Space, MCKinsey: “$1,800 billion growth opportunity for the global economy”
“The aerospace industry is experiencing unprecedented growth, with innovative developments occurring week after week. From testing new rocket systems to launching advanced satellites and robotic exploration missions to the Moon, activity in space is accelerating and transforming our world. The space economy is expected to reach a value of $1.8 trillion by 2035, up significantly from $630 billion in 2023 and growing at 9% per year.” This is what emerges from an analysis by McKinsey.
“This boom it does not only concern traditional 'backbone' applications, such as satellites, launchers, services such as broadcast television or GPS, but also those that we define as 'reach', i.e. those for which space technology helps companies in all sectors to generate revenues. Uber, for example, relies on the combination of satellite signals and chips inside smartphones to connect drivers and passengers and provide driving directions in each city”, emerges from the investigation. “In 2023, backbone applications – continues McKinsey – represented $330 billion, or just over 50%, of the global space economy, while applications reach accounted for $300 billion. The projected annual growth rate for backbone and reach applications significantly exceeds the projected global GDP growth rate for the next decade.”
“Growth drivers of the space economy include the need for greater connectivity through satellites, increased demand for positioning and navigation services on mobile phones and increasing demand for analytics powered by artificial intelligence and machine learning. These innovations are providing greater benefits to a much more diverse range of stakeholders than ever before, including companies in sectors ranging from food and beverage to transportation. They could also help solve some of the biggest global challenges, such as climate change,” the survey reads. The survey also highlighted that: “the impact of space will increasingly extend beyond space itself.
The share of the overall space economy gained by incumbent providers of space hardware and services will gradually decline to the benefit of non-traditional providers such as ride-hailing appswhich would never have reached a global scale without satellite technology that connects drivers and passengers and provides navigation services.” And again “space will increasingly become a means of connecting people and goods. Five sectors – supply chain and transportation; food and drink products; state-funded defense; retail, consumer goods and lifestyle; digital communications – will generate an increase of over 60% in the space economy by 2035. Furthermore, nine other sectors will record space-related revenues of several billion dollars, creating opportunities for traditional and non-traditional players”.
In addition to generating revenue, space will play an increasingly crucial role in mitigating global challenges, from disaster warning and climate monitoring, to improved humanitarian response and greater prosperity. Collaboration between public and private actors will be key to ensuring that the resources offered by space reach this potential. While there are differing opinions on the extent to which space-based and space-enabled applications have already reached an inflection point, space is set to undergo a major transformation over the next decade. Public sector investment continues to expand: countries such as Japan, Peru, Saudi Arabia and Thailand are investing in space ventures, and India was the first to land a spacecraft near the lunar south pole.
At the same time, Private sector space investments continue to drive innovation and opportunities in areas such as in-orbit inspection, maintenance services and commercially funded space stations, while partnerships established between the non-space private sector and space industry players are expanding. The space economy is evolving from a niche to a mainstream economy, creating value across multiple industries and solutions to many of the world's most pressing challenges. Four main drivers are fueling the growing relevance of space in everyday life. First of all, lower costs relating to launch operations. The number of satellites being launched each year has grown at a cumulative annual rate of more than 50% from 2019 to 2023, while launch-related costs have decreased 10-fold over the past 20 years – thus decreasing costs make possible a greater number of launches. The price of data, fundamental for connectivity, is also expected to decrease by 10% by 2035, against a 60% increase in demand.
Another growth driver: commercial innovation (e.g. components and software). Continuous commercial innovation makes it possible to achieve better results in space with increasingly smaller satellites. Observing the Earth from space, for example, currently allows objects to be identified with a resolution of 15 centimeters (cm). Furthermore, these images are available at a more affordable price, as the cost per pixel is constantly decreasing. Therefore diversification of investments and applications. A broad group of investors has shown interest in the space sector, with private investments reaching all-time highs of more than $70 billion in 2021 and 2022. Meanwhile, space-enabled businesses and applications are also becoming increasingly more diversified, for example with space tourism.
And the latest developments in space are generating excitement and interest around the world, with government and business leaders increasingly wondering what space might offer in the future. Space is already changing the world as we know it and both traditional players and new entrants across all sectors should be ready to exploit its economic, social and geopolitical benefits, as space-based or space-enabled technologies become more widespread in everyday life. Technological innovation and financial competitiveness will also play an important role in charting the trajectory of the space economy, with an estimate rising to $2.3 trillion by 2035, thanks to improved access to space data and reduction of the costs of access to space. Conversely, stalled access to space and technological advances at the terrestrial level that reduce the need for space technologies could lead to a lower estimate of $1.4 trillion by 2035.
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