by Michael Barr, Senior Research Analyst, Neuberger Berman
Space-based industry is much more down-to-earth than you might think—and every day it touches more and more of our lives.
Today’s CIO Weekly Perspectives comes from guest contributor Michael Barr.
When supply chains and logistics are stretched beyond their limits here on earth, investing in the space economy can seem like an indulgent misallocation of capital.
In fact, space-based industry has a critical and fast-growing role in solving some of the biggest and most pressing challenges closer to home—including making our supply chains more resilient, producing enough food for the world, enhancing connectivity in an increasingly online economy, and helping to measure and manage climate change.
Why has space-based industry suddenly become so important, and how is it already changing our lives?
For more than 50 years, space was the domain of a handful of governments and research agencies. Sending ever more complex and expensive hardware into orbit demanded ever more expensive risk management, rocketing launch costs north of $100 million in some cases.
Elon Musk founded SpaceX in 2002 with a goal to bring launch costs down, and it sparked a revolution. According to the Center for Strategic and International Studies, all-in launch costs are now 10 times lower than they were 20 years ago. When $2 million or $5 million is at risk, many more commercial businesses can afford to consider the opportunities space opens up for them.
In addition, technological advances have increased what they can do from space. With 10 times the bandwidth, with data latency down from 300 milliseconds to just three milliseconds, and with 100 times better lens resolution, for example, satellites can do much more than broadcast TV and track the weather.
Infrastructure, Enablers, Applications
To delineate the investment opportunity, we think the evolution of the smartphone economy is a good analogy.
That began with the basic infrastructure: Smartphone manufacturers are analogous to businesses like SpaceX and Rocket Lab, the largest commercial launch providers, or to companies that manufacture satellites and their components.
Next came the technology enablers: the app stores that were the smartphone’s new interface. For the space economy, we see an equivalent in the cloud- and edge-computing infrastructure, the remote sensors and the advanced cameras and lenses that enable new in-orbit opportunities for earth-bound (as well as space-based) businesses.
And those businesses, which exploit the new space infrastructure and technology, are the equivalent of the smartphone apps, giving us the third pillar of the investment opportunity, and the space economy’s biggest source of potential growth.
That brings us back to today’s big challenges and the killer apps that space brings to solve them.
Satellite technology can’t open Ukrainian ports or train more truck drivers, but the combination of more satellites, better lenses, faster data speed and bigger datasets enables logistics decisions to be made with a high-resolution, global view in real time. That can make supply chains more efficient day-to-day, but it can also enhance responsiveness when there is disruption, whether due to conflict or to a cargo vessel blocking the Suez Canal.
Similarly, while we can’t open up Ukraine’s grain market from space, over the longer term, precision agriculture informed by satellite insights can make food production more widespread and efficient. Enhanced sensors can gather data not only on weather, but also on the quality, temperature and moistness of soil, which can be fed into automated planting systems that sow seeds in the right place and the right time for maximum yield. This can minimize costs, but also water and fertilizer usage.
Supplementing tower-and-cable technology with satellites also makes it much easier and cheaper to spread connectivity worldwide, even to the most isolated locations. Mobile communications have already transformed the economies of many emerging countries; cost-effective satellite communications can spread those benefits. Ride-sharing and ride-hailing apps have already built huge businesses using space-based global positioning technology; expanding connectivity will make it possible to make those services truly global.
Acting as backup for cellphone tower dark spots, satellite communications with low-latency data transmission can also provide the seamless connectivity necessary to make the Internet of Things a reality. For the first time, for example, owners of remote facilities such as offshore windfarms or oil and gas pipelines will be able to receive constant real-time data on performance and maintenance requirements.
The global nature of our climate and environmental challenges creates a special niche for space-based solutions. Deforestation and changes to sea levels and polar ice caps have been tracked from space for years, but wider satellite coverage, enhanced sensors and high-resolution lenses are now making it possible to measure a whole range of environmental changes at a more granular level.
Companies can now verify, firsthand, suppliers’ claims about the sustainability of their raw materials—by spotting deforestation for palm oil production in specific locations, for example. Our growing ability to measure greenhouse gas emissions from space is revealing just how much we were undercounting emissions in the past, but it also creates opportunities for technologies and data analytics that bring accuracy and fairness to carbon regulation, pricing and taxation.
If the possibilities seem almost endless, that’s because space infrastructure and technology is not only creating new space industries, but expanding the potential of existing earth-bound businesses.
Today’s space economy is worth around $400 billion, and more than 50% is “legacy” activities such as broadcasting and government services. Industry analysts estimate that it could grow to about $1.2 trillion by 2035, almost three-quarters of which would be new commercial activity, including all the possibilities described above.
The space economy has left the launch pad. Luckily, you don’t have to go into orbit to benefit from it—or invest in it.
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