How SpaceX Transformed Space Exploration

SpaceX created history on Feb. 6, 2018 by launching the Falcon Heavy — which is, per SpaceX's company website, "the most powerful operational rocket in the world by a factor of two." As if that weren't impressive enough, CEO Elon Musk tweeted that the Falcon had a cherry red Tesla Roadster strapped on top of it for the rocket's third and final burn. While the launch is a technical and style feat in itself, SpaceX has also achieved a business feat of sorts. That's because the Hawthorne, Calif.-based company has drastically reduced the costs of launching rockets and, in the process, emerged as a front runner in the industry, though it does face stiff competition from Jeff Bezos' Blue Origin (AMZN) with similar motives of disrupting space travel. SpaceX is a private company — meaning it does not have a public market capitalization — but the Wall Street Journal values the company at $30.5 billion at the time of writing.

On Dec. 18, 2018, the Wall Street Journal reported that SpaceX is raising $500 million to fund a massive satellite internet project, called Starlink. The company plans to send 4,425 broadband satellites into low-Earth orbit sometime in 2019 and then another 7,518 satellites at a later date. Starlink, a name that SpaceX trademarked last year, could offer broadband speeds on par with fiber optic networks for a fraction of the cost — if the technology works. And that's a big if. The FCC approved SpaceX's application for the service in March, making it the first time the federal agency has ever authorized a company to provide broadband services through low-orbit satellites. That makes SpaceX a bit of guinea pig, but the risk is apparently worth the reward for Tesla CEO Elon Musk. SpaceX's valuation could soar to more than $50 billion should the Starlink project succeed based on projections from Morgan Stanley.

How SpaceX is Making Space Cheaper

In 2012, SpaceX advertised a launch price of $57 million for Falcon 9, a two-stage rocket designed and manufactured by the company to transport satellites. At that point in time, the market for rocket launches was dominated by Arianespace, a French company that had a head start of more than three decades over SpaceX. Today, SpaceX claims that a Falcon 9 launch costs roughly $62 million, while the new Falcon Heavy dwarfs that, costing an estimated $90 million per launch. In an interview, SpaceX CEO Elon Musk said the Falcon 9's first stage accounts for 75% of total launch costs, or $46.5 million. 

Because SpaceX is a private company, it has not divulged the secret to its pricing. It has also not filed for patents because they might reveal secrets about its technology. However, in an interview, Musk hinted at how the space company has achieved cost-efficient launches. He said the company operated with a "Silicon Valley operating system and DNA as applied to the problem of space transport." This means eschewing conventionally accepted business maxims, such as outsourcing, prevalent in the space industry. Instead, SpaceX is vertically integrated and has built its entire supply chain, from rocket engines to the electronics components used in its rockets, from scratch.

In the process, SpaceX has innovated in processes and technology. For example, the production floor and engineering are situated right next to each other in the company's factory for faster turnaround and better communication. Similarly, its two-stage rockets carry just one set of fuel tanks loaded with propellants that will be used across both stages. Most previous rockets used three sets of propellants for as many stages. One can presume that the decline in the cost of certain components, such as sensors and electronics, has also helped the company reduce prices.

With the launch of its first reusable rocket in recent years, it is probable that this will help SpaceX to further bring down rocket launch costs. A reusable rocket adds economies of scale to operations. Thus, the more times a rocket is reused, the cheaper its launch costs become. Arianespace has estimated that a partially reusable rocket would need to be relaunched 35-40 times per year to realize its full cost benefits. The French company is expected to launch its first reusable rocket in 2020, and it is scheduled to be reused 12 times per year.

Musk's final plan is to send humans to Mars, and with the successful launch of the Falcon Heavy, he is one small step closer to bringing humanity to its next giant leap, or at least to throwing very expensive cars into space.