“Future lunar economy” has companies running a new space race

During second-quarter earnings calls, space company executives discussed the market expansion that the new space race is driving. Governments and the private sector are investing in projects to secure rare metals and resources found on the moon, which can be used in new technology and further sustainable energy. Governments are also racing to establish infrastructure on the moon to secure satellite constellations, which provide vital geopolitical intelligence used in modern warfare. Executives highlighted the U.S. government’s increasing demand for commercial space technology. These products have prices that the commercial market establishes, and they can be procured using contracts with fewer regulatory burdens than products that are only for governmental use. While supply chain constraints are easing in the space market, companies that focused on strengthening their logistics during the pandemic are now positioned to meet customer demand expectations. Three themes emerged from the earnings calls, transcripts of which were provided by Bloomberg.

Market expansion

Executives highlighted the importance of the new space race in the expansion of the space market. The U.S., China, Japan and India, along with the private sector, view the moon as a critical component of securing rare resources, furthering sustainable energy, and securing satellites. Peter Cannito, CEO of Redwire Corp., referred to the company’s recently announced award to develop trailblazing systems to build landing pads, roads and other forms of infrastructure on the moon. Cannito said: “The future lunar economy, based on a permanent presence on the lunar surface, will bring significant benefit to humanity, and for developing lunar infrastructure solutions to support this critical mission.” Government spending is on the rise. Marc H. Bell, CEO of Terran Orbital Corp., said the U.S. organization for licensing satellites has received 60,000 applications. Many nations are investing in their own satellite constellation and transfer layer. Even amid economic uncertainty, the space market continues to grow. John Rood, CEO of Momentus, Inc., cited the Space Foundation’s Annual Space Report, which stated that the global space economy grew by 8% in 2022 to $546 billion. The Space Foundation also estimated that total space spending by the U.S. Department of Defense—covering both classified and unclassified spending for all military branches and intelligence agencies—grew to $42.9 billion in 2022, a 21% year-over-year increase. Space companies are positioning themselves through their security, performance and reliability. They are differentiating themselves through advanced intelligence, monitoring capabilities and scalability to capture the expanding market.

The role of commercial products

As countries continue the new space race, the U.S. government sees commercial products as critical for its geopolitical intelligence strategy. Commercial products are faster to procure because market competition drives the price, reducing purchasing regulatory burdens. Brian O’Toole, CEO of BlackSky Technology, Inc., said geopolitical intelligence drives the increased U.S. government demand. O’Toole said the government is looking for “commercial imagery and analytics through the expansion of projects that are utilizing the capabilities of commercial space companies in support of their space-based geospatial intelligence requirements.” He said countries are looking to procure commercial capacity while taking advantage of AI-enabled analytics to support global missions. To learn more about space technology, visit RSM’s government contracting page. Momentus CEO John Rood said his company utilized its core technologies from a commercial satellite, rebranding the technology as a dual-use satellite that can be tailored to meet commercial and U.S. government needs. Commercial companies are positioned to serve the U.S. government quickly, taking advantage of the latest technology and creating flexible, low-cost alternatives to support the government’s expansion of its space presence.

Supply chain challenges

Due to the pandemic’s impact on the economy, many companies put significant effort into optimizing their logistics. David Kagan, CEO of Globalstar, Inc., said: “All the supply chain issues have been resolved, and the company is in full production.” Kagan, who recently announced his retirement, said Globalstar’s goal is to build six months of safety stock for each of its main products. Many companies are moving away from just-in-time inventory and looking toward inventory strategies that reduce the risk of stockouts. Companies that optimized their supply chains during the pandemic are strategically suited to meet increased customer demand for shorter lead times. Companies that did not adapt as quickly are still struggling to meet customer demands. Peter J. Gundermann, CEO of Astronics Corp., said: “It still is a situation where our customers want to be able to place orders and get parts in 20 weeks in many cases, but the components that go into those parts for us have 40- or 50-week lead times.” The space market is not immune to the increasing demand of customers for shorter lead times. Customers expect a level of safety stock and are not as willing to wait for the full lead time for products.

The takeaway

As countries race to expand their space presence, the commercial market is positioned to capture the market expansion by offering governments faster procurement of the latest technologies due to their open-market-driven prices. Space companies that have dual-use product offerings are investing in innovation and optimizing their supply chain. They will be better positioned to capitalize on the increased market demand. Jenn Randles and Craig Romanick contributed to this article.