SpaceX Evolution (Chapter 6)
SpaceX Evolution (Chapter 6)
A serialized version of this book for SubStack
CHAPTER 6: SPACEX MAJORITY
While the setup at any Musk company appears close to ideal, that in no way guarantees their success in reaching their stated goals. There are always external factors which might weigh against such bold endeavors, particularly as they are so disruptive to the status quo. For a decade or more, many in the media have been jaundiced when reporting on Elon’s companies, and political support has been...elusive; which could be perceived as a potential weakness. However, media outlets and politicians are both highly reliant on Twitter, because it’s a powerful way to reach their target audiences. Of course both groups were fairly dismissive over Musk’s bid to takeover Twitter, right up to the point where it was a done deal. Now they have to think twice when dealing with Elon because they have no idea how he or Twitter might react to their more vitriolic outpourings. All told, a perfect demonstration of soft power. At a stroke Elon overcame two potential stumbling blocks to future expansion, which now seems boundless.
SpaceX Expansion
Due to their more integrated approach, SpaceX have become extraordinarily efficient and effective in all their operations. This has resulted in unprecedented dominance in their primary business area, i.e. providing commercial launch services.
Currently most legacy providers have retreated from the commercial launch market and now service civil or defense customers from their native countries, boutique clients, or the odd satellite customer who wants to compete with SpaceX’s Starlink constellation to provide ubiquitous internet. Even so SpaceX are winning a significant share of the defense launch market, particularly in the US, where they have become a primary launch provider for the Space Force. Similarly NASA now depends heavily on SpaceX capabilities, which have been tailored to meet their requirements. Here’s a list of the programs where SpaceX have become indispensable to the overall space effort: -
International Space Station Cargo and Crew – the majority of goods and astronauts sent to the ISS are carried by SpaceX’s Dragon spacecraft. Following the first operational Crew Dragon flight, Gwynne Shotwell confirmed they should perform seven Dragon missions to the ISS in the following 15 months,1 more than all other providers combined. At present Crew Dragon is the only commercial means to launch astronauts to the ISS. Estimated ISS revenue ~ $1bn p.a. from 4 flights on average.
Lunar Gateway – NASA intends to operate a space station in orbit around the moon, as a platform for deep space science and staging post for the moon and Mars. SpaceX’s Falcon Heavy rocket is currently the only commercial vehicle powerful enough to carry the two primary modules of this station to lunar orbit, which is slated to fly in 2024. In addition they have been contracted to provide cargo flights to the Gateway station for the first twelve years of operation, again making them sole provider. Estimated Gateway revenue: ~$400m p.a. long-term
Artemis Base Camp – NASA plans to send astronauts to the moon’s South Pole region by 2025 as part of their Artemis program, the first step towards building a sustained lunar base.2 SpaceX have been contracted to produce a Human Landing System (HLS) based on their Starship vehicle, and agreed to share development costs with NASA. This will likely lead to a long-term contract for HLS operations in cislunar space, which could only be fulfilled by SpaceX, given the time constraint. Estimated HLS revenue: $1bn p.a. long-term.
Lunar Cargo – NASA’s Commercial Lunar Payload Services (CLPS) program will send small payloads, like rovers and in situ science instruments to the moon to support Artemis, beginning late 2023. This program is handled on a commercial basis so five out of six of these landers will be carried by SpaceX. Estimated lunar launch revenue: ~$100m p.a. long-term
Commercial Passengers – SpaceX sent their first civilian passengers to orbit on the Inspiration4 Dragon mission in September 2021, followed by the first civilian mission to the ISS in April 2022. These are the first of many such dedicated civilian flights, again a service offered by no other provider. Estimated passenger revenue: ~$400m p.a. from 2 flights minimum
Cislunar Cruise – Of course SpaceX are offering to use Starship for cruises to the moon for more adventurous tourists. This service should commence in 2025 with the #Dearmoon mission, which should carry 9 talented individuals around the moon, plus a small SpaceX crew. No-one on Earth could hope to compete with the price of this service, nor offer comparable cruise liner conditions, leaving this market solely in the hands of SpaceX for the foreseeable future. Estimated revenue from cislunar cruise: ~$250m p.a.
Intercontinental Travel – Long haul air travel is a highly lucrative segment of the air transport market. SpaceX intend to use a ballistic version of Starship to perform both civilian and military flights in the near future.3 These would be capable of delivering military materiel or commercial passengers anywhere in the world in less than an hour, with this service operating 10 or more times a day, at competitive rates to normal aircraft. If successful they would be the only company capable of delivering such a service, likely for decades to come. Once established this should generate more revenue than all their other launch services combined. Estimated revenue: ~$100bn p.a. long term.
Starlink – Military, civil and commercial users are all intent on using SpaceX’s Starlink service, which can deliver high speed low latency internet anywhere in the world (like a wifi router for planet Earth). This service alone should provide SpaceX with a magnitude more revenue than all of their other activities combined – at software margins! SpaceX’s early entrant advantage, continuous improvement to service and low cost should guarantee their dominance of the satellite internet market. How much is it worth to provide internet to almost every household, business and AI on Earth? Estimated Starlink revenue: $1tn p.a. long term.
“The total addressable market for launch, with a conservative outlook on commercial human passengers, is probably about $6 billion. But the addressable market for global broadband is $1 trillion. If you want to help fund long term Mars development programs, you want to go into markets and sectors that are much bigger than the one you're in, especially if there's enough connective tissue between that giant market, and what you're doing now.” ~ Gwynne Shotwell, SpaceX COO/Via Satellite4
Starshield – As a side project SpaceX will design, develop and deploy a secure communications and surveillance constellation for the US DoD, called Starshield. This should allow high bandwidth communications via hand receivers, and continuous monitoring of the EM spectrum anywhere on Earth. The large number of satellites involved (initially ~800) should make this constellation highly resilient, hence invaluable to the US military. Estimated Starshield revenue: $1bn p.a. longterm.
X-Factor – SpaceX have many irons in the fire which should seriously strengthen their market position in the long run. These seminal space capabilities could allow them to forge entirely new markets of enormous scale as they ramp operations. Here is what’s known about their efforts to expand space enterprises...
Following his success with Inspiration4, Jared Isaacman has partnered with SpaceX to create the first private space program, called Polaris.5 Jared is a businessman who followed his passion for computing and performance aircraft to found the successful companies: Shift4 payments and Draken International. Now, through the Polaris Program, he intends to extend commercial capabilities to space walks, satellite servicing (starting with the Hubble Space Telescope6) and trail-blaze crew Starship operations. No doubt he plans to recoup his financial outlay through some future space enterprise, such as operating a commercial space station in LEO, to provide comprehensive space services (e.g. tourism, debris removal, satellite maintenance, commercial research etc.). And no doubt SpaceX would play a substantial role in any new market given Starship’s unequaled launch capacity and marketable cost.
NASA has long sought to create a sustained moon base dating back to the Apollo era. Recently they made considerable progress with the Artemis Program, which plans to land astronauts at the lunar south pole, an ideal location for any lunar settlement. SpaceX are supporting this effort through providing a Human Landing System (HLS) based on their Starship vehicle. However, this HLS vehicle can carry far more payload (~200 tonnes) to the lunar surface than NASA will require for at least a decade… Proceeding in parallel, SpaceX’s plans to colonize Mars are already well advanced, including hardware development such as ISRU equipment, energy storage/generation, surface vehicles and pressure suits. No doubt they intend to trial some of this equipment on the moon, creating in effect a prototype space colony. Given the growing interest in all manner of cislunar activities (tourism, resource mining, national defense, propellant production etc) a SpaceX engineered settlement, bored deep underground, could present a considerable commercial opportunity in the not too distant future.
With SpaceX’s head-start in space technology, accelerated development and diverse resources, they look likely to take the lion’s share of these emerging markets. The value of these X-factor enterprises is difficult to assess, depending on the demand from commercial, civil and defense customers as well as service prices. Certainly if either market materializes they will be worth $billions p.a. over the long term.
Company Value
if all these commercial applications pan-out for SpaceX their yearly revenue should exceed $1tn, roughly 10 times their current market valuation. If we assume a 10X ratio for enterprise value-to-sales (reasonable for a high margin business) this suggests SpaceX should eventually be worth $10tn…
That’s one huge company but in all likelihood Tesla will be worth more, mainly due to its dominance of the auto market. No one comes close to their accomplishment with Full Self Driving (FSD) software, which offers to open a robotaxi market worth over $1tn p.a., in addition to their auto production and energy management business. Likely the other Musk enterprises will be close behind, a virtual phalanx of new-tech companies, who together will ford commercial moats and force technologic growth. Overall this sounds great news for the US economy but the truth is no single country could hope to contain such a cornucopia of wealth generating companies; more than likely the economic benefits will spread throughout this world and far beyond...
Link to next installment: https://chrisprophet.substack.com/p/spacex-evolution-chapter-7
2https://www.nasa.gov/sites/default/files/atoms/files/a_sustained_lunar_presence_nspc_report4220final.pdf
3 https://spacenews.com/spacex-wins-102-million-air-force-contract-to-demonstrate-technologies-for-point-to-point-space-transportation/
4 http://interactive.satellitetoday.com/via/may-2021/a-conversation-with-gwynne-shotwell-2020-satellite-executive-of-the-year/
https://polarisprogram.com/
6 https://spacenews.com/nasa-and-spacex-to-study-possible-private-hubble-servicing-mission/