SPEAKER_01 0:00

So uh you mentioned scaling. And I think that, you know, when we're thinking about risk and ability to scale, one thing that comes to mind for me is not just whether a particular company that supplies a product that the government buys, whether that company has the capacity to produce the output that's demanded, but whether the supply chain upstream has the capacity to produce all of the inputs that that company needs to produce the thing the government wants to buy.

SPEAKER_02 0:50

Hello, welcome to the space policy show, brought to you by the Center for Space Policy and Strategy, part of the Aerospace Corporation. I'm Colleen Stover. This show is one of the longest-running podcasts on space policy. We've been going since 2020. Aerospace is a not-for-profit national laboratory focused on the technical needs across the space enterprise. And the policy center brings forward unbiased research and analysis to inform the broader space policy discussions. In today's show, we are looking at the space economy from measuring it to understanding some of the vulnerabilities as an industrial supply chain. I'm pleased to host two aerospace experts, Andrew Berglund and Jacqueline Burman. Andrew, you're part of CSPS. You're a senior analyst with us. You've been on the show before, talking about supply chain acquisition, architectures. Thank you very much for joining us again today. And Jackie, you are part of Aerospace's EMAC, the Economic and Market Analysis Center. Can you start off by introducing yourself a little bit? And what exactly is EMAC?

SPEAKER_01 2:09

Sure. Thanks. I uh I'm an economist. And so EMAC is a pretty small and relatively new group of economists and financial analysts that uh help aerospace's national security and civil space customers navigate the how-to-buy things part of their mission. So I recently heard somebody describe this as aerospace has been helping our customers figure out how to build things for a really long time. And now an important part of space is how our customers buy things. And so Emacs's job is to help them navigate that.

SPEAKER_02 2:49

I love that. I love that. Um, yeah, the government as a customer for commercial uh companies has definitely grown in recent years. So measuring, I'm gonna just start off by defining some terms. And I know Jackie, you probably have a lot of stuff on this. So I'm gonna start with Andrew, you first. Um measuring the size and the growth of the space economy is really hard. Tell us, our audience, like why is it so hard? It's just numbers, right?

SPEAKER_00 3:22

Well, maybe I'll start with the why and let the economists get into the the numbers and the details of how we come up with these estimates. Why we want to measure the space economy is a critical starting point. So, from a policy standpoint, we one want to understand how healthy the market is, given that we rely on it for defense and civil space missions. Uh, a lot of the things that the government wants to accomplish in space will require a really healthy and robust industrial base. So understanding where that market is at this point in time and where it's headed uh is part of how we ensure that we have the inputs and the components and the technologies that we'll need to meet those national missions. Uh so I think the the why is is really an important point to start with there. Uh and then Emac and Jackie uh have done some really great work digging through the different ways that we think through uh how those estimates are made and how we how we figure out those projections. Because it's not a it's not a simple exercise.

SPEAKER_02 4:24

Yeah, yeah. I've recently um, you know, people often ask the question, are we really going to be measuring the space economy through like the number of Uber rides and Amazon deliveries? Jackie.

SPEAKER_01 4:39

Um, so yeah, that's a good question. How expansive do we want this definition of the space economy to be? Um, there was a good um analysis of this done by the Bureau of Economic Analysis, the BEA, um, a few years ago, where they went through this exercise to measure the space economy. And their definition of the space economy was really expansive. Um, I'm not sure if it would have included Uber and Amazon, um, but they tried to include, you know, everything that takes place in space, everything that supports the things that take place in space, and all the things that depend on space to function. And so you might think of things like Uber and Amazon as using either communications from space or using GPS as part of that. I don't know if that fell in the BEA's definition. Um, but yeah, that that's a very expansive definition of the space economy. And it made a lot of sense for the BEA to be looking at it that way. So the BEA's definition is very expansive because their goal was really to just measure the whole value of economic activity that takes place in or depends on space. Um but for other activities like trying to understand the space industry and the production of the of satellites and things like that, you need a much narrower definition. And so what you see when you're look, when you Google say how big is the space economy, is all these definitions vary. And so all the estimates of the size of the space economy and the growth forecasts that we're seeing vary pretty wildly because there's no one definition of the space economy. Oh, I love it.

SPEAKER_02 6:20

The economist has an unclear answer. It's not clear. It depends. It depends. Um, so yeah, so you kind of started talking a little bit about like in terms of production, right? And I know that there's um different ways, you know, what we've traditionally called um kind of upstream things before um something is, you know, the making of something, I suppose. And then there's kind of downstream things as the using of something. Um how do and then also we've actually had a show, a space policy show, with uh another space economist, Karen Jones, from our team. Um, and her and uh Dr. Brian Whedon have done a lot of research on um the space economy and how it's measured using different um financial um indices. And so that was kind of interesting. So if people on the audience haven't seen that, they should go back and check it out because it's not much different today. Um But so these different ways of measuring the economy, the space economy, how Jackie, I'll start with you. How do these things address different, how do the different ways of measuring address different issues and different questions?

SPEAKER_01 7:36

Yeah, so like I said, the BEA was their goal was to measure the whole value of economic activity that takes place in space. And so they needed a relatively broad definition to kind of serve that objective. Um, if you're interested in looking at, for example, Emac uh recently did an analysis of a small part of the supply chain for um producing certain goods that are required by space applications. Um and for that analysis, we really narrowed the definition down to just a few representative space industries so that we could dig into some of the details of how these industries, say the industry that produces satellites, how that industry depends on and interacts with other parts of the economy, what are the inputs that it needs from other industries across the economy? And and that's the level of detail that you can really only uh get to with a much narrower definition of your interest in, say, like the space industry.

SPEAKER_02 8:38

I can appreciate that. Andrew, would you like to add something in terms of just the different ways different issues addressed, I guess, with questions?

SPEAKER_00 8:48

Yeah, I I think the again, it's it's not a a simple thing to solve. And and often what economists like Jackie are trying to figure out is if you have a big category that includes a lot of different things, maybe some portion of that is space, but it's also going to have maybe missiles or something else that's used in other applications that really aren't, shouldn't be counted uh among space activity. So so it is a lot of work to figure out, and it it really depends on sort of the granularity of the data that's available. I think the other thing that that has come up in previous CSPS research, including what you talked about with Karen and Brian, is uh a need for some amount of skepticism or at least thinking through the source of some of these estimates, because estimates will serve different purposes, right? They may be there primarily to drive investment uh or or to drive funding. Um so they're they're making an argument, and the argument is sort of structured by the way they they build up these economic models and estimates. And I think that's why you hear Jackie referring to B BEA, Bureau of Economic Analysis, so much, because it's uh even if we might count differently, or you might take you know issue with one characterization they made or something that they included, the source is trustworthy and they're very upfront about how those estimates are generated. So that so having those sort of bedrock sources is really critical for making uh good value judgments and and understanding the quality of the data.

SPEAKER_02 10:27

Yeah, and certainly for making policy decisions for government policy decisions.

SPEAKER_01 10:31

Jackie? Uh I was just gonna add to what Andrew said that uh that that's one of the issues that we ran into really quickly is that even if you know how you want to define the space industry, um, the data does not define it that way. And so what you see is the space industry really is is spread across many different industries that are traditionally captured in the data that we think of as like the data on the economy, which is typically from BEA. Um, you know, you'll see, like Andrew said, missiles and also satellites and other kind of space applications commingled with non-space applications in a bunch of different industries. So defining what you want for the space industry is is one thing, and actually finding it in the data is quite another challenge that we ran into.

SPEAKER_02 11:25

No, that's a that's a good point. What are some what are some other examples? Um, I know that space has some very kind of distinct technologies um that that only space has. So what are those and why are they important to watch? Or just examples, obviously, not the full list.

SPEAKER_01 11:46

So something like star trackers, for example, every satellite needs a star tracker to figure out where it is in space. Um, but you don't need star trackers for many very many other things. And so in the in the BEA data, you don't see an industry called I make star trackers. You see like optical and you know lens guidance instruments or something like that. Um and a small, small part of that is star trackers. So uh a lot of these really niche applications that are required by you know satellite manufacturers and things like that are so hard to disentangle from the larger industries that make them.

SPEAKER_00 12:27

Yeah, and I'll add there, I think uh Star Trekers is a great example and relates to some ongoing research we're doing. Part of the story there is it's not a fully distinct technology, it's a it's a distinct application of a technology that's used in a in a lot of other areas. So if you follow the development of Star Trekers, it really coincides with the development of digital camera technology over the last 25, 30 years. Very similar sensor in space, you're taking that light, the light is hitting the sensor, and you're using that information to figure out where your satellite's pointed and your satellite payload is pointed. Uh, but you have the same sensor in your in your digital camera uh or your smartphone. So that that is another kind of layer to the complexity here, and why frankly, space has a hard time sort of uh competing within these input markets because smartphones are a you know one billion dollar plus annual uh uh business, right? Satellites are growing, they're not growing, they're not growing to that level, at least not yet. Uh so it's so space has to compete for these underlying technologies, and then it needs them to be more specialized in some cases. So you might have to go to that that sensor manufacturer and say, we love this technology, but we also need it to be rad hardened or fit in a particular form. Yeah, uh exactly. So so you have underlying technology commonality, but then these distinct sort of expressions of that to to exist and function in the space domain. Uh and that's really where a lot of the challenge comes from for space competing with other industries and and trying to advocate for the quantities it needs, because it's pretty much always going to be less than than the number of smartphones that are sold.

SPEAKER_02 14:28

Yeah, yeah. That's um that's so the Star Trekers is one example. Uh Andrew, do you have any others that you want to share?

SPEAKER_00 14:35

Yeah, uh another one that comes up pretty frequently is optical communications terminals. So as we're trying to move from uh communicating by radio frequency and communicating by uh laser uh to kind of enable these big proliferated constellations in space. Uh optical communication terminals are sort of the component that enables that to happen. So sending and receiving uh light to communicate between satellites. Uh that's a you know a networking function, right? A lot of the internet backbone is built on similar types of technologies. Uh it's it's much different to do that in space where satellites are are moving constantly and have to be oriented just right to connect to one another. Um, but you have these again, you have the same story of kind of underlying technology that's that's common across different industries. But we got to move that thing into space uh and be able to conduct it and achieve that communication reliably and consistently, and depending on the mission, you know, in a in a sort of no-fail kind of uh manner, right?

SPEAKER_02 15:46

Yeah, and there might even be I'm uh for optical communications, um, that's kind of a an area of potential growth as well, since um the kind of spectrum is uh the radio frequency spectrum is is getting crowded and is regulated quite heavily. So we're not only competing though for technology with other industries, is that right? There's also things like material.

SPEAKER_01 16:12

Um, so natural resources are definitely an area of competition. Um some of the you know niche things like germanium, as well as some of the less uh thing specialized materials like um certain qualities of steel. I've heard um uh companies talk about you know not being able to get access to enough of a particular material. Um so it's it's the things that you think about like germanium for semiconductors and also the things that you may not always think about as being in really limited supply. But uh the space industry, you know, the space economy in BEA's estimate was say like a half percent of GDP, which is enormous, uh, but it's also tiny in comparison to lots of other industries that it's competing with. So it's uh it's a bit of a balancing act for them, I think.

SPEAKER_02 17:14

Yeah, yeah, interesting. And um, so that's that the whole kind of rare earth um metals and elements that um the US has also been looking at trying to kind of create um homegrown industry instead of relying on the kind of foreign um import of it, especially from China. So any other any other kind of these some of these supply chains, Andrew, um whether it's you know germanium or um competition with other other industries, there's been a lot of disruptions in supply chain. Um I mean, of course, my first thought is the COVID um 19 pandemic in 2020. That seems so long ago. But yet that was the that was the first big one that really kind of shook people up in terms of um, you know, realizing how vulnerable we were. But what other things have you been seeing?

SPEAKER_00 18:08

Yeah, and I think the COVID experience is an important part of the story, uh, but I think it it can also sort of disguise some of the things that were happening with the space market generally. Uh, because we sort of I think there's a tendency to sort of throw up our hands and say, well, everything is like baby formula and toilet paper and it all just kind of broke. Uh, but for space, a lot of those supply chains were kind of in an early formation period. Where, you know, if you go back to 2019, 2020 for the space force, that's that's the the creation. Uh, and and sort of the early seeds of the investment into the space development agency and proliferated LEO, low Earth orbit constellations. So those supply chains were sort of just getting started on the government side. Obviously, there's a an earlier heritage for commercial. Uh, so that's you know, that I think that's an important and underappreciated part of the story is these global supply chains were happening to very immature uh space supply chains. Those disruptions were happening to very immature space supply chains. Um, and then uh, you know, Jackie uh talked about rare earth elements and critical minerals. Those have become you know part of trade disputes between the US and China. Uh, we have obviously um artificial intelligence, you know, graphics processing unit uh and other kinds of chips that are that are part of that deal. Um, so so those kinds of inputs are also pulled into these these major trade disputes. Um but I think we we can't kind of underscore enough how early we are in in trying to really establish some of these space supply chains and how difficult it is to kind of overcome those disruptions when they're happening really early.

SPEAKER_02 19:59

Interesting.

SPEAKER_01 19:59

And that just yeah, please. I would add to that too that um not only are they really early on supply chains, sometimes they're very, very small, in that there are maybe, especially for like defense applications, there may be only a handful of suppliers that are qualified to um provide a particular um component that a defense manufacturer needs. And so the supply chains are very vulnerable to disruptions compared to something like you mentioned, you know, toilet paper during the pandemic. Um the manufacturers that are making satellites for defense applications can't easily switch to you know getting their um component input from a different supplier because there are so few suppliers out in the world that make that thing, let alone are you know qualified to produce it for defense applications. And so I think that adds an extra layer of vulnerability, just the the small size of the supplier base and the um you know challenge of getting qualified as a supplier sometimes too.

SPEAKER_00 21:08

Yeah, it's it's such a good point. I I think we can look at the space economy and space market overall as being quote unquote small uh in in terms of how it competes with other industries, but then there's sort of subcomponents to that, which is the the market for kind of the exquisite technology for defense applications or for some some uh really advanced scientific applications. So Star Trek is again a really good example here where uh the the Star Treker market, supplier market, has gone through a lot of churn over the last few decades. But if you want to buy a Star Treker right now, kind of on the low end of the spectrum, say for a commercial system, commercial application, or a government application that that is um kind of mirrors that. You have a lot of choice, both in the US and from European firms. But if you want to buy at the very exquisite end of the market, there's not a US option and a very small number of suppliers in Europe. So that's when I think you get into these really interesting technology and policy choices, too. We sort of take for granted that we need exquisiteness for certain types of systems and capabilities because that's how we've done it before. But if you can think through alternatives to that, it may kind of open your aperture to be able to apply different types of technologies that might be more similar to what you find on the commercial market and therefore much easier to get a hold of. So, you know, that's a that's a strategy policy technology kind of nexus choice that's not easy by any means, but part of what we have to figure out. Because if if the Space Force, uh, if if space command demands this really exquisite type of system, this really exquisite type of technology that moves you further and further from where where the commercial market is going, you have to be willing to pay for that. Uh, and you have to be willing to find a supplier, uh, work closely with that supplier to ensure that you can uh sustain that technology, then you can uh uh sustain access to it over the long term.

SPEAKER_02 23:27

Yeah, you're you're kind of both of you are hitting on that idea of like having a more kind of resilient supply chain through diversity, um kind of thinking commercial market type things, but also hitting on the idea of trusted, right? How can you trust the supplier, especially for national security um things, um missions and parts? So what other, Andrew, what other kinds of things is is government doing to kind of try to help shore up the the uh space industry in terms of supply chain?

SPEAKER_00 24:01

Yeah, so I I think the simplest way to sort of bucket it is to think about what the policy interventions are on the supply side and what they are on the demand side. So on the supply side, we're trying to help firms either uh establish a production line, improve the quality of their product, maybe uh you know, expand their product offerings. So that can be things like loan guarantees, um uh purchase commitments, sort of the Defense Production Act type funding, the type of funding that comes through legislation with the CHIPS Act uh several years ago. What we're trying to do is in part buy down the cost of research and development and scaling production for companies so that they can supply more of what we want, right? So that's kind of the supply side case. On the demand side, it's it's pretty, you know, this is, I think, the one that gets industry really excited because they're like, just buy more of our stuff and we'll make more, right? Like the market can solve this problem. Uh that is, you know, a big part of the story for what the Department of War is trying to do with acquisition transformation, with the creation of portfolio acquisition executives. You're trying to shorten the cycle between decision making and and funding, right? And and put more of that control in the hands of the people that that can make the decision really drive um drive that sort of customer business relationship. Uh, and this is what you hear a lot when when commercial industry talks about the demand signal, right? Like they might hear demand signal from kind of the warfighter community, but that may be so divorced from the budget process and from the acquisition process that you know the actual the actual real demand from that signal is is years down the road. Businesses are not going to respond to that, right? They're not going to be able to increase manufacturing uh capacity based on a kind of a promise. And and so that that's kind of the the rubber meets the road moment uh for the department, for the acquisition community is is trying to sort of shore up these this demand capability, make it more effective and meaningful, all of which is to provide us provide a signal to industry that that they can trust and they can respond to. And it's you know, it's it's a it's a big challenge. I think you have to match both sort of the supply side interventions and and the demand side in some cases. And we haven't always done a good job of that. And and I think um some industries have suffered as a result.

SPEAKER_02 26:45

Interesting. Yeah, I like how you divided um those two, the supply and the demand side. Um, Jackie, you want to add to some some of that?

SPEAKER_01 26:55

Yeah, I think it's such an interesting problem because you know, the space industry, um government is such a huge consumer in that industry still. Um, I mean, I know that commercial space is is growing rapidly, but I think we're still in a place where a lot of applications and a lot of development um is purchased by either defense, national security, or by civil um space applications. And so a lot of these companies, you know, really do have to navigate their relationship with the government in order to kind of figure out um what to do in terms of their own investments. You know, do I invest in additional production capacity? Do I invest in improving this technology? Is somebody going to be out there to buy it? Um if I launch this satellite, will somebody, you know, will somebody use it? So I do think it's such an interesting um industry because of how large government's role is. Yeah.

SPEAKER_02 27:54

Can you can you talk a little bit more about that? I mean, because I'm thinking they obviously have to um navigate their own investors too, if they're gonna be a true commercial company. Talk, do you have um some more to say about maybe that kind of government as an anchor customer versus the kind of a true kind of commercial marketplace for certain things?

SPEAKER_01 28:17

Yeah, I mean, there's there's a lot of interest, I think, these days in um buying commercial from the government side, right? There's a push to buy commercial where you can. But when the government is the primary market for or the primary um consumer for a good or service, then it's uh a little bit challenging, I think, to um to stand up a commercial market, right? One of the the market needs supply and demand. And if the government is the only source of demand, then is it really a commercial market? Um so I think there's a lot of interest in in finding ways to buy things that are more commercial where the government isn't the only consumer, where there are other customers buying from you know similar applications from the same firms to kind of increase competition and to encourage that kind of market outcome. But there's only so much you can do for certain like niche applications, I think.

SPEAKER_02 29:23

Yeah, so defining the the space economy um is um is it depends uh as well as what commercial space is and defining commercial space. I know that um CSPS has done some research with the European Space Policy Institute um trying to help kind of define that spectrum of what commercial space is. So um, Andrew, you said uh something earlier about um if if you just buy, if you know if the government just buys more stuff, then industry can just will just make more stuff, right? But what about risk, right? Jackie kind of mentioned there might be a slight risk in terms of government as the only customer, right? In terms of becoming commercial and and um competitive, but there's other risks as well.

SPEAKER_00 30:15

Yeah, it's certainly. I I think one kind of relevant to this this line of thinking is the space economy we have today is is not going to be this the same in five or 10 years. And so commercial companies that are navigating both the commercial market and and working with the government are are thinking about how to position themselves both for the the market as it as it exists and also what it can and will be over the future, right? And that's where I think you have these difficult conversations and different difficult sort of business decisions about how specialized to be uh in designing your products around government demand, uh, particularly if it moves you further away from those commercial applications, right? We and I I think there's numerous examples, both um recent history in the space industry and happening right now. Companies really have to figure that out, and that's a business risk for them, partly because government demand is it is kind of fickle, right? Like we've had a few years of of uh at least higher than normal defense spending, particularly on space. Uh, and that's great for those companies right now that are able to win awards and and and be competitive. There's no promise that that continues, right? So they want to diversify their customer base, but they may also be asked by the government to design something that kind of moves them away from commercial customers. So uh I think that's a critical source of risk that that companies are aware of. Um, I think the other part of it is like in terms of manufacturing and scaling, which is the thing that everybody is concerned about right now, there's a lot of capital investment up front that has to, that has to be made to design your facilities, your your warehouses to be able to increase the the amount that you can produce. That's all based on the expectation of customers in the future willing to buy that excess capacity or what will not become excess capacity will will kind of meet the demand in the moment. Uh, but that's an upfront business risk that companies have to consider when they're making these investments. And just as you said, they have to be responsive to investors, whether that's private capital or public capital, uh, and they are gonna have to answer for these decisions that they make. So it's one thing for the government to say, we need everybody to increase their manufacturing, we want to buy more of your stuff. A lot of that risk is front-loaded on industry to make those commitments today.

SPEAKER_02 33:02

Yeah, the research and development, as well as that kind of um scaling through capital investments. Yeah, Jackie, what do you have to say about risk?

SPEAKER_01 33:10

Tell us, talk to us. So uh you mentioned scaling. And I think that, you know, when we're thinking about risk and ability to scale, one thing that comes to mind for me is not just whether a particular company that supplies a product that the government buys, whether that company has the capacity to produce the output that's demanded, but whether the supply chain upstream has the capacity to produce all of the inputs that that company needs to produce the thing the government wants to buy. Um, Emac recently did an analysis looking at this for a couple of specific parts of the space industry, or a couple of specific industries that are related to space. Um, and we we kind of looked at risk in three different ways. We looked first at um what industries supply the industries that produce the main space stuff. So, like uh looking upstream in the supply chain at what things flow into space applications. Um we for those industries we looked at growth rates recently in the the upstream industries to see how they've been doing. Um, because one of the things we wanted to look at is, you know, sure, we can say that the guided missiles and space vehicles industry is going to grow by some percent per year for the next six years. Very expansive growth, but that requires all of those upstream industries to either sell a larger share of their output to the guided missiles and space vehicles manufacturing industry or to produce more output to keep up. And either one of those things works, but it requires one of those to happen. And so we wanted to look at whether we thought that they were going to be able to produce more output to keep up with the demand from the space industry. So uh we found a couple of um cases or several cases of industries that, you know, we weren't sure that they were going to be able to produce enough. Maybe they've been shrinking recently. And so if an industry has been shrinking, that suggests that it may not be able to turn around and start growing really fast to supply more stuff to space, which is not necessarily to say that that's a bottleneck for sure. That industry may be experiencing a contraction in demand from a different customer and may be able to sell a larger share of their reduced output to the space industry. That's that's not a problem for sure, but it's an indicator that there may be a problem. Um, the other indicators that we looked at were the share of inputs to an upstream industry that are imported because we talked earlier about trade disruptions and volatility and trade policy. Um so we felt that industries with a very high share of um inputs required from imports. Um that's a nice we we felt that those industries might be subject to to higher risk on the supply side, might be uh less likely to be able to produce the output that the space industries would later demand from them. Um and we also looked at price changes, uh, industries with price spikes. For example, recently price spikes in the semiconductor industry uh related to the AI boom. Um we looked for industries like that with price spikes that might indicate um, you know, either supply-side issues like rising input costs or uh something going on in demand from a different customer that the space industry would then have to compete with. So looking at all of this and trying to understand, you know, is the space industry gonna be able to get the inputs that it needs to make the output that the government wants from it? Um I think is a really important way to look at the risk of scaling and whether the space industry is gonna be able to scale at the rate that's been projected.

SPEAKER_02 37:37

Love that. Yeah, you're really kind of picking apart and looking at the nuances of it in order to understand the bigger picture and the potential for any kind of one slice of the space market or space economy to grow. Yeah. Anything else on risk that we want to talk about? Personally, my you know, my um the wagon that I always get on is workforce. I see workforce as a risk, I see workforce as a kind of on the supply side um and the demand side for that matter. Um, but what about workforce in terms of risk? Either one of you.

SPEAKER_00 38:14

That's best for best for Jackie. I know when I'm overmatched uh intellectually.

SPEAKER_01 38:20

So I would say that labor is definitely part of the supply chain. And in addition to will the space industries be able to get the physical inputs that they need and the raw materials that they need. Um, a big question, I think, is whether they will be able to get the quality and quantity of workers that they need to scale their output. Um and it's not just, you know, the exquisite aerospace engineers that uh that we should be worried about. Um, I think, you know, we need to be looking at not just whether the space industry will have access to the right quantity of aerospace engineers, we need to be looking at technicians and specialized assemblers and people who repair um specialized machinery because a lot of those um sort of skilled technician jobs um, I think are are at a high risk as well. And so that's one of the analyses that EMAC is actually currently working on is looking to identify some areas where there may be risk on the workforce side as well.

SPEAKER_00 39:30

Yeah, it's a good example too of of how quickly things can change. And so I think flexibility uh and and having really useful current data on on what is happening is really important. Uh the obviously the labor market is is never static, but if you look at what has happened with data center center build-outs, uh inputs for labor and inputs for all kinds of things, that's a demand that didn't exist just a few years ago, right? Like I think all the time about Nvidia uh chips because when I was a kid, Nvidia chips were for my friends building their computers to play games, right? Like that's that's what they were for. This the same graphic processing units are are powering uh AI frontier model development now, right? Like that's how quickly that's changed. I you see recent stories about data centers using uh aircraft turbines, even pulling some aircraft turbines off of decommissioned aircraft uh to use for powering uh data centers. So the the demand uh and and that sort of competition can change so quickly. I think it really uh is is a strong argument in in favor of the need for really high quality uh data to drive decision making. And and uh so I I guess that's another side of the uh the need for a strong workforce, right? Like the economists should be really busy uh helping inform policy making right now because things are changing so quickly. Uh and I think space, by virtue of being relatively small in in sort of this competitive landscape, uh really needs to be on its on its you know front foot in being responsive and thinking through these challenges.

SPEAKER_02 41:25

Yeah, the sp the space, um, the space sector spa small but mighty. Um so you mentioned you mentioned um some you know um how numbers can inform decision making um and measurements. What are some other kind of potential policy uh solutions to some of the risks that we've talked about? I mean, we've talked about um um, you know, workforce, of course, we've talked about upstream things, we've talked about imports.

SPEAKER_00 41:56

I think the first is is partly a data issue. I think we need better data on the lower tiers of the space supply chain and where those weaknesses are and and how that's changing uh in a you know very dynamic time. Um I think one thing I'm interested in is how how can government sort of bring that supply side investment into the lower tiers of the supply chain. So we hear a lot about the sort of silver tsunami idea of a lot of the mom and pop machine shops uh and folks like that that are gonna be in this retirement wave. They don't have uh you know an obvious successor for those companies, and and they might just close shop, right? Like that might just be the end. And it can literally be a handful of those things that are supplying uh, maybe it's again small in quantities, but but sort of a critical part of the space supply chain. I don't think we're doing it nearly enough to identify where those weaknesses are and target investments there, right? Like, can we bring everybody wants to be a founder? Can we bring uh some people to be sustainers, to set step into those businesses uh and carry that sort of really critical work forward that's spread all over the country, right? Like these are you know, state level programs and national level programs can both be really directed here in an important way to make sure that there is nearby capacity and capability to uh sustain the space industrial base.

SPEAKER_02 43:27

Interesting. I'm I'm I'm picturing um if if anybody does this, you heard it here first. I'm picturing an apprenticeship program where we're training up new workforce, but at the state level to take over these mom and pop garage garage places and um and keep keep the um supply chain resilient. Yeah. Jackie, what it what do you think about what what is something that you think decision makers uh need to be kind of looking out for? Um What how can we um better inform the future for them?

SPEAKER_01 44:07

So I think one thing that comes to mind for me when we're thinking about um policy tools is you know using the policies that you already have access to carefully. Uh there are things like the uh DPaaS, the defense priorities and allocation system, is that right? Um, where uh suppliers can get ratings through DPaaS to get preferential access to raw materials and to other inputs that they need. And so I think one of the things that can be done is really carefully using that tool that's in place to make sure that the priorities that are set there reflect the like more holistic priorities that we have. Because that's that's one tool that we have to ensure that the things that really matter to the government actually get that prioritization and get access to um the materials and the inputs that they need. Um but you asked what what the thing is to look out for. I think for me, um I'm I'm with Andrew on look at those mom and pop machine shops and other sort of small but important parts of the supply chain. I think the biggest unknown here is maybe where there are small suppliers that enter into um upstream in different kinds of supply chains, right? So you might have a look at the supply chain for one kind of satellite or one kind of space application, and a look at the supply chain for an application in a different mission area, it may be that the same supplier enters both supply chains. And so that really introduces kind of an elevated risk, I think, because if the supply chain for the first kind of satellite looks mostly okay, then you might conclude, hey, this one's going to be able to scale. And then if you look at the second one and it also looks kind of okay, you might conclude that they can scale too. But the question, I think, remains, can they both scale at the same time if they rely on some of the same upstream suppliers? That is so hard to know from the data that we have. Um, I mean, frankly, it's probably unknowable from the data that we have. Um, but I think it's an important risk to be looking out for, not just where these really small suppliers are that may be going out of business soon, but where the supply chains for different kinds of products or applications or mission areas cross and where we might not know that um a small supplier affects outcomes in many different areas.

SPEAKER_02 46:53

Andrew, any last words? We're um almost at time here, so I wanted to offer you offer you something.

SPEAKER_00 47:00

Yeah, I I guess I would just say I I think I think the industry needs consistency. And I think again, kind of going back to some of the acquisition transformation work, we're in a period where I think there's more bipartisan consensus that stronger interventions are needed. Uh, and we just need to see that work carried forward. I think the seeing sort of uh the executive and and legislative branches work together on these things, um, it's again about converting that demand signal into an actual consistent demand that that companies can rely on. And that's that's true for the mom and pop shop, and it's true for the traditional defense contractors, and it's true for all the new companies that are bringing exciting innovation um both to space generally and to defense uh in in particular. So I think that's one of the real things that that people are watching out for is can we move to a place of greater consistency in policy execution and in funding uh that can inform decision making.

SPEAKER_02 48:06

Love it. That's great. Well, thank you both very much for joining today. Um, this was um kind of a primer, really, like looking across that whole kind of space economy. What is it? What is it not? Where are the vulnerabilities? And I really appreciate you guys being here.

SPEAKER_00 48:25

Yeah, thanks, Elaine. Thanks, Jackie.

SPEAKER_02 48:28

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