Predictions from Goldman Sachs, Morgan Stanley and other major investment banks about a trillion-dollar space economy by 2040 have been widely discussed in the industry for over five years. Some analysts have loosely defined what counts as a space company, prompting skepticism — for example, does Uber count because its ride-hailing service relies on GPS? However, there is general agreement about significant growth ahead even for traditional space businesses. The exact way and timing for total yearly revenues from satellites, launchers, and what most people consider space businesses to triple from the current $330 billion is uncertain.
Lucas Pleney, a consultant at space research firm Euroconsult, acknowledged that this is a very important question because long-term market projections usually come with a lot of uncertainties.
According to Pleney, the short answer is that it is indeed possible for the space economy to reach a trillion dollars in 16 years, surpassing the growth rate of global gross domestic product (GDP).
However, there is a lot of potential for unexpected “black swan” events that could reduce projections over this timeframe. Despite widespread optimism in the industry, the uptake of connectivity, imagery, and other services from space may happen much more slowly than expected, changing market estimates.
“Reaching the trillion-dollar economy will only happen if [business-to-consumer] markets are widely adopted,” Pleney added, including broadband services from Starlink and other megaconstellations under development.
“If space remains as it is now, it is likely that we will never reach the trillion-dollar mark but stagnate.”
Forecast from the bottom up
After a year of work to get a more detailed view of the apparent growth ahead, researchers from McKinsey & Co. and the World Economic Forum have just completed their own projection for the space economy.
“We didn't really feel like there was a true, bottom-up, use case-based” approach with the facts that “supported whatever number someone would put out,” said McKinsey senior partner Ryan Brukardt.
Their report suggests that the space industry will grow by about 7% per year to reach $775 billion in 2035, surpassing the growth in global GDP by 150%. This would put space on par with the semiconductor industry, which is expected to grow by 6-8% per year into the 2030s.
Although the McKinsey/WEF forecast does not extend to 2040, Brukardt expects the industry to be close to hitting a trillion dollars by then.
And if companies that rely on space like Uber are included, a prime example of what Brukardt calls “reach applications,” the space economy could grow from around $630 billion today to $1.16 trillion by the end of this decade, reaching nearly $1.8 trillion in 2035.
Becoming widespread
There are four main factors driving the expansion of the space economy:
1. Plummeting launch costs. The report says the number of satellites launched annually has recently grown at a rate of 50%, while launch costs have decreased tenfold in the last two decades, thanks in no small part to SpaceX’s rapid cadence and rocket reusability. SpaceX’s Starship/Super Heavy vehicle promises to bring another major improvement for launch availability and capacity, along with other next-generation rockets entering the market.
2. Commercial innovation. Privately funded advancements in technology are making satellites cheaper but more powerful. Companies that observe Earth from space can now identify objects with a resolution of just 15 centimeters, which is a big improvement from about three meters several decades ago.
3. Broader investor ecosystem. The space industry used to be limited to governments and billionaires, but now it has attracted a variety of venture capitalists as well as private and public equity investors. Recently, special purpose acquisition companies (SPACs) have also played a role in bringing young space companies to the stock market. This broader and more active investment pool has led to record funding for an industry that requires a lot of capital.
4. Cultural adoption. The growing geopolitical significance of space, the availability of more affordable services, and the use of standardized protocols that work well with terrestrial networks are increasing people's awareness of space. According to the report, government and business leaders are increasingly interested in the potential capabilities that space could offer in the future.
Show me the growth
The space economy has always relied on government demand, and although there has been significant commercial growth, the report predicts that investments sponsored by states will still make up nearly half of the total market.
Government agencies play a particularly important role in stimulating demand for high-quality products and services. The need to enhance national security and autonomy will continue to drive significant investments from established space nations such as the United States and China.
On the civilian side, the report anticipates increased investments in research and the necessary capabilities to predict and respond to disasters.
Meanwhile, the number of space agencies worldwide is expected to keep growing, having nearly doubled from 40 in 2000. This has significant implications for civil space. The report highlights how the United Arab Emirates, for example, established its space agency less than a decade ago and has already sent an astronaut to the International Space Station and a probe to Mars.
Years ago, there was a belief that commercial funding would surpass government funding in the very near future. However, according to Brukardt, the growth of national security, government, and civil funding is actually expected to outpace commercial funding, which is somewhat surprising. He remarked that the commercial market will eventually