Blain’s Morning Porridge – Jan 11th 2023: Space – The Next Tech Bubble or the Final Frontier?
“The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.”
This morning: The failure of Virgin Orbit to achieve the first successful satellite launch from the UK is disappointing. It puts the opportunities for space business under the spotlight. There is money to be made, but how, and by whom?
Dear Readers – Apologies for some missing and late morning porridges recently.
I have caught the winter flu. I’m not feeling particularly sick, but I have a cough that just won’t stop. Its particularly bad at night – hence the recent missed comments. Normal Service will be resumed asap!
BB
Space – the next Tech Bubble or the Final Frontier?
Monday was a disappointing night for the embryonic UK launch industry when the first ever space launch from the UK ended up with a big splash somewhere in the Atlantic. Virgin Orbit successfully dropped a wing-carried rocket from it repurposed Jumbo Jet “Cosmic Girl”, which fired its first stage, accelerated to 13k kph, but something went wrong with the second stage. Millions of pounds worth of Satellites tumbled into the Ocean or burnt up in the atmosphere.
More to the point, the launch failure was a devasting opener to the UK’s campaign to establish itself as a player in the potential $1 trillion plus commercial satellite business – although the UK Space Agency and the Cornwall Spacesport are making all the right noises about carrying on with further launches. (There are questions whether Virgin Orbit – a small scale operation – has the clout or the financial viability to remain in the game.)
The lost satellites included the fascinating Space Forge, an experimental micro-factory in zero-gravity designed to make new metal alloys and materials for use in green tech and computing. Other areas for the burgeoning satellite industry include monitoring of climate change, the environment, biodiversity, data mapping, weather monitoring and tracking, alongside the military applications for “surveillance”, and commercial communications – where the Elon Musk “Starlink” constellation of Low Earth Orbit (LEO) units is already providing service, and has been hailed as a game changer by the Ukraine Military. (I have heard from sailing chums using Starlink while crossing oceans is “variable”, and the equipment expensive and not rugged enough – with spares difficult to access.)
The failure of Virgin Orbit’s to deliver its load of satellites is a massive disappointment, but it happens. Space launches are notoriously difficult – and a large number fail because something very small in the very complex rocket systems fails. According to the Torygraph Virgin Orbit assumed 4 of the 17 launches it planned from Cornwall through to 2030 would fail. Most satellites are insured.
Developing a launch capability for the UK is economically critical for the UK. The space sector employs over 50,000 skilled workers and contributes over £16 bln to the economy. The UK is the second largest manufacturer of satellites after the USA – with a significant portion of the industry for Low Earth Orbit birds around Glasgow and the University of Strathclyde, where new rocket builders, Orbex and Skyora are planning launchers.
It’s a fascinating business – miniaturisation means satellites have gone from coms units the size of a double decker bus to the size of a shoe-box. It means even the small Virgin rocket was able to carry 9 satellites. SpaceX can deliver over 50 of Musk’s Starlinks in a single launch (greatly annoying skywatchers as they distract and block views of the stars.)
I should write this in quiet small letters in case a Brexiteering ERG Tory minister reads it, but the UK remains part of, and a net contributor, to the European Space Agency – it makes sense; no small nation with a budget crisis has the wherewithal to drive the massive investment a space programme would require. However, the UK is at the forefront of the European space industry.
A few years ago I was closely involved trying to finance a plan to build Prestwick airport into a spaceport using a launch system similar to Virgin Orbit. The imperative behind the deal was the lack of commercial launch capacity for the increasing number of satellite launches. That seems to be easing. And the infrastructure is developing. The Cornwall Spaceport is up and running, SpaceHub Sunderland is set to become a proper vertical rocket site, while the SaxaVord site in Shetland could launch this year.
The biggest player in the Space game is SpaceX. It has been launching rockets into the deep blue for nearly 15 years. Musk was a founder in 2002, investing his own cash and private money. It’s now gone stratospheric – with an implied valuation of $137 bln (based on a recent cash raise), making it, potentially, the third most valuable Aerospace firm after Raytheon and Boeing.
Many observers think it will soon be IPO’d, and in light of Musk’s loss of value in his Telsa Stake, his share of SpaceX could boost him back up the rich list – if the market still worked that way; believing everything he utters or tweets about his own brilliance. Clue: it does not. In fact; Musk owns 42% of SpaceX now following several cash raising rounds.
SpaceX launched over 60 rockets in 2022, and has a massive programme in place to launch its own Starship rocket this year, perhaps take tourists and other commercial interests around the Moon, and support Nasa’s programme for the 2025 Artemis Moonshot programme. The first Starship orbital flight is set to go – although they are still blowing up more often than seems safe to me….
Perhaps even more interesting than SpaceX would be taking the Starlink internet system public. Musk has said that’s still years away, but SPAC guru Chamath Palihapitiya says it would make sense to do it now. Perhaps giving Musk breathing room as Tesla crashes in value, and his reputation for deal brilliance is consumed by Twitter? Just saying….
There is certainly business out there for SpaceX. It has now launched over 80 satellites for Starlink competitor, the UK Govt owned OneWeb – which plans a constellation of 648 satellites to provide internet service around the globe (502 are already up). The Russians stopped their launches in March after the Ukraine invasion, and it says something they’ve been able to find capacity from SpaceX, and the Indian NewSpace (NSIL) to launch 3 missions.
Meanwhile Space X is launching rockets like it was 5th November/4th July rolled into one. More of its own Starlink internet satellites, more Dragon missions to the Space Station, sending a Japanese lander to the moon, as well as larger communication satellites for other users. In just a few years one of their Falcon 9 re-useable rockets has completed 14 missions – the venerable Space Shuttle Discovery made 39 flights over 27 years.
2 years ago I wrote how SpaceX could become one of the most important companies ever… driving competition to commercialise space. I think its worth sharing some of the things I wrote:
- “I am massively enthusiastic about the possibilities of the space industry – and SpaceX, much like Tesla was in electric vehicles, is way ahead in the sector. I also reckon Space is a massive commercial opportunity – and if you believe in disruptive tech, then you should be invested.
- Space X, is a much, much more important company than Tesla. The EV maker simply improved existing battery and powertrain technology, dressed it up as disruptive innovation, and went on the make itself, briefly, among the most valuable companies on the planet. Now it’s becoming clear Tesla faces enormous competition in the space it’s created. Tesla will survive and no doubt thrive – but it’s unlikely to change the world as conclusively as we once thought.
- Musk sees the commercial value in space very clearly. SpaceX is not just him joyriding and planning his eventual departure to Mars. Musk perceives massive value from SpaceX as the launch system for his Starlink system of over 12000 LEO satellites providing space-based internet to anywhere on the planet. What SpaceX shows is the commercial reality of space. It is monetizable. It will be worth billions.”
Now I am not so sure.
I wonder if Musk’s success will again be his failure. Space X is brilliant. It’s not just built brilliant reusable rockers, but shaken the Nasa bureaucracy and design stultification to the core. It’s woken the globe to the opportunities to innovate and launch. It’s spurred new companies around the world to see what can be done. I will be properly impressed when a SpaceX Starship lands a mission on the moon, but there will be other engineers out there who see opportunities to make what SpaceX does but better..
SpaceX is not going to be a monopoly in Space, just like Tesla is no longer a monopoly in EVs. But Space is a real business…
Five Things To Read This Morning
FT – Virgin Orbit scrambles to establish why first UK satellite launch failed
BBerg Elon Musk Might Never Be The World’s Richest Person Again
FT Battered 60-40 portfolios face another challenging year
WSJ Bank Earnings to Put US Economy Under Microscope
Zerohedge Market Downside and Tesla: Mark Spiegel
Out of time, and back to the day job
Bill Blain, Strategist, Shard Capital