Space: the final frontier
Tianwen-1 on February 10, Al Amal, "hope" in Arabic, on February 14 and Perseverance on February 18. The month of February saw the almost simultaneous arrival of several probes in orbit and on Mars. The first, sent by China, will study the atmosphere and the topography of the red planet; the second, from the United Arab Emirates, will focus on its climate and weather; and the third, sent by NASA, will search for traces of past life on Mars.
The space race was originally the sole preserve of the Cold War superpowers, as the US and Soviet Union vied to put the first man in orbit or on the Moon. It was a way of demonstrating technological prowess and financial firepower, given the vast sums involved. In recent decades however, more and more countries have developed space programmes. We have identified 76, of which 14 have full launch capabilities. According to the OECD, public-sector investment has increased from $52bn in 2008 to $79bn in 2019 and there are now 82 countries with satellites in orbit.
Public sector investment in space took a new turn in 2018 when the Trump Administration announced plans to set up a new branch of US armed forces, the Space Command. As has often been the case with new defence projects, this initiative looks sure to spark investment in new, innovative technologies. Many of these will have peaceful, commercial applications – the Global Positioning System launched by the US Defense Department in the 1970s now powers a host of smartphone apps.
As technology has advanced, costs have declined, putting rocket launch capabilities within reach of the private sector. A few decades ago, launch rockets were expendable while only the Space Shuttle could be used again. Now, reusable rockets can handle multiple launches, greatly reducing costs. The private sector is also developing aeroplane-borne rocket launchers capable of cheaply delivering satellites into low earth orbit.
Indeed, the private sector is now muscling in on some public-sector projects. In May 2020, for example, SpaceX allowed the US to send astronauts to the International Space Station without going through Roscosmos for the first time since the shuttles were retired in 2011. This innovation has allowed NASA to make a nice saving - each shuttle seat cost $170M, Soyuz charges $90M per head while SpaceX is sending astronauts to the ISS for $55M each.
Private sector investment in space is driving innovation in many areas, from communications (the satellite Internet that SpaceX's Starlink constellation will enable) to tourism (via the personal spaceflight that Blue Origin or Virgin Galactic want to offer). The indirect effects of the investments made will benefit a very wide variety of sectors. The OECD notes that significant funds are being spent on environmental projects - for example, sustainable food production is increasingly relying on satellite imagery and geolocation for detailed forecasting, yield enhancement and productivity improvements.
Commercial space activities have grown exponentially in recent years – their revenues are now almost four times larger than public-sector expenditure. According to the Space Foundation, commercial space revenue rose 78% over the past 10 years to $350 billion today, and this growth is expected to accelerate over the next few years - we estimate that commercial space businesses will have revenues in excess of $1 trillion by 2030.
However, space revenues remain modest in global terms – the market capitalisations of US tech giants Apple, Microsoft, Amazon and Alphabet each topped $1 trillion in recent months. And history is littered with examples of failed investments, such as the satellite companies which were launched in the 1990s. Moreover, it is a highly risky field, as shown by the numerous accidents that have marked the history of the conquest of space. Nevertheless, the diversity of applications and business opportunities, the technological advances and cost reductions make us confident in the long-term prospects of this sector.
Space investment has achieved lift-off thanks to rapid technological progress in satellites and rockets and the proliferation of start-up entrants which have disrupted the industry. Diversified exposure across emerging and more established players in this industry should open up a new frontier for long-term investment.
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