- April 26, 2024
- Posted by: admin
- Category: Emilio Cozzi
The World Economic Forum report outlines a new space economy that is increasingly present in our lives. And capable of producing wealth thanks to decreasing costs and derived applications
BY EMILIO COZZI
An explosion, a boom, a big bang.
Call it what you will, but the space economy will expand unstoppably over the next decade. Figures from the World Economic Forum say so: a global value of $1.8 trillion in 2035, up from $630 billion in 2023. That is an average growth of 9% per year, higher than that of world GDP.
It is good to remember how the phenomenon comes from afar and is not entirely unforeseen. If anything, it is its vigour that is surprising, a ride that will have less to do with hardware and much more to do with the resulting applications. The protagonists will increasingly be commercial initiatives. Prospects that, although ‘depressed’ by contingent reasons (political, emergency, think of Covid or wars) see the gap opening up from a minimum of 1,400 billion to 2,300 billion in the most optimistic estimate.
It is the consulting firm McKinsey & Company that signed the report Space: The $1.8 Trillion opportunity for global economic growth, for the Wef, published at the beginning of April and compiled with the involvement of over 60 opinion leaders from the public, private and non-profit sectors, representing over 15 sectors and most of the world.
The dossier distinguishes two macro-areas: the backbone, or backbone, which includes the construction of hardware, such as satellites and rockets, and the services directly produced by orbiting infrastructure (such as those for defence, geopositioning, communications and broadcasting). The projection for this area starts from USD 330 billion in 2023 to reach USD 755 billion in 2035. The second macro-area is represented by reach, i.e. what branches off from the backbone in terms of – mainly – information exploitation, which from just under 50% of the space economy today (300 billion) will become preponderant with 1,035 billion in 2035.
It starts here.
Derivative services, exploiting the mine
Today, information coming from space is a gold mine: Hundreds of terabytes per day ‘rain down’ into servers (many of which, like the repositories of the Copernicus Sentinels, are free to access and exploit) and generate wealth thanks to software, algorithms and artificial intelligence applications, to provide services even to companies that have historically been detached from extra-atmospheric activities; for example, those that exploit navigation services, such as ride hailing apps (typically Uber) or the delivery of goods such as couriers and drones that bring a parcel or daily shopping to your doorstep. It is mainly this segment that will drive expansion.
For ride hailing, revenues are expected to grow from USD 61 billion in 2023 to USD 300 billion in 2035; vehicle sharing will increase from USD 11 billion to USD 64 billion. Last-mile delivery for perishable goods, food and beverages will grow from USD 100 billion to USD 334 billion. Over the same period, personalised tracking services for entertainment and sports will rise from $2bn to $9bn, boosted by a growing supply of smart wearable devices capable of harnessing data ($5bn in 2023, $20bn in 2035).
Overall, the report says, ‘the space will increasingly become a connection between people and goods’. Five industries – supply chain and transportation; food and beverage; government-funded defence; retail, consumer goods and lifestyle; and digital communications – will generate more than 60 per cent of the increase in the space economy by 2035. ‘Every industry can be an engine for the space economy,’ it is emphasised. But it will also and increasingly be a connection of things to things, given the growing importance of the Internet of things in connecting vehicles, devices and machinery through GPS, remote control and diagnostics into a single network.
On the backbone, communications will remain the main source of commercial revenue, thanks to new constellations, for instance for mobility in remote areas, and will cannibalise traditional demand for larger satellites, growing from USD 133 billion in 2023 to USD 218 billion in 2035. As large constellations such as Starlink, Project Kuiper and OneWeb reach full deployment, the market will benefit from broadband and connectivity applications. Among the few minus figures, an expected decrease in satellite TV subscribers as streaming grows. Satellite broadcasting, however, will remain the ‘hard core’ of the communications sector (from EUR 98 billion to EUR 103 billion) albeit with revenues with a narrower growth margin (4 per cent per year), from EUR 133 billion to EUR 218 billion.
Chips, smartphones and receivers
That space ‘and its derivatives’ will in the future enter our lives more directly is evidenced by another prediction: receivers and chips will become increasingly pervasive, from the inclusion in smartphones – which will communicate with satellites without bridging them with terrestrial antennas (direct-to-device) – to broadband satellite receivers and terminals for aircraft and ships. This segment is expected to grow from the current USD 2 billion to USD 8 billion annually by 2035. Still on the hardware side, devices, miniaturisation and mass production will mean that these chips will be embedded in almost 3 billion devices produced each year in 2035 (up from 2 billion today). And the associated revenues will grow from the current $40 billion to $95 billion annually.
Meanwhile, applications will multiply this value: specific software with user-interfaces will continue to be developed, ranging from simple maps to sophisticated algorithms for real-time routing. ‘Usually monetised through location-based advertising or fees per active user, revenues are expected to grow from $7 billion per year in 2023 to $25 billion per year in 2035,’ the experts write.
Earth observation deserves a separate discussion: today worth two billion, it is one of the less ‘heavy’, in an economic sense, but still one of the most important segments, and promises annual growth of 12 per cent to a value of 9 billion in less than ten years. It will be driven mainly by the sectors of energy supply, agriculture, construction, and environmental and climate services. In this regard, the dossier does not fail to point out how remote sensing and weather services, despite being an almost imperceptible niche within the numbers of big business, play a fundamental role in forecasting, prevention, mitigation and ultimately in disaster response. By helping to safeguard the integrity of buildings and infrastructure, they will save billions of dollars post-event and, more importantly, save thousands of lives.
Space for Defence
Of the backbone applications, derived directly from space, just under half are those funded by states for defence purposes. For decades now, space has been an integral part of military strategies; for the past few years, it has also been the domain of war. Today, 66 billion is spent globally on defence in the ‘core’ space sector; in just over a decade, this will rise to 180 billion and up to 251 billion (from 94 billion today) if derived applications are considered. This is an annual growth rate of 9 per cent, which testifies to the importance of the sector.
The ‘miners’
Counterintuitively, it is some of the few negative numbers that are driving the exponential growth. For example, the cost per kilo of space launches and the production of satellites, which are increasingly smaller in size and with increasingly cheaper components. One interesting fact concerns the price-per-weight forecast for space payloads: 40 per cent less between 2023 and 2035, because launchers will become ‘more reusable and heavier’. In fact, a more powerful rocket has much lower costs per kilogram launched than a smaller launcher, which, it is expected, will take a large share of the market, 70 per cent. This is perhaps the factor that will have the biggest impact on the drop in the price of data (-10 per cent) despite the fact that demand is expected to grow by 60 per cent.
The commercial satellite market is set to triple from USD 4 billion in 2023 to USD 12 billion in 2035, according to the analysis. The supply of space launchers and launch site operations will increase revenues from $13 billion today to $32 billion in 2035. Insurance will also benefit, of course, both in terms of the ‘traditional’ risks associated with satellites, such as those at launch, and new factors, such as cybersecurity and the increasingly pressing problem of space debris. With more infrastructure in orbit, the work and need for ground facilities will also grow. This segment is expected to grow fivefold, reaching 11 billion by 2035.
Among the driving factors, the report also mentions ‘diversification of investments and applications. A wide range of investors have shown interest in the space sector, with private investment reaching all-time highs of over USD 70 billion in 2021 and 2022. Meanwhile, space activities and applications are also becoming more diversified, with applications, such as space tourism, no longer looking like something out of a science-fiction film’.
There is also a cultural issue: space has become part of everyday life, it is talked about in the media and creates enthusiasm and confidence in the future.
Travelling and living in space
So far, unmanned, robotic services and infrastructures, wealth produced by machines working from space have been analysed. Even in the most optimistic of predictions, the space economy of human space travel and exploration will not be able to realise in 2035 what was predicted in the 1960s, with sci-fi cities and planetary colonies.
Just think of space tourism: it will remain a niche, albeit a little more ‘comfortable’. ‘Until 2035, the size of the market is expected to remain limited to around $4-6 billion per year, with the bulk of space tourism revenues coming from in-orbit stays aboard space stations, thanks to the purchase of space travel experiences by very high net worth customers. Suborbital flights are expected to continue and become financially more affordable, but they will only account for a small share of the market (no more than $1-2 billion per year by 2035)’. The outlook might change somewhat if Elon Musk manages to fulfil his promises: to use Starships for journeys of many people in orbit and beyond (perhaps around the Moon, as with the DearMoon project). Costs would perhaps be lowered, to become affordable for the rich and not just for ‘nabobs’. In general, however, it is likely that extra-terrestrial tourism will remain a once-in-a-lifetime experience.
The International Space Station will most likely be ‘retired’ before 2035. By that time, commercial stations such as Axiom’s or Airbus’ Starlab and Voyager Space should already be in orbit and operational. As far as certain commercial ‘ventures’ outside the atmosphere are concerned, according to the experts, there will still be a difficult umbilical cord to sever: ‘annual investments could reach between $2 and $4 billion per year by 2030-35, most of it covered by government-sponsored support and service contracts. Similarly, for lunar and cislunar applications (such as iSpace’s Hakuto-R landers and rovers and Intuitive Machines’ lunar lander), state-sponsored contracts are likely to remain a key factor, with commercial revenues capped at $2 billion per year by 2035′.
From research to patents
In 2023, 16 billion was spent globally on space exploration. This is projected to become 39 in 2035. This is the largest chapter of civil expenditure financed by states, which is projected to reach 140 billion from 59, followed by Earth observation. The increase is fuelled by the ever-increasing number of space agencies (there are about 90 now) through which countries will exploit the new opportunities and reach out with their own instruments, companies and astronauts, outside the Earth.
This will lead to the creation of innovation and secondary revenues through patent licences (from USD 3 billion per year today to USD 6 billion by 2035). ‘As private agencies and companies pursue more public-private partnerships, these will play an increasingly important role in transferring knowledge from publicly funded research centres to privately developed marketable products, as exemplified by Nasa’s Technology Transfer Programme.’