Rocket Lab: America’s Secret Weapon to Win in Space

When Rocket Lab CEO Peter Beck founded his company back in 2007, his goal was to launch rocket ships into space for commercial needs at a more affordable cost. This meant pursuing satellite constellation markets more aggressively with a plan to leverage advanced space technology for more launches.

Fast forward to Q3 2024, the company posted a 55% year-on-year growth with a strong demand coming from a backlog of $1.05 billion. This figure was largely fueled by $55 million worth of Electron launches, the production and delivery of spacecraft for NASA’s ESCAPADE mission to Mars, and the completion of their Assembly, Integration, and Test (A.I.T.) facility in Virginia, among others.

Rocket Lab’s role in winning the space industry hinges on driving down the cost of launch vehicles for greater access to space and launch services for satellites and other payloads, but with a focus on end-to-end services for the government, NASA and commercial customers.

Why Rocket Lab is a Secret Weapon

In an industry where high costs, technological challenges, and stiff competition lead to frequent failures, Rocket Lab’s capability to remain operational and profitable has enabled the startup to survive and thrive in the aerospace sector.

One of their strategies is vertical integration, bolstered by strategic acquisitions, to maintain greater control over their supply chain, reduce dependency on third-party suppliers, and shorten their production timelines.

Manufacturing in-house components, such as rocket engines and avionics, through the acquisition of companies like SolAero (for solar power products and precision aerospace structures) and Sinclair Interplanetary (for spacecraft hardware that support rapid-schedule small satellite programs), the company continues to strengthen their foothold in both launch services and satellite manufacturing.

Second, the company’s lean approach to research and development sets it apart from competitors. The cost-effective R&D and rapid turnaround times help advance space technology at a fraction of the cost. As an example, their upcoming medium-lift reusable rocket, Neutron, is expected to cost only $350 million. This is a fraction of what competitors like SpaceX or Blue Origin spend on similar systems.

Rocket Lab’s reusability, simplicity, and efficiency focus brings products to market faster and at a lower cost, which allows them for quicker returns on investment.

Finally, as an end-to-end space systems provider, they can diversify through launch services for small and medium payloads, satellite manufacturing, spacecraft operations and data services to better mitigate risks associated with relying on a single revenue source.

These factors allow the company to provide the U.S. government and commercial sectors with dependable access to space for small payloads that combine innovation, affordability, and reliability

How They Help in Ways SpaceX Can’t

The Electron rocket is the first and most successful small satellite launch vehicle based on a track record of reliability and performance. Rocket Lab has been known for specializing in small satellite launches with the Electron rocket, optimized for dedicated launches of lightweight payloads to low Earth orbit (LEO). This makes them ideal for customers who need specific orbital insertions without sharing payload space. 

SpaceX, on the other hand, focuses on heavy-lift launches, such as large satellite constellations, crewed missions, and deep space exploration. 

In addition, while SpaceX relies on bundling multiple payloads into one launch to reduce costs. The Transporter missions can launch 100 smallsats, and only offer per-kilogram prices below dedicated small launch vehicles. This approach, however, compromises schedule flexibility for smaller customers.

According to Rocket Lab director of global commercial launch services Sandy Tirtey in an interview:

“The Transporter program was created a few years ago with, in my opinion, the sole purpose of trying to kill new entrants like us…yet, we are still flying because we offer something unique….most of the missions that we fly are enabled by the fact that we offer dedicated services.”

Finally, with the launch of Neutron, this is expected to offer affordable and immediate commercial solutions, while SpaceX relies on high-risk, high-reward innovation. Neutron will be very influential in the industry. If the launch timeline pushes through, Rocket Lab will be the first to deploy the fastest time to market for a commercially developed rocket.

As CEO Peter Beck opined:

"50% [of Neutron] is to break the monopoly that’s in medium launch right now. Fifty percent is to be able to launch our own stuff into orbit. I think we have the right combination of expertise and execution to be a real competitor."

Why We Have to Win in Space

For CEO Beck, the space industry is still very young, and smaller companies can still have a share of the market as long as they offer services:

“The launch demand is coming from all directions, not just one or the other…the transformation or democratization of space that everybody has been talking about, we are truly into the thick of it.”

The U.S. must seize every opportunity presented by this infancy of the space industry by fostering innovation, enabling vertical integration, and shaping the future of space democratization. This democratization of space will continue to propel the U.S. in a position to lead inclusively and set policies that reflect national interest.

More than just a matter of national pride, we need to secure long-term dominance in this industry through smaller companies that can quickly iterate on their technology to meet market demands, such as developing reusable rockets and in-space propulsion systems that Rocket Lab is now known for.

Risks

As competition in the industry intensifies, price wars for small satellite launches could compress Rocket Lab’s margins and reduce profitability. SpaceX dominates with economies of scale and proven launch capabilities, and this will be a challenge for Rocket Lab to compete against.

In addition, while Rocket Lab has expanded into satellite systems and space services, a significant portion of their revenue still depends on launch services. This still exposes the company to market fluctuations.

Bottom Line

Leveraging vertical integration, strategic acquisitions, and affordable R&D, Rocket Lab offers reliable solutions for small payloads that sets it apart from competitors. With growth targets achieved in the past year and a billion-dollar backlog, Rocket Lab thrives by meeting diverse launch demands while advancing reusability. Although, competition, price pressures, and market dependency remain significant risks, investor confidence is still on an upbeat because of the potential for the company to stay on top of their game.

Disclosure: At the time of this publication some members affiliated with Marksman Research own stock, options or other interest in RKLB.