Rocket Lab founder and CEO, Peter Beck, says the space-launch services provider’s mounting vertical integration will allow it to jump at opportunity.
The latest addition to the California-based company’s infrastructure is the lease of a 113,000 square-foot former Vertical Launch Building at Lockheed Martin’s
LMT
The acquisition is part of a broader strategy that will see Rocket Lab vertically integrate much in the way that SpaceX has. It’s a departure from the established organization of companies in the space sector but very much in keeping with the in-house mentality that has defined both launch providers and spacecraft makers in the burgeoning commercial space market for Low Earth Orbit (LEO
LEO
“Traditionally you were a spacecraft builder, a spacecraft component builder or a launch provider and those things were quite divorced,” Beck told me in a phone interview just before Thanksgiving.
Not so for Rocket Lab which builds both LEO space-lift rockets (its partially reusable LEO Electron and Neutron launch vehicles) and satellite buses (main bodies), straddling the major structures and business lines of the commercial space industry. Its origins as a space launch vehicle provider allow it to do both effectively Beck maintains.
“A rocket is a giant engineering compromise and a spacecraft is a giant engineering compromise. When you do those two things together you compromise less. And the reality is, if you can build a rocket, then you can build a satellite.”
Beck thinks that the successful commercial space companies of the future will build their own rockets, satellites and other components, providing direct-to-customer capabilities that bypass the middle-tier structures, engine and other component makers. Call it a new kind of SaaS – “Space as a Service”.
In pursuit of this model Rocket Lab and others will integrate in a way that anyone who has used a phone can imagine.
“All the telecommunication companies used to have their own trench diggers and cable pullers – they were vertically integrated in that sense,” Beck says. “Once all the copper, all the fiber’s in the ground, it probably goes back to a distributed [industry] model again but that’s well off.”
In the meantime, companies like Rocket Lab will be the “copper layers”, building the on-orbit infrastructure to support an expanding panoply of communications, data-transport, sensing, tactical military and applied science capabilities in LEO and at higher altitudes. In so doing Beck says they will essentially merge what have been disparate business activities.
“At this point, what is SpaceX? Is it an internet provider or is it a space company? I think the [business models] will get blurrier and blurrier as time goes on especially when you have large amounts of infrastructure to build.”
Rocket Lab itself will blur the lines, methodically building all the infrastructure that it needs “for us to deploy our own constellation of satellites to provide service,” Beck affirms.
What that service will be, Rocket Lab has yet to determine. Instead, Beck and the company leadership are happy to continue providing launch services for others’ constellations, waiting to see what develops as they diversify and integrate. When the opportunity does become obvious (or just before it becomes obvious) they’ll move out.
“What is the really big opportunity in space? Is it internet from space? Is it direct-to-mobile from space? The one thing we’re making sure of is that we’re in position to compete when it becomes really obvious.”
Acquiring the space at Middle River is part of the process of building the foundations required Beck says. It’s a process Rocket Lab is executing aggressively. In addition to a host of corporate acquisitions to bring more capability in-house, the company has been increasing the size of its house.
It now undertakes composite work for launch vehicles and spacecraft across facilities in Long Beach, California, Albuquerque, New Mexico, Auckland and Warkworth, New Zealand.
Rocket Lab has pushed forward with this expansion despite a soft market rocked by high interest rates. As the Federal Reserve’s interest rate hikes have made it more expensive for companies to borrow, space stocks have had a tough 2023.
Andrew Chanin, founder of the Procure Space exchange traded fund (ETF), which counts Rocket Lab among its holdings, told Yahoo Finance that, “Higher interest rates are not helping any company in the space industry.”
Rocket Lab’s Wednesday (11/22) close at $4.26 per share is convincing evidence of Chanin’s market characterization.
But the company (whose current market capitalization is $2.07B) is investing all the same. Beck explains that the facility at Middle River was attractive on several fronts. The local pool of talent in the central Baltim0re-Washington area is deep he says.
“That is one of the bigger throttles for Rocket Lab’s growth. We’re fussy on talent and the bar is super high.”
High though it may be, the company won’t be looking for much of it in the area. Thanks to the small initial scale of the Space Structures Complex and the fact that it will be a highly automated carbon composite manufacturing operation, Rocket Lab won’t need many hands. It plans to employ 65 people at Middle River.
That has not stopped the State of Maryland from rolling out incentives for the company. The Maryland Department of Commerce is providing a $1.56 million repayable loan through the Advantage Maryland program. Rocket Lab is also eligible for various other incentives and tax credits, including the Partnership for Workforce Quality program, the More Jobs for Marylanders program, and the state’s Job Creation Tax Credit.
Beck nonetheless maintains that the kind of manufacturing engineers Rocket Lab requires are readily available in Maryland despite manufacturing writ-large having long left the State.
The Middle River complex brings with other compensations with it including direct water/barge access, allowing for shipment large structures (spacecraft/rockets) right from its doors. These can waft down and around the Chesapeake Bay to Rocket Lab’s assembly, integration and test complex at the Mid-Atlantic Regional Spaceport and NASA Wallops Flight Facility in Virginia. The launch facilities for the company’s Electron and Neutron rockets are there as well.
Back up at Middle River, Rocket Lab’s 65 employees will have ample elbow room in the 113,000 square-feet it is taking over. I’ve been there, and at least for a while it will seem cavernous.
“That’s a good thing,” Beck asserts before reflecting that, “with every single [newly acquired] factory I’ve walked into, I have that same sinking feeling like, ‘God, what have I done?’ Then you give it a couple years and you’ve got containers and tents outside with people working in them.”
Beck did not disclose the terms of the lease deal with Lockheed Martin. But with the defense prime vacating the premises and a small pool of parties who might find it an appealing large space to move into, Rocket Lab likely got a generous deal.
“I think everybody’s happy with the deal that was struck,” Beck affirms.
The deal not only furthers the vertically integrated manufacturing the company desires for its space-lift offerings and eventual constellation, it adds to capacity for the hypersonics business Rocket Lab has landed.
On November 8, the Department of Defense’s Defense Innovation Unit (DIU) announced a launch services agreement with Rocket Lab for a HASTE (Hypersonic Accelerator Suborbital Test Electron) mission from the company’s Launch Complex 2 at Wallops Island.
Using Rocket Lab’s Electron rocket, HASTE will deploy a suborbital payload from Australian company Hypersonix called DART AE, a scramjet-powered hypersonic vehicle capable of flying non-ballistic flight patterns at speeds of up to Mach 7. The mission is part of DIU’s HyCat (hypersonic and high-cadence testing capabilities) program which seeks to accelerate real-world in flight testing of hypersonic projectiles and vehicles.
It’s a coup for Rocket Lab which beat a field of other would-be hypersonic test providers to the contract including runway-capable reusable hypersonic test platforms from Hermeus, Venus, and Destinus as well as air-launch providers like Stratolaunch. Rocket Lab’s success lay in its ready-right now capability Beck explains.
“A lot of the [other companies] are in various stages of development and promise. We had the best product available now.”
HASTE provides useful illustration for the vertically-integrated formula Beck is putting in place at Middle River and elsewhere. With facilities and people at-hand, Rocket Lab is ready to go when its leadership pulls the trigger on the next big space opportunity. The company will continue to “lay copper” Beck acknowledges – even if it makes him uncomfortable.
“It’s a running joke that I’m the one in the company that hates real estate. Although it’s a great sign of growth, it’s another thing to have to own, look after and feed. For us, real estate acquisitions are well debated. This one was a no-brainer.”
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