On Wednesday, I was on a call with Elon Musk, CEO of both Tesla Motors and space exploration company SpaceX. The latter company was announcing what it’s hailing as the “largest single commercial launch deal ever” — a $492 million contract to carry into space the mobile telecommunications satellites of Iridium Communications, beginning in 2015.
Though SpaceX has launched just two three rockets successfully in its history — including sending one of its Falcon 9 rockets into a 155-mile orbit earlier this month and, last July. delivering to orbit a satellite for Malaysian satellite maker ATSB — it has over $2.5 billion in revenue under contract. In addition to its partnership with Iridium, the company has booked orders to carry to orbit a giant satellite for Loral Space & Communications and to conduct 12 “resupply” flights to the International Space Station on behalf of the National Aeronautics and Space Administration.
Whether it manages to successfully complete all its missions remains to be seen, but on the call, Musk spoke at length about why SpaceX is far more cost-efficient than heritage aerospace companies; I thought the detail he offered was pretty interesting. If you’re a space nut, you might too.
The answer to that is complex and I don’t like to give sound bites because it oversimplifies the thing and it sort of comes across as wrong to me, if I were to put myself in the shoes of someone hearing that bite. It’s sort of like when they say: why is Southwest Airlines so much more efficient, and you could say, well, it’s because they use 737s. Well, if it were that easy, then anyone could do that.
If you go to heart of it, SpaceX operates with really with a sort of Silicon Valley operating system and DNA as applied to problem of space transport. And in that sense, culturally, the way things operate are closer to an Intel or Google or Apple in the way that it functions.
We’re quite vertically integrated, which increases the number of problems you have to solve, but you also have fewer middlemen. I think the aerospace guys got into this craze of outsourcing everything, then even the suppliers would outsource, and eventually it got to where you had to go four companies down before you found someone cutting metal. And there’s an old maxim that if you want efficiency, you have to cut out the middleman, and so we’ve done that at SpaceX.
Also, to the degree that we inherited legacy components, we inherited the legacy cost structure, and that necessitated rebuilding almost the whole market in order to achieve significant breakthroughs. Because if you look at the cost of our market, if you break it down, it’s the cost of the engines, the structures, the electronics, the launch operation, and the overhead of the business, and in order to make a significant breakthrough, you have to really see improvements across the board, systemwide.
Like if somebody gave you free engines or free structure or free electronics, you’d still only make maybe a 20 percent improvement in the actual cost of launch; to have a 50 or 60 or 70 percent improvement, you have to see improvement in all of those areas.
So I think we’ve come up with significant technology innovations in all of those areas; we’ve come up with process innovations. We’re vertically integrated but there’s a strong focus internally on communications — everyone is in a cube, including me. We have the factory collocated with engineering, which helps tighten the loop between production and engineering, because however you design a vehicle, that sets the best possible cost number for that vehicle.
Some of what we’ve done is really just common sense — for example, using the same propellant in the upper and lower stages means that operationally, you only need to have one set of fuel tanks. If you can imagine a situation where you have a kerosene first stage, hydrogen upper stage, and solid rocket side boosters, you’ve just tripled your cost right there.
Also, the upper stage of a Falcon 9 is simply a short version of the first stage. That may seem pretty obvious, but nobody else does that. They tend to create upper stage in a totally different way than they create the first stage.
The Merlin engine — we used it on the upper stage of Falcon 9, on the main stage of Falcon 9 and on the first stage of Falcon 1. So we get economies of scale in use of the Merlin engine.
Our tanks are friction stir welded, [aluminum] skin and stringer designed as opposed to machined aluminum, [giving us] a 20 fold advantage in the cost of materials, and our stage ends up being lighter …because geometrically, we can have deeper stringers.
So, yeah, those are some examples.