The global space economy is projected to grow from about $400 billion today to more than $1 trillion by 2040, according to BCG analysis. To meet that demand, the companies that manufacture satellites, rockets, and other critical space hardware must scale up production dramatically.

The So What

Currently, manufacturers are limited by their strategy, talent, supply, prototyping, and production processes—problems that they must solve head-on if they are to capitalize on the coming space boom. Based on our experience, manufacturers that make even modest improvements in a few of these areas can make dramatic gains in performance, such as:

• A three-fold increase in production volume.
• Cost reductions for key products of 10% to 30%.
• Faster production times by 5% to 15%.
• Fewer hours per build by 10% to 20%.

Pursuing aggressive measures to boost production through a broad set of initiatives can yield even more impressive results—increasing volumes up to eight-fold.

The Backdrop

Today’s space sector is growing at an unprecedented rate. The proliferation of low-Earth orbit (LEO) satellites, reductions in launch costs, and the increasing importance of space-based services to national economies and security have all led to a steady rise in the number of space launches over the past two decades. At the same time, many space functions that were once almost exclusively performed by governments, like launching rockets and operating satellites, are now also handled by private companies.

In 2023, the industry saw 221 orbital launches worldwide, the highest number yet. And more growth is coming. With an estimated 24,000 satellites set to be launched between 2023 and 2031, the demand for space products and services is soaring.

Now What

This surge in demand is creating a massive opportunity for firms that manufacture rockets, satellites, and other space-related components. In our experience, firms can increase their production capacity by focusing on the following five priorities.

Create a clear strategic goal to achieve scale. Large infrequent contracts make it difficult to set scaling targets and timelines. In addition, measures such as vertical integration require a high upfront investment and a long run time to see the benefits. But manufacturers need to scale up starting now. To that end, they should set a clear, strategic goal for achieving scale—developing synergistic product lines with defined volumes by certain dates—and align the entire organization around that goal. Specific factors that can support a scaling strategy include demand forecasting, establishing a budget for scaling, evaluating potential acquisitions of niche manufacturers, and conducting a cost-benefit analysis of expanding or acquiring new facilities. Of course, different regions and countries have their unique constraints when it comes to awarding supplier contacts, and suppliers need to keep those in mind when setting strategic production goals.

Update talent recruitment and retention. The industry faces a growing talent shortage. Moreover, many engineers prefer cutting-edge work, and there is a risk that they may leave when firms shift from developing new products to scaling up production. Manufacturers need to address this challenge head-on, by professionalizing their HR function, strengthening the recruitment pipeline, making compensation more attractive, and upgrading training programs. Some companies source talent from declining adjacent industries or forge partnerships with leading universities to establish space programs. Others improve retention by offering deferred compensation such as equity that vests after a set number of years.

Simplify product designs and prototypes. Designs for space products are complex and costly, driven primarily by the environment they operate in and stringent performance requirements. Design changes can result in testing costs in the tens of thousands and engineering costs in the hundreds of thousands. Lead times are long as well—worldwide, the average time to first launch is seven years for LEO constellations and can be up to 10 years for defense constellations. To reduce this burden, companies should simplify product designs and accelerate the time to build prototypes. In part, speed can come from shifting away from bespoke products and instead building modular components that can be used in multiple designs.

Collaborate with suppliers. Space components such as semiconductors, propulsion systems, valves, avionics, and reaction wheels can be difficult to source. Suppliers often deprioritize space orders because they are lower in volume than orders from other industries. The solution is to collaborate more directly with suppliers, identify alternate sources for critical inputs, and incentivize suppliers to take on nonrecurring costs—such as investing in the equipment they need to produce specific parts at higher volumes. A key element in this collaboration is greater transparency, so that suppliers have a better sense of future demand volumes for a given part, component, or capability. For critical components in long-term programs, OEMs can potentially coinvest with suppliers to increase capacity and ensure a reliable supply.

Make operations more efficient. Manufacturing processes in the space industry are complex and often slow. Building a new manufacturing facility with costly, technically advanced machinery can take two to three years from design to full operation. Testing processes alone for space components can take three to six months. Some of these constraints are due to the requirements of space components, but companies can still move from customized, highly bespoke production to serial manufacturing and streamlining processes to get goods into the hands of customers more quickly. Leading companies are finding opportunities to increase production rates by up to 60% by implementing process improvements via automation and manual means.

The authors thank Zachary Conley, Fabio Dal Pan, Dan Hyman, and Alice Qin for their work on this publication.