New Kids on the Block: How New Start-Up Space Companies Have Influenced the U.S. Supply Chain
Recently, there has been a good deal of attention focused on start-up space companies, particularly in terms of the numbers. From 2000 to 2016, U.S. start-up space ventures reported over $16.6 billion of investment, including $5.1 billion in debt financing. Over 140 angel- and venture backed space companies have been founded and funded since 2000. But there is much more to the story. In the U.S., start-up space companies are changing a space supply chain that can trace its roots all the way back to World War I.
The space industry supply chain built upon the robust manufacturing infrastructure forged during WWI, incubated during the Golden Age of Aviation, and unleashed during WWII. Tapping resources and skilled labor from this fertile base, the newly established Department of Defense funded research and development of ballistic missiles, nuclear warheads, and satellite technology. Soon after NASA was formed in 1958, the ballistic missiles gave rise to powerful launch vehicles used to send satellites into orbit and probes to the Moon. NASA eventually financed and operated missions involving even more powerful launch vehicles to carry astronauts to the Moon and probes to the planets. During much of this history, companies built machines and wrote software under contract for the government, the owner and operator of the resulting technologies.
What had evolved was a supply chain consisting of many companies manufacturing products that can be grouped into five tiers. A complete system, like a launch vehicle or a satellite, falls under Tier 1. Tier 2 consists of subsystems like propulsion or structures. Assemblies like computers, batteries, and antennas fall under Tier 3. Amplifiers, battery cells, gyros, solar cells, and a huge number of other components and parts constitute Tier 4. Finally, all the other hardware and material, from resources extracted from the Earth to simple products like gaskets and ball bearings, make up Tier 5. As it turns out, companies can manufacture products up and down this five-tiered paradigm; for example, Orbital ATK can not only build a complete satellite, it can also design and manufacture assemblies and even Tier 4 components and parts.
Things started to change in the 1990s as efforts to streamline operations, save money, and free up resources for research became primary concerns of the government. Companies were formed to operate communication satellites and provide services to customers worldwide. Companies were established to provide launch services to satellite operators. By the late 1990s, companies were formed to operate Earth observation satellites for profit. Other companies had plans to provide satellite-based access to the newly available Internet, but these visions failed as markets were either non-existent or ill defined. Despite these developments, the supply chain remained largely unchanged and the main customer was the U.S. government – the anchor client.
But a funny thing happened after the turn of the century. Entrepreneurs, most with no experience in aerospace, entered the scene to leverage their business acumen and desire to change the way the world works. Start-up companies focused on launch services using partially reusable vehicles sprung into existence, designed and built by engineers gathered together under the leadership of CEOs that proved themselves in the software industries. Others found inspiration in low-cost, cube-shaped, miniature satellites originally developed by universities for research; many companies sprung up to design, build, and deploy constellations of these CubeSats to image the entire surface of the Earth many times a day and provide data to hungry customers in industries far and wide. Against this backdrop are emerging markets like commercial human spaceflight and the identification of non-terrestrial resources. Has this new era of space activity changed the nearly century-old aerospace industry supply chain? The short answer is yes.
Bryce studied the impacts of start-up space companies on the U.S. space industry supply chain in two parts. First, we used surveys to investigate a hypothesis: Start-up space companies have influenced the U.S. space industry supply chain by lowering prices, increasing quality, increasing delivery speed, increasing geographic distribution, and introducing new manufacturing techniques. The survey results suggest that start up space companies are influencing the space industry supply chain, but that the impact is subtle and gradual. Not dramatic and sudden. For example, two-thirds of respondents said prices have either stayed the same or decreased, an overwhelming majority said quality stayed the same or improved, about 80 percent said delivery speeds increased or remained about the same, and most said there was no discernable change in the geographic distribution of their suppliers. Indeed, the vast majority or respondents said start-up space companies have had a negligible or positive impact on the supply chain overall.
Second, we used the surveys, interviews, site visits, and secondary research to study any trends that might have emerged as a result of start-up space companies interacting with the supply chain. We found seven such trends:
- start-up space companies tend to be vertically integrated;
- many start-ups are manufacturer-operators;
- there are substantially more small team innovators;
- start-ups tend to leverage commercial-off-the-shelf (COTS) components more than their more traditional counterparts;
- manufacturer-operators seek to warehouse systems and subsystems;
- reusability of space systems is a key aspect of cutting service costs; and
- start-up space companies are inclined to use additive manufacturing to streamline costs and schedule.
But what does all this mean for America’s space industry? The capability to produce parts and tools through rapid prototyping for evaluation and testing, followed by the production of operational hardware via additive manufacturing, all supported by easy to obtain and use information technology solutions, means that virtually any organization or individual with the financial means can produce parts for a space system. Put simply, we are seeing real signs that the U.S. space industry is evolving from one characterized by custom-built goods for a few customers (an artisan industry) to mass-produced, customized precision goods for many customers (a mass production industry).
To find out more, download Start-Up Space 2017: Update on Investment in Commercial Space Ventures, recently published by Bryce Space and Technology.