related companies topped $10 billion in 2021 – close to a tenfold increase over the past decade (2022, despite much angst, had the second-most inflows in history). If the current momentum continues, commercial funding for space ventures could surpass government funding in the next 20 years. We have seen this same trend occur during the early days of mass commercial air travel (enabled by government investment in aviation during World War II) and the internet (originally conceived as a national-security network in the US.”