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Space industry is on its way to $1 trillion in revenue by 2040: Citi

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On February 3, 2022, a Falcon 9 rocket will carry 49 Starlink satellites into orbit.

SpaceX

Citigroup analysts have stated in a detailed report that by 2040 the industry’s annual revenues should be $1 trillion, and launch costs will drop 95%.

The bank stated that a further drop in space access costs would open up more possibilities for technological innovation and expansion, and unlock more services such as satellite broadband or manufacturing.

Citi’s industry forecasts are consistent with those published by Citi in the recent years. Morgan Stanley, Bank of AmericaOther. According to a report by The Guardian, the global space economy was valued at $424 billion in 2020. research from Space FoundationSince 2010, the company has grown by 70%

Citi stated that the bulk of revenue growth will come from satellite industry, including manufacturing and launch services. The fastest rate of growth will be seen in the new industries and space applications, where revenue is forecast to increase from zero up to $101 billion.

Over the last decade, private investment has consistently broken records in terms of annual record, particularly from venture capital. Space infrastructure companies received $14.5 million in private investment last year. to Space Capital’s quarterly reportThe company tracks approximately 1,700 companies.

Space companies have been going public in a flurry through SPAC transactions last year, however most stocks remain undervalued despite industry growth. There are many other factors that could affect the success of these companies. shifting market environment, with climbing interest rates hitting technology and growth stocks hardSpace stocks have also dropped in recent years. About a dozen companies in space have seen their shares drop by 50% since they were founded.

Despite Citi’s optimistic outlook, the firm emphasized that much remains speculative in the industry, “such as space-based solar power, moon/asteroid mining, space logistics/cargo, space tourism, intercity rocket travel, and microgravity R&D and construction.”

The analysts stated, “An analogy similar would be to attempt to predict the value of internet today versus almost 20 years ago,”

The launch costs are falling

Citi believes that a $1 trillion space economy could be achieved through lower launch costs. This is about 40x less than what it claims.

The typical cost of rocket launches is calculated on a dollar/kilogram basis. Citi observed that from 1970 through 2010, the average rocket launch cost was around $16,000 for heavy payloads while it hovered at $30,000 for light ones.

According to the bank, the steep decline in cost was due to the private sector. Citi noted that SpaceX was the one to pioneer lower launch costs with Falcon 9’s 2010 launch. Rocket’s average cost per kilogram dropped to about $2,500. This is 30% lower than NASA Space Shuttle’s and eleven times less than previous historical averages.

Citi noted that “Fundamentally with the new space driven by the private sector, the launch business is experiencing a shift from being largely price-plus pricing-based, to being value-based, in order to expand new markets and maximize profit.” The launch market was dominated by a small number of companies supported by the government that were focused more on creating new revenue streams and job creation than increasing operational efficiency.

Reusing booster rockets to boost launches is becoming more common, driving down their cost. Citi projects that launch costs will drop to $30 per kilogram in the best case scenario. The firm stated that rockets could still be reused approximately 10 times each per year by 2040, as SpaceX has done. This would bring down the launch cost to $300 per kilogram.

Satellite boom

Citi states that satellite markets make up more than 70% of the total space economy. Citi also says there is a “paradigm shift” in the demand for this sector.

Satellite revenue has largely come from television and other services. However, the bank expects to see an expansion in application areas such as consumer broadband, mobile connectivity, internet-of-things network applications, and more.

According to the bank, SpaceX’s Starlink satellite network and its vast array of networks are worth their attention. Amazon’sProject Kuiper will speed up this transition through greater accessibility to internet services all over the globe.

Citi is also seeing strong growth in satellite imaging, which Citi estimates accounts for approximately 2% (or $2.6 billion) of the world’s current space economy. Citi predicts that the sector will grow due to space-as-aservice applications and reach $17 billion annual sales in 2040.

Space junk and regulations

The firm stated that expanding the space economy will not be simple. They noted the risks associated with the harsh space environment, high upfront costs, and long time to realize returns from space projects.

Citi spoke out against the idea that space is merely a hobby for billionaires. The industry must be accepted by the public before being adopted in other industries. The firm stated that while private investment has helped lower the cost of space access, it is still possible for the public to perceive space as a hobby of billionaires.

Citi pointed out that human spaceflight has a lower failure rate than crewed launches historically. However, Citi noted that that is still “far too high” to be considered space passenger flights. This was due to the fact that commercial aviation has a failure rate of 0.0001%.

Citi pointed out that regulatory risk is another problem facing the industry. Space companies are regulated by several international and federal agencies.

Space junk is another threat. Citi noted that space junk is “a rapidly increasing threat to satellites currently in orbit, future launches, and the expansion opportunities within the space ecosystem.” Tens to thousands of artificial objects can be found orbiting the Earth. Others are smaller than expected, and are therefore not possible to track.

“This increases the risk of the ‘Kessler Syndrome’ becoming a reality — the idea that space junk in orbit around the earth, with no air resistance to slow it down, will reach a saturation point where it simply collides with other space junk and fragments into smaller pieces, until it eventually creates a debris field that stops any new satellites from being launched,” Citi said.

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